HANSON arouses strong passions. Over the years the market has loved it, happily sanctioning its claims to be able to extract more value from targeted companies than incumbent management. Critics, on the other hand, charge that in the building, as opposed to the extraction, of value, Hanson is mediocre: in concentrating on short-term returns to shareholders it short-changes the future.
What few dispute, however, is the fitness of Hanson ‘s stripped-down management style to its purpose of maximising shareholder value. A headquarters of 120 people for a group with 80,000 employees concerns itself solely with finance: providing they meet stringent financial targets, operating managers are highly autonomous.
Coordination by the market rather than by hierarchy has the virtues of simplicity and economy. But it has drawbacks too. Lateral communication (for spreading best practice) is difficult. And since there is no group personnel department, how does Hanson find good people in its companies to fill management vacancies around its divisions and companies? Simple – and apt. It runs a competition.
Every year Hanson chooses two ‘Annual Achievers’ (one in the UK, one in the US) from around 150 applicants in the operating divisions.
The winning criteria have nothing to do with qualifications or potential, and everything to do with achievement: ‘Not the future, but strictly what you’ve done in the past,’ says Peter Harper, the main-board director in charge of the scheme.
For Hanson , the aim of the competition is simple. It wants to identify management talent that otherwise would go unnoticed by the centre. ‘It’s a safety net to pick up people who would not come up through the normal channels,’ says one manager.
Once that talent is pinpointed, Hanson is as ruthless as you would expect in ‘robbing Peter to pay Paul’: promoting the achievers to new hotspots and leaving their places free to be competed for by other would-be achievers. Previous award winners have ‘usually gone on to higher things’, says Harper. The first award-winner in 1983 now runs the industrial services division. Another is on secondment to the DTI’s innovation unit.
The other purpose is to expose operating managers to the Hanson Group, which they would normally never meet. (Hanson ‘s US chief, Lord White, used to boast that he never set foot in the operating companies it is a principle that even the most senior operating managers do not go on the Hanson board.)
This year’s winner is Ken Fredericks, leaf and technical manager at Imperial Tobacco, who developed a series of measures which have made Imperial’s cigar-making capacity ‘the best in Europe’, acquiring BS 5750 in the process and increasing productivity by 63 per cent. Fredericks agrees that Hanson ‘s budget-setting is ‘horrific’, but adds that ‘we have never submitted a major capital expenditure proposal that has been turned down’ – a surprise in view of Hanson ‘s reputation.
Fredericks’ prize: three weeks in the US. But this is Hanson: one of those weeks will be work.