June 22, 2009 3:47 am

Dean’s Column: Steady drip of ethical values lifts S&S to the top

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Jim Fraser

Jim Forbes: no tolerance for egos or large expense accounts

When the world is baying for the blood of bankers, it is particularly dangerous to admit to being not only a banker but an investment banker.

I used to be one, advising large companies and governments on capital raising, privatisation, mergers and acquisitions and strategy.

A glutton for an unpopular career, I then moved into government, though not, I should add, as a politician: I created and managed the Shareholder Executive, a body designed to improve the government’s performance as a shareholder.

In 2007, I accepted the deanship of Cass Business School because of its strong tradition and reputation spanning both finance and management.

In the course of my advisory career I worked with some leaders who were highly egocentric and others – particularly in banking – whose values I really had to question. The person I want to write about was not one of these; indeed, he will most likely be shocked that I would want to write about him at all.

Jim Forbes, former chief executive of Southern Electric and then Scottish and Southern Energy had a clear, well understood approach and set of values which I was able to observe as a member of the board.

Since joining Cass, values, ethics and the emphasis we place on them in business education have never been far from my thoughts.

When Mr Forbes took over Southern Electric, the group was a newly privatised electricity distribution group. Under his leadership and that of his successor Ian Marchant, it has become the one of the largest energy groups in the UK, a highly integrated industry group – in the FTSE 30 – and one of only two utilities in the UK that is not controlled by an overseas parent.

So what can we learn from Jim Forbes?

First, he had a style of leadership which did not tolerate egos, large expense accounts or corporate trappings but was grounded, people-centric and simple. He encouraged rigorous financial discipline, service and team-work. This influence still permeates the business and has helped the group avoid the trap of regarding the boss as a heroic leader, ignoring any weaknesses.

Second is the value of serendipity: he was the right man in the right job at the right time. Mr Forbes took over Scottish and Southern when the company was emerging from government ownership and brought a strong emphasis on operational efficiency and customer service. These values are now part of the DNA of the company and have led to it gaining some of its best customer service ratings in the industry. The group is also regarded by Ofgem as one of the most efficient operators in the industry.

Third, M&A may be exciting, but too many good chief executives have become distracted by it. Mr Forbes’s first act on becoming chief executive was to pull out of a competitive auction for a water company. He recognised the enormous potential benefits of “sticking to the knitting”. After privatisation, some water industry groups indulged in disastrous overseas moves or value-destroying diversifications that were subsequently unwound, rather than focusing on core efficiency. Mr Forbes introduced and then stuck to rigorous financial targets that made sure that any deals were done on the right terms.

Fourth, executives need to have good timing. When it became apparent that Scottish Hydro might be prepared to agree a merger, Mr Forbes rapidly stitched together what has become one of the textbook mergers in recent UK corporate history, making sure both companies would profit from the expanded platform.

Fifth, the ability to spot and nurture good leaders, and to know when to pass the baton. Scottish and Southern has a very strong cadre of leaders, with great continuity of service.

The four executive directors who constitute the leadership team form a very cohesive partnership under Ian Marchant, who was himself Mr Forbes’s finance director. All four executive leaders were identified and nurtured under Mr Forbes and represent what must be one of the longest-standing teams of its type in the FTSE 100.

Following on from finding and developing the talent, Mr Forbes picked exactly the right moment to move on – when he felt he had taken the company as far as his skills allowed and when the new leadership was ready for the next set of challenges.

In addition, not only did he vacate his executive position, but content to retire on a high note, he refused to slide into the chairman’s seat and left the field for his successor.

I learnt a great deal from Jim and think of him as a real role model for all who seek education in business, particularly at this critical time of uncertainty and change when the need for a steadying influence is so vital.

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