Human resources must up their act if UK is to succeed
When Wolfson, the Edinburgh-based maker of advanced silicon chips, announced yesterday that it had received a takeover bid …
Anthony Hilton
Published: 01 May 2014
When Wolfson, the Edinburgh-based maker of advanced silicon chips, announced yesterday that it had received a takeover bid — and one that is likely to succeed — from larger us rival Cirrus, it immediately reignited the recurring debate about the seeming inability of this country to nurture and sustain modern hi-tech businesses.
We are good at inventing these things, and we are getting better at spinning them out of universities so they can be exploited commercially. But somewhere we are still lacking what is necessary to turn these businesses into established world leaders.
In the US, in contrast, and particularly in California, they seem to have no problem. Of the 100 leading businesses to emerge in the world over the last 20 years, several have come to the fore in Asia, and many more in the US. Virtually none have been spawned in Europe, let alone in the UK.
The common assumption is that the US financial system works better and there is more patient capital willing to be more adventurous, but that is not the whole story. It has an advantage because, as one British venture capitalist said the other day, the stupendous profits Americans have made from the dizzyingly high market valuations of Twitter, Facebook and suchlike give them the money to take a further chance on all manner of outlandish ideas, some of which might just pay off.
UK venture capitalists do not have that financial firepower, so are more cautious — they prefer to back established businesses where the risk is less.
But venture capitalists fall by the wayside even in Silicon Valley, which prompted one observer to say counter-intuitively that the major advantage the Americans had was in human resources. Whereas in the UK these departments are characterised as being anal, inward-looking and living in a world semi-detached from the daily cut and thrust of business life, they are centre stage in the hothouse of Silicon Valley.
The practical effect of this is that when a venture capitalist backs an entrepreneur, it also understands the people the entrepreneur will need to make the business successful and turn the idea into a viable sustainable company. So it knows who to bring in to run finance or marketing or production, or indeed all three, and insists those people are appointed.
Perhaps because many of the venture capitalists employ people who have been successful entrepreneurs in earlier life, the financiers also understand how the company will need additional skills if it is to overcome hurdles at subsequent stages of its development. Expansion is properly planned for in advance by bringing in the people who know what needs to be done to take the company through its next stage, even if this means jettisoning some of the original crew.
The difference between California and the UK lies not in the availability of finance but in the understanding of the human resources needed to make things happen coupled with the ability to find and recruit those who have the skills.
In Britain, this is rare indeed. Human resources departments see themselves as reactive not proactive. They have a secure role monitoring employment legislation and ensuring the business is compliant, putting in place training programmes and handling the fallout from redundancies and closures. But in general they rarely venture out from their narrow domain, and rarely have boardroom clout. There are exceptions — Unilever being a case in point — but it is almost unknown for the HR chief to be genuinely proactive in terms of thinking about what the business will need if the chief executive wishes successfully to deliver on his strategy.
The HR industry will no doubt protest that this is an outdated view of what it does, but in many cases it is still the reality. At a conference organised by CRF last year, one chief executive privately said he hoped that one day his HR chief would come to him and say that, with all the business they are planning to do in China, they should be looking for a Mandarin-speaking accountant. But he was equally convinced it would not happen. HR departments are not in general run by people who think it is their role to tell the chief executive what senior people he is going to need in a couple of years if his plans are to have a hope of success.
It is obviously unfair to lay the blame on human resources for the complete failure of the British economy to develop and sustain new businesses. But it has substance. For far too long, management in this country has been entirely focused on numbers, with accountants in the driving seat. It is high time more realised the business success is actually about people.
But if that is ever to happen, human resources departments will have to raise their game.
