= agility and responsiveness
The Group comprises a number of high quality, specialised businesses which design their individual business models to make them essential to their customers.
We encourage an entrepreneurial culture across our businesses, through a decentralised management structure. We want the managers to feel that they have the freedom to run their own businesses, while being able to draw upon the support and resources of a larger group where this is beneficial.
Within our businesses we have strong, self-standing management teams who are committed to, and rewarded according to the success of their businesses. This ensures that decisions are made close to the customer and that the businesses are agile and responsive to changes in the market and the competitive environment.
The Diploma management model has been built around strong, self-standing management teams in the various operating businesses, committed to and rewarded according to the short and long-term success of those businesses.
The small corporate team in Diploma focus on strategic and financial control across the Group businesses. In the major business clusters, there are small senior management groups providing more direct leadership and control and ensuring quick decision making.
Across the operating businesses, we have a cadre of ca. 100 senior managers, who demonstrate a good blend of energy, ambition and experience. The average length of service within their companies/industries is ca. 11 years.
Within an agreed strategic framework, the tactical decision making takes place in the businesses, close to the customers. The management teams can therefore respond quickly to changes in market demand, customer requirements or competitive dynamics. This proved very important during the 2009 worldwide recession, when our management teams were able to closely align resources (both people and working capital) to the changing demand to maintain customer service levels while managing operating costs and cash flow.
Profile of Senior Management:
- Senior management cadre: ca. 100 managers
- Average length of service within company/industry: ca. 11 years
Essential to the successful development of Diploma over many years, has been the ability to make carefully selected acquisitions to accelerate growth and take us into new, but strategically related markets.
In introducing these acquisitions into the Group, it has been essential to create an environment where entrepreneurial owner managers feel comfortable staying with the businesses under new ownership and thereby ensure continued growth and planned succession.
The acquisitions we have made have typically been privately owned companies, already successful and with a good track record. The reasons for sale are varied. It may be that the owner is approaching retirement and wants to engineer a planned exit over a period of time. In other cases, multiple owners may be using the sale to allow the majority owner to exit, while the minority owners continue in the business under restructured ownership. In many cases the business has reached the point where additional resources are needed to take it to the next level of growth and owners are unable or unwilling to provide the additional funding.
Our willingness to be flexible when acquiring businesses has proved to be a significant competitive advantage for us in making acquisitions. In many of our medium sized acquisitions, where the objective has been to extend into new markets or geographies, it has been essential to retain the committed involvement of the owner managers. In these cases, we leave owner managers with a minority shareholding (typically 10–20% in aggregate) with put and call options, exercisable typically over three to five years. This allows Sellers to crystallise the larger part of the value created in their business, while giving them the opportunity to share in the future growth of the business post acquisition. This aligns our interests closely and reduces risk.
Flexible acquisition model:
- Owner managers can retain minority shareholdings
- Put and call options exercisable over three to five years
- Aligns interests and reduces risk
The development of strong managers and management teams is essential for the Group's continued growth; a committed group of managers is required who respond to a challenging work environment and have the potential to manage aggressive growth strategies. Importantly they must be able to motivate their staff and engender in them the same commitment.
The first priority is to ensure a challenging work environment for talented managers who want to broaden their skills and experience. They are encouraged to set demanding but achievable growth targets for their businesses and to formulate convincing strategies to achieve these objectives. Once agreed, the management teams are responsible for the execution of these strategies, and can take full satisfaction from the success they achieve. Tailored management development and training programmes are encouraged to further develop the skills of managers.Appropriate reward systems are also important in keeping managers motivated and to give recognition for their success. Management compensation is structured to reward performance against the Group's Key Performance Indicators on a short and longer term basis.
We also ensure that the management teams have the appropriate resources in place to support them in their strategies. Regular investment is made in IT systems and automation to ensure that management have access to the information they need and the ability to run their operations efficiently. The management teams can also draw on the resources of the larger Group – whether by accessing best practices from around the Group, or by sourcing cost-effective services.
- Challenging work environment
- Appropriate reward system
- Resources and support