From Bags to Blenders

CHAPTER TWO

THREE STAGES

Looking back, it is clear that Peter Black went through three distinct stages on its 60-year journey, starting in 1947 through to the final sell-off in 2007. I have observed that many other companies that have expanded over the years have had a similar pattern of growth.

Stage One

The first stage is the start-up period. The founder is often a dynamic and hard-working entrepreneur who runs the business 'off the seat of his pants'. The danger is that there is an absence of systems of control, and the business relies on the strength of personality and example of the owner.

Fortunately, my father was an enlightened founder. He recognised that if the business was to go to the next stage, things had to change. He encouraged Thomas and me to bring in additional young management and to broaden the product range. His approach was: get into trouble for the mistakes you make, rather than the ones you don't make. I remember going to a trade fair in Germany and seeing a range of shopping bags made out of a new polyurethane-based material called Vistram which looked and felt like soft leather. I found out the name of the German manufacturer and ordered 1,000 metres. When I got back to the office, with some trepidation I showed a cutting of the material to PB and told him about the speculative order I had placed. His reaction was not what I expected. He said, 'You idiot, you should have ordered 10,000 metres.'

PB jokingly said the business should be called Thomas and Gordon Black and Father Limited. Everything used to be much more formal. My father was Mr Black and Thomas and I were Mr Thomas and Mr Gordon. All this could be slightly confusing, and led to some amusing incidents. Thomas paid a visit to our Skipton factory. On arrival, he came face to face with a new cleaner who did not recognise him. In a forthright Yorkshire way, she asked, 'Who are you?' Thomas replied indignantly, 'Mr Thomas'. It was clear to Thomas that she did not realise who he was. He was quick off the mark and saw this as an opportunity to gain some intelligence. He said, 'I've come for a job, what's it like here?' The cleaner's response is now part of our history. She replied, 'Well, the money's good, you have to work hard, the old man is a real charmer, but his eldest son is a right b-----d!'

In the early days, we really lived the business. When I was at school and university, I received regular business updates from my father. Looking back, I have sympathy for my long-suffering mother. The family residence was five minutes from our head office in Keighley. Thomas and I both lived at home before we got married. Mostly the conversation was about business. The evening meal was early, at 6.30pm, so that we could go back to the factory and check the night shift. Saturday morning was mandatory - the only bending of protocol being that we wore a sports jacket and tie rather than a suit.

My father-in-law, Geoffrey Dawson, was a big influence on Thomas and me as regards the business and life in general. Geoffrey and my father got on well, although their approach to business was poles apart. My father was an energetic entrepreneur, hands-on, disciplined, and devoted to detail. Geoffrey was a more laid-back (I'm choosing my words carefully) strategist who concentrated on the bigger picture. It was Geoffrey who encouraged Thomas and me to take the business public. It was a measure of my father's open-mindedness and flexibility that he welcomed Geoffrey's input.

Stage Two

This is a critical stage, demanding a more formal and professional approach to structure and personnel. The objective is to reduce dependence on the founder's personalised style and put in place strong foundations which can support sustained growth.

As regards structure, pivotal to all the changes we made was the maxim 'small is beautiful'. Rather than one big sprawling entity, we put in place a decentralised, three-tier board structure:

• Directors of Peter Black Holdings were the Joint Chairmen (Thomas and myself), the Group Chief Executive, the Group Financial Director and the Non-Executive Directors.
• The Executive Board was chaired by the Group Chief Executive and was made up of the Group Financial Director and the Managing Directors of the different operating companies in the Group.
• All the operating companies had their own board of directors, comprising the Managing Director, the Financial Director, the Production Director and the Sales Director.

This devolution of management responsibility and accountability to the individual operations promoted strong leadership, the ability to react promptly to market demands, job satisfaction and the preservation of the entrepreneurial spirit on which the company was founded. At all levels, it was important that boards did not become too big and unwieldy. In my opinion, ten directors is the absolute maximum. No director at any level was permitted to take on non-executive duties with other companies. We wanted them to focus 100 per cent without any distractions.

The chain of command was crystal clear - there was no hiding place for our managers at any level. Their areas of responsibility and accountability were clearly defined. The pressure to deliver budgets was passed down the line. In this context, the following incident comes immediately to mind. There was a knock on my office door and in came a footwear production manager. I could almost smell the negativity. With reference to a production problem, his opening line was 'You've got a problem, Mr Gordon'. I did not let him proceed. My instant reply was that I did not have a problem: HE had a problem - his job was to bring me solutions rather than pass the buck.

We realised correctly that the management team that was in place during Stage One would need changes and additions in order to navigate Stage Two successfully. Some of the original team could adapt to a more professional and structured world, others could not. In Stage One our financial controls were somewhat haphazard. In Stage Two, especially as a plc, we needed accurate and up-to-date financial data. Stephen Lister joined us as Group Financial Director in 1988 and he led the team, putting in place the appropriate systems and controls. As our product range diversified into toiletries, cosmetics, healthcare etc. we needed to bring in new executives with the relevant specialist skills.

Stage Three

If the vital changes required in Stage Two had been successfully implemented, Stage Three should bring more stability, and the day-to-day running of the business should be less of a challenge. Typically, more macro issues emerged:

• The advantages and disadvantages of being a family business
• Whether or not to grow by acquisition
• What are the merits of Non-Executive Directors?
• Whether or not to sell, part-sell or float.

One cannot be definitive about whether it is right or wrong to remain a family business. Specific circumstances point towards which is the most viable route to take. In our case, I am sure Thomas and I made the right decision at an early stage not to remain a family business. Thomas has four boys, my sister Josefine, who lives in the USA, has four boys, Louise and I have one boy and two girls. Feed in husbands and wives, and the politics would have been disastrous. I also think it is fundamentally wrong to compel siblings to join a family business when, given freedom of choice, they would have much preferred to do something completely different. In extreme cases, this sort of pressure can cause serious unhappiness. In addition, we would never have attracted the high calibre of management which enabled the company to progress, if all the best jobs had gone to members of the family. I am reminded of the old-fashioned Yorkshire mill owner who introduced his son to one of his foremen as follows: 'Smith, this is my son Rupert who has come to start at the bottom for a few days'.

On the other hand, there are certainly examples of eminent private companies that have remained family businesses. They have stood the test of time and are progressing in a fast-changing world. There are two examples close to home for me. My daughter-in-law is a member of the Fenwick family - their stores have moved with the times and are as highly regarded as ever. One of my closest friends, Ian McAlpine, is Chairman of the builders Robert McAlpine - they have consistently outperformed the competition and have maintained their position at the forefront of their industry.

If I had my time over again, in the interests of discretion I would not call a company by my own family name. A company's name should be simple and internationally pronounceable. Some of the mistakes that have been made are amazing. Did you hear about the Italian genetic engineering company called Gene Italia?

Acquisitions are a big subject. Peter Black's expansion was indeed the result of organic growth and acquisitions. Some of our takeovers were more successful than others. Looking back on our experiences, I have some hard-won observations to pass on:

• Proceed with caution. With a little creative accounting a mediocre company can be made to look more attractive - the process of dressing up a business for market has been likened to putting lipstick on a pig. We often found that when we got under the skin of an acquisition, there were a few unpleasant surprises. The Americans have...