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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.


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.


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.


• 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.


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


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.


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.”


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.


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