A Team Leader

20 May 2010

MITIE’s Chief Executive, Ruby McGregor-Smith, talks exclusively to PFM about recent developments in the company and where she plans to take it in future in the UK and in Europe. Jane Fenwick reports

THERE MAY BE STORMY WATERS ahead as the UK economy recovers from the recession and faces its debt mountain, but for some companies the last couple of years have not been all bad news. MITIE is one in the FM sector that has seen its fortunes continue to grow. According the Chief Executive, Ruby McGregor-Smith, ”The recession has been really positive for MITIE. Recessions give you an opportunity to rethink your strategy and change as your clients need you to change. We have had challenges in two or three areas but we also made our biggest acquisition as well. From a Group perspective it has been very much a positive experience.”
Appointed Chief Executive in March 2007, moving up from Chief Operating Officer and three years as MITIE’s Finance Director prior to that, McGregor-Smith revealed that the company had placed Dalkia in its sights for the last three or four years before it came onto the market in 2009 and bought it for £120m. “When in came to market it was very much our intention to buy it. The reasons why businesses have come to market is driven by the recession and you will see MITIE do more M&A over the next five years because of this. Two or three years ago prices were unusually high and we did not buy, but now they are more realistic.”
She continued, ”Our strategy is about sustainable profitable growth. It is around MITIE offering the best service provision. We are in the top three in the FM market. I am not concerned about becoming number one but I want us to be recognized by our clients as being the best in the market for service provision. In the next five years there will be a big growth in our energy efficiency and facilities management offer. We also have plans to do more work in Europe. We are driven by clients who want us to look after more than their UK portfolios.”
A partner in SMI – Service Management International – a grouping of European service providers capable of delivering services ‘locally’ to multinational company locations across Europe, McGregor-Smith explained that she will be now taking the MITIE brand itself into Europe in addition to this SMI relationship. “Where we are already looking after a large UK portfolio for a multinational, then it will be more natural for MITIE rather than SMI to take on responsibility for its European interests. We are already working in Ireland and Poland, and we will gradually grow as clients need us to.“
Within five years, McGregor-Smith expects MITIE’s non-UK business to be about 10 percent of the Group’s revenues, and the appointment recently of Paul Yearly as International Director to head a new international team within MITIE will underpin this. She continued: ”It is an exciting development and it gives us the opportunity to do things differently. The UK outsourcing market is mature and leads the world. We can help to transport that knowledge to other countries.”
Closer to home, MITIE has not been standing still. Market changes have seen MITIE’s clients demanding more integrated services. This has meant that the company’s original group of independently managed specialist services operating to the ethos of the Management Incentive Through Investment Equity mantra, has been largely overtaken by a more mature business structure. “The reality is that culturally our clients wanted integrated services and this has required a team approach from MITIE,” McGregor-Smith commented. ”In fact, one of the reasons I so rarely give interviews like this is because MITIE is not about me but about the team. There are great people in MITIE and we work together well. We have been on a journey; it was tough but that has been part of the fun of changing MITIE.”
She observed that a result of recession-driven change has been that in the private sector there has been a growth in the scale of work. Regional contracts have moved to national contracts, and national contracts moved to total FM contracts.
”The speed of this change has been considerable,” she said, ”but it has been a real opportunity for the group. Our financial services, retail and transport contracts moved very quickly, and in the next two years we will see the public sector moving this way too. The biggest change for us has been to provide services in bigger packages.”
She reported that MITIE’s bundled services business has grown in the recession from one third to about one half of Group activity, and that even ‘single’ service contracts now normally have more than one service stream included.
About 40 percent of MITIE’s business is currently in the public sector. Its acquisition in 2009 of Environmental Property Services’s business in repairs, maintenance, gas services, lock and repairs activities in social housing focused on the south east, helped to make MITIE the seventh largest operator in this sector, earning it some £200m revenue. Its social housing contracts are mainly in the Midlands, Scotland and the south coast. McGregor-Smith sees this social housing role naturally developing into a ‘care in the community’ service utilising the existing teams, vehicles, IT and help desk structures for more than just repairs and maintenance but also to support community facilities and provide some social support to residents.
The acquisition of Dalkia last year has meant that MITIE can meet a growing demand for energy services from its clients. In December 2009, it relaunched the CarbonCare name and programme from Dalkia and drove it across all MITIE's business activities. “There is a huge demand for our energy offering,” McGregor-Smith explained, ”particularly where clients have a big energy spend. We can show that energy spend can be reduced and this is a major part of the MITIE offer.“
With the addition of Dalkia, MITIE can now offer a the full range of energy services from just advice on energy saving to project work for Carbon Reduction Commitment strategies including investment in new plant with payback schemes, and carbon trading. McGregor-Smith commented that it is good business to reduce energy now as energy prices will rise in the long term, and MITIE was itself following this path.
She stressed that MITIE’s success is underpinned by its staff and the focus within the company on skills development. While recognising that there continues to be a skills shortage in the UK, McGregor-Smith observed that at least FM appears to be becoming more attractive for people to enter, and they are she said, different people from a few years ago. She revealed that MITIE is announcing a graduate training scheme this month in which 10 graduates in two tranches of five each will be taken on in April and September each year. ”It is massively important for us to have bright young people across the organisation to innovate. We want a mix of skills including IT, energy, general management, marketing and communications – the whole range. My hope is that after one year they will all be working within one of the businesses.”
She continued: “These young managers will make the senior business leaders of tomorrow, and we are putting in training and development for that to happen. As our contracts get bigger we need a different skill base to run them. Some contracts are the size of a businesses in their own right and that requires different skills to manage them. I want that in my team and the clients need to see that we are developing our people.”
With some 57,000 staff comprising about 12,500 employed in security and 25,000 in cleaning, talent development is an hugely important for McGregor-Smith. ”From our apprenticeships through to graduate and senior management development, it is about showing everyone that you really believe that big aspirations can happen - and you can have some fun - otherwise why do it.”
McGregor-Smith confessed that she is very driven. ”I always believe that in MITIE we can do whatever we want to do. There are no barriers to what we want to do. Wherever we set our sights, it is my view that we can get there. We can take MITIE to be the best UK outsource firm and have big global presence over the next five years. It is only just a beginning. People haven’t seen the best of us yet.”