Chief Human Resources Officer, Hitachi Europe
Hitachi, one of the world’s biggest corporations is contributing significantly to key UK infrastructure, the two headline makers being high-speed trains, that are now hurtling through the Kent countryside cutting journey times in half, and HS2 in the future, and nuclear power, still considered by power industry experts as the only truly reliable and sustainable form of energy as fossil fuels diminish.
Stephen, tell us about your early career and how you got into HR.
I was at university and a family friend who worked for John Lewis in HR encouraged me to consider a career in people management, so I applied for a number of HR graduate roles. Why it got my interest was, I think, the obvious things really – as the well-worn cliché says, people are every company’s greatest asset, so that alone made it a worthwhile vocation in my mind, and cliché or not, I really don’t think you can underestimate the value HR can add in making that a reality. My first role was on a graduate training scheme at United Biscuits, where I managed production lines and took on a number of HR roles, which culminated in becoming employee relations manager for the site. I was a couple of years into my career with responsibility for employee relations in a factory that operated, 24/7 and was highly unionised, so it was fantastic experience. At that time, UB were implementing new working practices, and I was also involved in downsizing and closing a large production site, so there was a lot of on-the-job training around communications, change management and the key principles of building relationships and trust. From there I moved to another large site in Glasgow as HR Manager and became part of the senior team. Again we had a change management challenge, because the site was struggling from aged processes and infrastructure. I worked with senior management and engaged with the staff to see how we could transform the site; the objective was to get investment to develop the plant, and make it sustainable for the future.
In the past, there had been changes to modernise the business, but never before had the market been so competitive. The pressure was greater than ever and we had a burning platform for change; the future of the business was in jeopardy, so there was no option. Setting the tone right to deliver such a message is crucial, and I was involved in leading change as we consultatively transformed the site. By the time I left, the site was far more efficient and competitive to win new business, and there were other examples of positive wins, including having the best safety record in the group, and absence rates had decreased dramatically. I then moved on to a corporate role within UB with a concentration on talent management which was a great experience as it included interacting with the Board of the company on the development, as well as their executive teams.
In 2000 I joined an American company called WR Grace which operated globally, producing specialty chemicals for a wide range of industries. I was European HR Director, which got me into international HR for the first time, and I also gained a really useful understanding of US corporate culture, spending time in Boston and Columbia, Maryland. With a European role I became familiar with the many challenges of getting to grips with different country cultures and legal frameworks. It’s not until you experience this on a practical level that you truly appreciate the complexity, and trying to navigate that, and explain it to the US parent company, was a continual challenge. It was a great business, but it was announced that the organisation was going into Chapter 11 in the US, due to legal issues from the historic use of asbestos. We had to explain to staff that the underlying business was strong and it was an important process you need to go through to resolve the financial issues and ensure you have a successful company in the future. Employees of course followed events online, especially the publicity in the US so we focussed on continually communicating transparently and comprehensively.
After four years, I left to join a packaging business called Chesapeake as European HR Director, responsible for 5000 people around Europe, and sitting on the Operating Board of the company. Again, this was a US-owned company, but unlike Grace, the core decision making was here in the UK. I had a broad HR role plus responsibility for Health and Safety and Marketing Communications. Again I was involved in change management, including restructuring, particularly the pension schemes. Managing defined benefit pension scheme changes seems to have been a continual role for me and as HRDs we can make a real financial impact if we can get to grips with pension issues. Anyone with senior HR ambitions may want to consider developing pensions expertise so you can explain it well in the boardroom and demonstrate real value. My view is that we shouldn’t just walk away and let the experts take ownership, and actually that goes for financial stuff in general. HR needs to understand the P&L, balance sheet and the key financial drivers so we can contribute and talk the language of the business rather than HR jargon.
It's that issue of HR's alignment again, do you think the sector is always having to explain itself?
As a function, HR has always talked about partnering with the business, but that suggests that it’s somehow peripheral. HR does not succeed unless it is in the thick of it, wholly understands the business, is integral to it and brings all stakeholders together to address issues and plan people strategy. In my opinion, HR needs to deliver added value solutions which meet the needs of the business and always ensure that the HR strategy is aligned with the business. We need to continually ask ourselves what actions we must take so our organisation’s people can deliver its business goals. If we can do that well then we can demonstrate the difference we and our teams have made.
The two previous companies had very clear agendas, but with your next move to Hitachi, here is a corporation with arguably the widest range of products and services in the world.
It was a key reason for me joining Hitachi in 2008, plus it is a Japanese company, a culture that has always fascinated me. Hitachi is a brand everyone knows but typically people know little about what it actually does. It’s a huge company in the top 50 global businesses with revenues of around $100 billion. In Europe we have about 11,000 people across 100 companies in a wide range of sectors; from building high speed trains, to nuclear power stations, financial services, consulting, construction machinery and information technologies, services and solutions. I believed then, as I do today, that there is a massive opportunity for HR to make a difference. My first impressions were that the businesses were somewhat disparate and working very independently, which I suppose wasn’t surprising when you consider the vastly different sectors in which they operate. Consequently this reflected on how the business was perceived both internally and externally, and so a key objective was to, metaphorically speaking, ‘build bridges’ so that the organisation could be viewed as a whole ‘One Hitachi’. If we could make that work, it would make a tremendous difference.
The way Hitachi’s businesses work separately is part of our culture and helps define who we are and have been for decades. It has underpinned our success, but with such diverse businesses, we faced challenges around communicating who Hitachi is and ensuring that when we go to the market for talent we can attract, retain and develop the best. Of course, a degree of autonomy and de-centralisation is unavoidable, as each area of the business has to manage its own P&L and there are different legal, cultural and other requirements depending on which sector and countries they are operating in. However, a lot of HR processes and functions can be set up consistently across all sectors and provide part of the ‘glue’ that can give even a massive and diverse business such as this a clear people agenda. We need to keep valuable skills and talent in the organisation, and one way we’re doing this is by giving people clear sight of opportunities across the business. Previously, staff reached the top of their group companies and couldn’t see what their next role could be. We had to remove the barriers and work to create different thinking. It’s tough to change on such a scale, but we are getting there. A part of the change process is introducing a careers website within Europe giving access to information on job opportunities on a wider scale than ever before, and today we have around 200 jobs in Europe advertised.
For HR, realistically these are tough issues to address across such diverse territories, trying to consistently be a presence for a workforce of thousands.
Certainly, technology is important and we are introducing several new systems to support the changes we need to make. However, there is no substitute for a strong HR presence, with HR leaders that are better supported with shared services and systems, and it’s clear we’re working better together, finding areas of common interest, building trust and engagement to make change. At a global level in 2011, there was a view that we should look globally at best practices, and since then we’ve been working with colleagues around the world to change HR practices. We now have a global performance management system, and whereas before there was no consistent way of measuring performance, we now have visibility of talent across the organisation.
The system this year will be used by 100,000 Hitachi staff. We’ve also introduced a global employee survey, and last year had responses from152,000 staff helping us understand, amongst other things, what people value in Hitachi and what we could do better. The response rate was about 78 percent, and people were really keen to give their view – it highlighted a number of common concerns across the company, and the work focussing on career progression across the business, was a direct result of this feedback. On such a massive scale, I think this is a considerable achievement. There were also a lot of positives which came out from the survey, including; appreciation of our colleagues, the strong focus on integrity and pride in the Hitachi brand, but it is so important to make sure surveys draw out issues of concern, and to respond to them to avoid an expensive wasted opportunity. We have implemented a lot of other change too in areas that deliver a more immediate financial benefit such as single payroll providers in each country and a global broker for employee benefits. By working together across all Hitachi companies we have reduced costs significantly through leveraging our scale and centralising to focus on best practice.
The skills shortage in many of your sectors is a significant challenge for the UK and Europe. You said the business has opened up potential, but developing individuals and understanding their aspirations must be a big challenge.
It is, and there is no one easy answer to address it. Having a global performance management system helps as there is a framework for discussion and a system to record people’s aspirations. We run a lot of development programmes, including our European leadership programme, where we invite high-potentials to develop their strategic leadership, but also to address specific business issues. So the training covers both theory and practical implementation and delivers real and immediate value. It is also about creating opportunities for people to meet each other from a wide variety of businesses, to develop a new network, and it raises their profile and shows them what is going on across the organisation. The high profile of the programme means that our Chief Executive always attends, gives his view on the company and takes questions and answers with the delegates, which they value very highly. We are increasing our apprenticeships and traineeshipprogrammes significantly, and recognise that attracting, developing and retaining them is going to be crucial for our future success. We have almost completed a new factory in County Durham to build Hitachi high speed trains, and this is a good example of where we are recruiting those with engineering skills, as well as apprentices and partnering with schools, to help ensure that young people see it as an exciting career option for the future.
We touched on the Japanese culture earlier and it’s a foundation of the business of course, but we are increasingly localising senior roles which traditionally would have been held by Japanese expats. We know that we need this flexibility because localisation brings local knowledge of customers, culture, markets and competitors, and we have many examples of strong teams with Japanese and local colleagues working together; it really is a case of east meets west and creating something which is greater than the sum of the parts. A good example is our European rail business which was set up in London in 1999 with Japanese ex-pat expertise in high-speed technology, from the bullet trains in Japan that Hitachi had developed and built for many years. Working with HR, they recruited local staff and became a strong team which won the contract for the Javelin trains that run between London and the Channel Tunnel now, and took 2.5 million spectators to Olympic Park in 2012. They have continued to build on this success and will also be delivering new high speed-trains to the Great Western line and East Coast mainline in the next few years.
There is a serious lack of engineers going through university and college which, it is often reported, will arrest the UK economy. How can this be improved?
People do want to work for technology companies, but I think that employers, schools and others have a role to play in raising the profile of engineering as a career and the opportunities it can bring. This is a continual challenge and something we must all get better at. The Hitachi brand is still quite low profile, and many people still think of us as a company that makes TVs. We still do of course but that is only a very small part of the business today, and there are huge opportunities for great careers in other areas. As I mentioned before, in County Durham our rail company is reacting to the increase in competition for skills for the new train factory. This project has been very high profile in the region and we are attracting candidates with the necessary skills who would like to be a part of that new site. We are training people in the factory and some are spending time in Japan to learn as well. So far we have found the talent we need, but we are concerned about the longer term challenges which will need to be addressed and we will continue to work closely with schools and provide the information and opportunities for students to have clear sight of what an employer like Hitachi can provide in terms of careers. There is a brilliant engineering heritage in that region and we look forward to being part of taking it to the next level.
What are the business challenges for the next five to ten years and what is HR expected to deliver to meet the needs?
Hitachi’s global strategy is to generate 50 percent of its overall revenue outside of Japan. We were at about 47 percent at the end of the last financial year, and so we are developing existing businesses, and actively looking at acquisitions which fit with our focus on social innovation. For example, we have announced the intention to acquire AnsaldoBreda and AnsaldoSTS, which are a major rail company and rail signalling company in Italy, so there’s a great deal of ambition and appetite for growth in Europe. There is continual change in other areas and, for example, our air conditioning business is planning a joint venture with a US company in the same sector. And there is a hugely ambitious drive to diversify in new areas for Europe, which can best be exemplified by the acquisition in 2012 of Horizon Nuclear Power. Right now we are planning the building of the next generation of nuclear power stations in Wylfa, Anglesey. This is new territory for us in Europe, but not for the company as they will be using Hitachi’s well established nuclear reactor technologies so there is a great deal of experience that can be drawn upon from Japan’s nuclear power industry.
The challenges for us in HR are obviously huge, as we have hired several hundred staff over the past couple of years to find the expertise that can ensure we receive the permissions and licenses for the nuclear reactors and begin the construction which should be complete by the mid-2020s. We have also been recruiting the executive team and a new Operations Director and Business Development Director have joined recently. The project will bring thousands of jobs to the area and power five million homes, so this is a massively important business imperative and a significant future investment; and like the high speed rail sector, this is inevitably an increasingly important initiative for the UK as well as for Hitachi. This is why we have worked so hard to break down the barriers, and make sure our core values of ‘harmony, sincerity and pioneering spirit’ are in hearts and minds. The growth and success of the business demonstrates what we all know ¬that great companies need great people – and in HR we need to provide leadership so we can find, hire, develop and retain the talent our company needs for the future. To do this we will need to keep changing and developing; and always reaching out for the next challenge.