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UK manufacturing
Skills, talent and leadershipWhat is required to make UK manufacturing a world leader again?by Graham Smith, Partner, Global Industrial Practice
UK manufacturing Skills, talent and leadership by Graham Smith, Partner, Global Industrial Practice The manufacturing sector comprises
a wide range of industries, techniques
and activities. Alongside established
industries such as automotive, aerospace,
electronics, capital equipment, food,
beverages and pharmaceuticals, new
industries are beginning to develop based
around emerging technologies. These
include low carbon, nanotechnology and
advanced materials such as composites.
Manufacturing is already a significant
sector in the UK, accounting for
approximately 10% of GDP. Growing it
even further and returning the UK to the
ranks of world manufacturing leaders will
require the right combination of skills,
talent and leadership.
From late 2013 to early 2014, Heidrick &
Struggles interviewed a number of CEOs
and other C-suite executives from large
UK manufacturing companies to find
out how they think the UK stands in a
European and global context with regard
to skills, talent and leadership. We wanted
to understand what the senior executive
requirements will be going forward and
what should be done to increase the
talent pool for the future.
2 UK manufacturing: Skills, talent and leadership
Key findings
The key issue in the UK appears to be how
future talent perceives manufacturing
from a career perspective, and the
resulting effect on the senior executive
talent pool.
The UK is actually very good at manufacturing, but
because the amount that goes on is comparatively
modest, the talent pool is small, opportunities are limited
and many senior executives look overseas. Promoting
success stories and showcasing successful leaders can
encourage more young talent to go into the industry.
There is no reason why a career in UK manufacturing
cannot be seen as it is in countries such as Germany,
on a par with doctors, lawyers, accountants and
other professions.
The main themes and findings discussed in this paper are:
• Current Government support is adding value
through various initiatives under the Department
for Business, Innovation & Skills (BIS), the agency
responsible for economic growth. It includes the
UK Trade & Investment department, which helps
companies succeed in the global economy, and
the Regional Growth Fund programmes, which
have helped numerous SMEs. However, if some
Government efforts were more targeted at the
larger corporates, the economic impact could
be greater.
• Whilst the BIS High Value Manufacturing
Catapult drives growth through seven “centres
of excellence,” better links between academia
and Industry are needed and developing
more of these centres of excellence would be
highly beneficial.
• Direct financial support could be made available
to the larger corporates to address the looming
talent shortage by taking on more apprentices
and graduates. See Inside Manufacturing (SIM),
the initiative established by BIS to transform
students’ perception of manufacturing, is focused
on this, but it faces a huge challenge and must
move quickly to address the shortfall.
• Executives are unclear about what support is
available because they have trouble navigating
the Government website. Organisations are
sometimes discouraged from participating in
Government programmes because of multiple
conditions and the red tape attached.
• Organisations that do not develop and invest
in their talented executives risk losing them
to competitors because an increasing number
of ambitious executives now manage their
own careers.
• UK executives are generally very skilled and in
demand overseas, as evidenced by the number of
British leaders in key global roles at some of the
largest corporates.
• Some executives are starting to come to the UK
from overseas because they see evidence of a real
resurgence in manufacturing, predominantly led
by the large corporates.
• Companies need to take leadership assessment
more seriously to get the best out of executives,
help them manage their careers and retain them
in their current organisations.
• More incentives are needed to stimulate
innovation and research and development.
• Established UK businesses operating globally
must “internationalise” their senior executive
teams if they are to achieve their strategic
objectives going forward
Heidrick & Struggles 3
Companies studied
Although Heidrick & Struggles talked to
executives at some smaller companies
for this report, most of the firms were
large FTSE or equivalent corporates, with
a high proportion employing more than
10,000 people. For the most part, only a
small proportion of the total workforce in
these organisations were based in the UK.
Generally, the smaller the company, the
higher the percentage of employees in
the UK.
Companies reported that between 61% and 93% of
their customer base resided outside the UK, with a
corresponding high level of exports. Consumer markets
companies tended to manufacture their products in the
same geographical area as their customer base rather than
export them.
Examples of the scale and success that can be achieved
by manufacturers in the UK include Nissan’s Sunderland
factory, its third largest and one of the most successful
in the world behind China and Mexico. Jaguar Land
Rover is enjoying great success with its three vehicle
manufacturing plants and is now building a new engine
plant in the UK. At the same time there is evidence of new
start-up organisations that are manufacturing solely in the
UK, McLaren Automotive being a good example.
figure 1
Rating the United Kingdom’s six key areas of manufacturing competence On a scale of 1-5 (1 being poor and 5 being outstanding)
3.9 General Management
3.8 Innovation
3.2 Research & Development
3.1 Operations
3.6 Supply Chain Management
3.6 Sustainability
Skills, talent and leadership qualities
We asked executives to rate UK talent
on a scale of 1-5 (1 being poor and 5
being outstanding) in six key areas of
manufacturing competence, compared
to their European and global counterparts
(fig 1). These findings confirm the strength
of UK manufacturing and the potential
that exists going forward. The only real
issue facing the industry is scale: The
manufacturing sector in the UK is simply
not making a large enough contribution
to GDP.
4 UK manufacturing: Skills, talent and leadership
General managementThe executives we interviewed saw this as the strongest
area of UK capability. The consensus is that UK general
managers are in demand, helped by the fact that English
is now the international business language. They are
generally excellent at communication, results-oriented,
analytical and able to think conceptually.
Personal development is perhaps not as high on the
agenda as it might be, according to Miles Roberts, CEO
of DS Smith. British general managers sometimes seem a
little risk-averse and conservative, but they are generally
considered to be good at working with different cultures.
Unfortunately, the talent pool is small. Martin Lamb, ex-
CEO of IMI, believes that the education establishment does
not always understand how exciting a management career
in the manufacturing sector can be, and that this has had
an adverse influence on the size of the talent pool.
A number of observations came out during our
discussions:
• There are variances in the way different roles are
perceived in different cultures. For example, the British
regard the CEO as the ultimate position, whereas
Germans often see the senior engineering role as
the pinnacle.
• Two of the top four business unit presidents at
Vesuvius are British, demonstrating CEO Francois
Wanecq’s statement that “UK guys export well.”
• Similarly, two of Nissan’s three global COOs are British –
Andy Palmer and Trevor Mann – and a number of other
UK individuals are on the senior management team.
• Honda has found that investing in leadership
assessment, culture change, talent management and
communication skills for managers improves standards
and brings significant payback.
• David Gosnell, president of Global Supply Chain and
Procurement at Diageo, believes that competition
among companies in the UK has increased
the capability of the current crop of general
management talent.
• Richard Tyson, president of Aerospace and Security
at Cobham, thinks general management has driven
a lot of cross-sector fertilisation, such as efficiency
improvements transferring from automotive into
aerospace and composite expertise from aerospace
into automotive.
• Stephen Harris, CEO of Bodycote, raised his concern
that UK general managers are not as well educated
as their French and German counterparts and
questioned whether this might have a detrimental
long-term impact.
InnovationInnovation had the second highest rating among the
six areas, suggesting high levels of creativity in the UK.
However, there is some thought that a more commercial
focus may be required. Jonathan Flint, CEO of Oxford
Instruments, explained that his firm developed the MRI
scanner many years ago but that Siemens ended up
commercialising it – something that he believes must
not be allowed to happen in the future. Mike Hawes,
CEO of the Society of Motor Manufacturers and Traders
(SMMT), believes there is still what he calls a “valley of
death” between intellectual property generation and
commercialisation in the UK.
To help overcome the problem, the Technology Strategy
Board, the Government’s innovation agency, is working
to identify the industries, technologies and areas of
innovation that will drive UK growth in the future.
A recent example of progress in this area is the
collaborative partnership between Constellium, Jaguar
Land Rover and Brunel University to explore the increased
use of scrap metal in alloy processes, thus reducing the
need to mine virgin materials. The Engineering and
Physical Sciences Research Council supports this effort
and has provided a GBP£4.4m grant that will go towards
creating an automotive light metals research centre, with
Brunel investing an additional GBP£2.5m into facilities.
Another example of innovative collaboration involves
the US automotive component supplier Visteon, which is
working with BAE and Finmeccanica on head-up displays
for cars.
Heidrick & Struggles 5
Although Dyson does most of its manufacturing
overseas for commercial reasons, much of the company’s
innovation and R&D work is carried out in the UK because
of the skill set available. Dyson also encourages its
graduates to spend time each week thinking creatively
about something relevant to the business.
Mike Flewitt, CEO of McLaren Automotive, believes the UK
has leading technologies in areas such as powertrain and
hybrid electric motors, offering huge opportunities for
manufacturers to capitalise upon.
Andy Palmer, global chief planning officer at Nissan,
believes that his company is not far behind Jaguar Land
Rover in terms of UK investment, particularly in battery
innovation, and said that he is proud Nissan now looks
to the UK as a second home. Nissan is also collaborating
with Oxford University to develop algorithms for
autonomous driving.
We have observed that innovation is often better in
smaller companies than in large corporate cultures, which
tend to stifle it. Larger companies therefore need to look at
how they organise themselves from a cultural perspective
to avoid this.
Innovation ultimately leads to value creation, so
companies must have their best people working in this
area or die in the long term. Remember what happened
to Kodak.
Research and developmentAlthough innovation rates high among UK manufacturing
competencies, research and development ranked fifth
among the six areas we asked executives to rate.
It is clearly evident that pressure for an early return
on investment can limit the amount of research and
development manufacturers are willing to devote to
commercialising innovative ideas and then bringing them
into production locally.
There is potential within the UK to address this problem.
Visteon is investing USD$10m in a development centre in
Chelmsford, because of the talent available in the UK and
the close proximity to its European customer base. And
there are already a number of excellent links between
industry and universities, including Manchester, Imperial,
Bath, Southampton, Warwick, Cambridge and Oxford.
Roland Aurich, CEO of Siemens UK, thinks that universities
should be transferring more thought leadership into
industry, and the Government’s BIS initiative is starting to
accomplish that. However, there is much more that must
be done to boost R&D in the UK.
OperationsAlthough receiving a relatively strong rating of 3.1 out of
5, operations had the lowest rating of the six competency
areas Heidrick & Struggles looked at. Cost pressures have
driven some efficiency into operations, but the operational
business model for manufacturing has not really changed
much over the years. However, the functions that support
operations have changed, helping improve performance
through the application of information technology,
financial awareness and better reporting.
Simon Peckham, CEO of Melrose, believes the UK starts at
a disadvantage compared to some overseas competitors
because of the cost of property, facilities and brownfield
sites. Another disadvantage is that UK companies tend to
adhere more strictly to regulations, such as the EU working
time directive, than some less-compliant countries.
However, labour employment contract law helps the
UK, providing a more flexible labour marketplace than
mainland Europe. Whilst labour reductions can happen
more quickly in the UK during a recession, employment
upturns also happen more quickly, because companies are
reluctant to recruit in countries with less flexible labour
employment laws. (Recent UK growth figures highlight
this fact.)
The favourable UK corporation tax environment also
continues to encourage manufacturing. Altogether, there
are many benefits of manufacturing in the UK, whereas
many other countries have hidden costs that may not
become apparent until it is too late.
Some examples of successful manufacturing operations in
the UK include:
• General Motors’ Ellesmere Port manufacturing
plant, a site that was under threat of closure a few
years ago and is now more efficient than some of its
German counterparts.
6 UK manufacturing: Skills, talent and leadership
• Ultra Electronics, which is running a healthy contract
manufacturing business.
• Nissan’s Sunderland plant, where there is a strong
culture of loyalty between the workforce and the
company, and many employees have over 20 years’
service.
Nevertheless, the UK still faces major problems in
motivating people to pursue a career in manufacturing
and arresting the decline in apprentice and graduate
programmes. The UK needs to create more geographical
manufacturing centres of excellence where people want
to work for large co-located manufacturers. Germany has
done this successfully in the automotive sector, with BMW
in Munich, Mercedes Benz in Stuttgart and VW Group
in Wolfsburg.
Supply chain managementThis is one of the stronger areas we looked at. Because it
is cut off from mainland Europe, the UK has developed
high levels of skill and capability in executing supply chain
best practices.
There is some evidence of a need for more procurement
expertise at the board level, where outsourcing of non-
core activities (particularly support services such as IT,
logistics and distribution, hygiene, security and facilities
management) is becoming more critical as companies
focus on their unique selling proposition.
There also appears to be a real demand for senior
executives who can balance the whole supply chain,
namely order book, suppliers, scheduling, factory
production, inventory, work-in-progress and delivery
of finished goods to customers. Consequently, career
development plans need to encourage the movement
of people across functions to allow them to gain broad
knowledge and expertise.
As tier one automotive suppliers are involved in more
assembly and sub-assembly these days, executives who
can manage tier two and three suppliers down the supply
chain are going to be in greater demand.
Andy Palmer of Nissan believes the UK needs to establish
a much stronger supplier base, to make the supply chain
more manageable, reduce complexity and attract large
manufacturers. Mike Hawes of the SMMT shares this view,
noting that only about 30% of automotive components
are manufactured in the UK and that there is excellent
potential to increase that figure through initiatives to re-
shore more component manufacture.
Co-location near customers is key, at least in consumer
markets, with packaging manufacturer DS Smith being a
good example. This is just as well, says DS Smith CEO Miles
Roberts, who believes there is a major road infrastructure
issue in the UK that must be addressed to support the
growth of manufacturing.
SustainabilitySustainability appears to be a more important issue for
manufacturers that are close to their customers. That
makes it extremely important for companies in retail
and consumer markets, where there is high demand
for executives who have experience in this increasingly
important area.
Whether driven by customer demands, legislative
requirements or a search for cost-efficiency, manufacturers
now need more expertise within their executive teams to
commercialise sustainable initiatives.
A minority of firms still see sustainability as nice to have
but a low priority; but even they acknowledge that it will
have to be embraced eventually and that opportunities
exist to capitalise on it.
Heidrick & Struggles 7
At Heidrick & Struggles, we find ourselves increasingly
involved in searches for Environmental, Health & Safety
executives, where choosing the right candidate can have
a significant impact on business performance. We have
found that the UK is well ahead of most countries in this
area and we see many examples where sustainability is
contributing to the bottom line:
• Honda UK has made a large investment in water-
based paints – an area where the UK has significant
knowledge and expertise.
• Nissan recycles water, uses wind power to generate
electricity in Sunderland and makes money on
carbon credits.
• Ultra Electronics has ISO 14001 accreditation at most
of its UK sites, which drives the company to reduce its
carbon dioxide emissions and overall carbon footprint,
according to HR Director Keith Thomson.
• Diageo has made significant progress in sustainability:
98% of its packaging is made of recycled materials;
all sites are moving toward zero landfill and
approximately 30 UK sites have already reached
that goal; and the company uses local raw materials
whenever possible, believing it has a positive influence
on customers’ buying decisions.
• DS Smith uses only recycled materials and, as one
of the largest users of power in the UK, is looking at
building an anaerobic power plant in Kent to generate
steam for the production process.
Management talent: better than 10 years ago
Large corporates have played a significant part in
improving and developing manufacturing management
talent and implementing best practices. At the same time,
two recessions and commercial pressures have weeded
out poor performers. Today, the old “school tie” culture
is vanishing, replaced by a more merit-based system. It’s
no longer sufficient to just copy the boss. Instead, firms
are looking for innovation, continuous improvement,
increased transparency and efficiency. There is high
demand for commercially savvy individuals who see the
big picture and understand the impact of their decisions
on the balance sheet.
This evolution is paying off. For example, the automotive
industry has given UK manufacturing a huge vote of
confidence, investing more than GBP£8bn over the last 10
years. Nissan’s Andy Palmer, who left the UK 13 years ago,
says significant progress has been made.
Siemens CEO Roland Aurich believes the UK now
competes very successfully internationally, partly as a
consequence of the single European market.
Large global corporates have led the way, driven partly
by cost pressures and global overcapacity in some
sectors. However, there is still work to be done further
down the supply chain, particularly in strengthening and
“internationalising” senior executive teams.
The UK also has to move into areas where there are
opportunities for growth. For example, McLaren
Automotive CEO Mike Flewitt wants to see more UK
production of composites, noting that his company has to
source carbon fibre tubs for its road cars from Austria.
To take manufacturing to the next level, even more
centres of excellence are necessary. The Manufacturing
Technology Centre, one of the seven High Value
Manufacturing Catapults, has done excellent work driving
8 UK manufacturing: Skills, talent and leadership
innovative approaches and bridging the gap between
academia and industry. Such initiatives need to continue
and grow.
Martin Lamb, ex-CEO of IMI, believes that the robotic
syllabus approach needs reviewing – particularly
in secondary education – and that more successful
entrepreneurial leaders should be encouraged into
schools to show students what a rewarding career
manufacturing can be.
Government intervention
Stephen Harris, CEO of Bodycote, is one of many business
leaders who believe the UK faces a serious talent shortage
in the coming years.
Partly to bolster the talent pipeline, the UK Trade and
Investment department has backed the Automotive
Investment Organisation (AIO), which takes its direction
from the Automotive Council and is led by former Ford
of Britain Chairman Joe Greenwell. The AIO is working to
develop the home-grown talent pool, attract foreign direct
investment and repatriate the supply chain.
There is consensus that the UK will face even more
pressure from emerging markets as overseas
manufacturers become more capable. Many executives
would like to see more incentives to re-shore
manufacturing, similar to the United States effort to re-
shore telecoms and medical equipment in recent years.
It appears that many businesses would take on more
apprentices if direct Government funding were available
to support it without the complex qualification and
compliance criteria that are associated with some
current schemes. Additionally, more incentives should
be available to encourage co-location of R&D centres
with manufacturing facilities to increase investment in
intellectual property.
The UK Government also has an important role to play
in attracting people into manufacturing by promoting
the industry and supporting education that leads to a
manufacturing career. A number of senior executives said
that more financial incentives should be made available
to encourage graduates to study engineering and enter
manufacturing careers. The UK could take a lesson from
the German system with its centres of excellence for
the automotive industry around Munich, Wolfsburg and
Stuttgart.
The High Value Manufacturing Catapult led by CEO Dick
Elsy has gone a long way to bridge the gap between
industry, academia and other research organisations. Its
seven existing centres of excellence are:
• Advanced Forming Research Centre
• Advanced Manufacturing Research Centre
• Centre for Process Innovation
• Manufacturing Technology Centre
• National Composites Centre
• Nuclear Advanced Manufacturing Research Centre
• Warwick Manufacturing Group
Heidrick & Struggles believes these centres should
continue to grow and that even more could be added.
However, Terry Morgan, chairman of the Manufacturing
Technology Centre, thinks the Department of Education
is not doing enough to underpin the vocational and
academic skills required for young people to go into
manufacturing. In his other role as chairman of Crossrail,
Morgan encourages suppliers to recruit one apprentice
for every GBP£3m of work they are awarded, and the best
suppliers follow his lead.
Heidrick & Struggles 9
Overseas experience
Talented leaders continue to leave the UK to work in
other countries. While overseas experience can be highly
valuable, the trick is to give those leaders a reason
to return and share what they have learned with up-
and-coming talent.
There are multiple reasons why talent decides to leave
the UK. Many large global corporates require senior
executives to have worked overseas as part of their
development. Much of our talent management, leadership
assessment and recruiting work indicates a desire by our
clients to “internationalise” boards of directors and senior
executive teams.
In some cases opportunities at home were not available.
Some managers have sought to capitalise on their
knowledge of English – now the international business
language – and pursue jobs with overseas employers.
In certain sectors, co-location with customers has played
a part.
IMI’s ex-chief executive Martin Lamb believes companies
need to understand the value of what they are selling
from a customer perspective. By spending time in other
countries, executives learn to concentrate on what he
calls customer “sweet spots.” For this reason, some of IMI’s
graduates are given four different assignments on four
different continents as part of their programme of work.
It should be pointed out that leadership movement is not
all in one direction. We are now finding that some senior
European manufacturing executives are keen to come
to the UK. A good example is the recent appointment
of Wolfgang Stadler as Jaguar Land Rover’s Global
Manufacturing Director following a career at BMW.
Joint ventures and alliances
Opinions vary greatly on the success of joint ventures
and alliances, particularly from a people perspective.
Nevertheless, there are few truly global organisations that
can achieve their strategic objectives without some joint
ventures or alliances.
Alliances in the manufacturing sector tend to be done for
three reasons: technical / production, market entry or back
office / procurement. Nissan is a big supporter of alliances
due to the cost savings and access to talent they provide.
Whatever the reason, the new organisation’s business
model must be clear from the start. Each party must be
seen to be contributing something and the balance of
composition must be right. We are seeing that clients need
considerable support from a cultural perspective when
they join with another organisation. It must not feel like “a
foreign company is doing something to them,” according
to David Gosnell of Diageo.
One UK success story is the alliance between Ultra
Electronics and GKN on the Boeing 787 wing ice protection
system, which uses electronic control of electro-thermal
heater mats instead of hot air from the engine. Ultra
Electronics is a strong proponent of teaming. Cobham has
a similarly successful alliance with Northrop Grumman in
the US.
Miles Roberts of DS Smith points out that when it comes
to joint venture or alliances, UK law is “very business
friendly, particularly if a contract dispute arises.”
10 UK manufacturing: Skills, talent and leadership
Building and managing cross-cultural teams
Cross-cultural teams are found frequently in large
corporates. There are 15 nationalities among Nissan’s top
100 global people, for example.
UK talent often plays a significant role on these
multicultural teams, breaking down barriers and helping
achieve consensus. This generally requires experienced
senior executives who are sensitive to cultural differences.
One nationality must not dominate the others or cultural
silos can result. Many organisations have found that
people from the UK work together particularly well with
people from Asian cultures.
The UK is a good place from which to run global teams
because of its location between the Americas and Asia.
IMI, for example, has successfully acquired businesses,
built and supported them from the UK head office while
leaving an entrepreneurial management team in place
locally. This approach has helped it succeed against
competition from some of the best US companies.
Continuing challenges
The manufacturing sector still faces enormous challenges
in the UK: increasing the talent pipeline, developing
current executives, succession planning and putting
together effective leadership teams. Supply chain
management is a weak link for many companies.
“Internationalisation” is high on many agendas, along with
increased efficiency, innovation and diversification.
Identifying the right people to handle these issues may be
the greatest challenge of all. With its global network and
wide-ranging expertise, Heidrick & Struggles is ready to
help the UK manufacturing sector meet it. n
About the author
Graham Smith is a Partner who leads Heidrick & Struggles
Manufacturing Practice based in London. Prior to joining
Heidrick & Struggles, Graham was a Partner at KPMG
Management Consulting where he was Global Head of
the Engineering & Industrial Products sector. A qualified
management accountant he spent his early career in
industry in line and senior management roles within the
manufacturing and automotive sectors.
Heidrick & Struggles 11
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