Talking Business: Industrialist David Grove
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In the latest in a series of ‘Talking Business’ interviews, David Grove of Grove Industries, chats to the editor of TheBusinessDesk.com Marc Reeves, and KPMG Midlands regional chairman Steve Hollis COMMENT The contagious passion of a manufacturing entrepreneur
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 AS AN industrialist with a reputation for plain speaking, David Grove didn’t disappoint at this month’s Talking Business lunch. The chairman of Grove Industries, which owns a clutch of manufacturing and engineering firms centred in the West Midlands, had much to talk about when he joined me and KPMG regional chairman Steve Hollis at Birmingham’s Malmaison hotel. Despair over the skills gap that could hold back the growth of some of his companies and anguish over the culture of ‘UK plc’ were counterbalanced by an enthusiasm for the people he works with and the sheer joy of encouraging them to embrace risk to drive their businesses forward. Grove Industries celebrates its 20th anniversary this year, and is a case study for anyone wanting to know how to build profits and revenues in manufacturing, sometimes regarded as the ‘cinderella sector’. Grove’s approach has been to spot engineering firms with promise and a good management team, to invest in them and give the teams the means and the authority to drive their business forward. It’s a deceptively simple strategy, and Grove appears baffled that anyone should find it so remarkable. He said: “We’re just an old-fashioned conglomerate. We’ve not forced all the separate businesses together as one. It’s got a £300m turnover but we don’t have consolidated accounts and all that stuff, because each one’s separate. In each the management has its own stake of between 15 and 40%.” Member firms include global Land Rover parts specialist Bearmach and coatings firm Comvac, as well as pressings business CovPress and defence and rail engineering group Key Technologies. This spread of sectors and markets helps overall GIL performance, said Grove. “We’ve always got a bit of a problem in one or two of them but we’ve always got one or two of them going gangbusters.” He said: “Core doesn’t mean anything to me. Hill & Smith had to be fairly focused because that’s the only thing the City understands. We said: ‘We want to do everything that’s made of metal that’s on the roads’ and that’s what we did. He confesses to frustration with the corporate world, and reflects that his current model for GIL would be unlikely to find favour on the markets. He said: “If I went to the City and said ‘Right, I’m going to put all these different businesses together in GIL and float them’, they’d jump out of the window, because they wouldn’t understand it!” Groves’s trick is to allow the individual companies within GIL to plough their own furrow, with the benefits of being part of a larger whole, but few, if any of the downsides. By having management teams focused on the product and market, rather than looking over their shoulder at head office, he says, you foster a more entrepreneurial approach. “That means that if their market starts to go awry, you will find that management team finding another market opportunity, such as a niche market where you can make better margins. That’s the trick of having a conglomerate: you have all sorts of businesses and management teams with an equity stake who will then be alert to opportunities. They won’t be restricted from investing because Head Office says no all the time.” “I want people to make mistakes. If somebody doesn’t make any mistakes at all, they’re not entrepreneurial enough. You’ve got to take risks in this world. “And if you’ve got somebody that cocks it up every year, well, I mean, you just can’t live with that, obviously.” KPMG’s Steve Hollis compares the Grove approach to Germany’s Mittelstand companies – the term used to describe the SMEs that are credited with driving Germany’s continued, export-led boom. Mittelstand companies combine a cautious and long-term approach with modern management practices, like employing outside professional management and the implementation of lean manufacturing practices and total quality management. Funding from banks often comes via long-term equity as well as debt. Mr Hollis said: “The banks support them over the long term and they take a long-term view, which is why the Germans can have lots of investment and product development knowing that they’re not subject to short-termism. I think that’s much more akin to growth.” But GIL’s winning formula can’t fend off all challenges, and Grove seems most worried about the impact of years of under-investment in engineering skills development by successive governments and the level of educational standards in general – although he also reserves some criticism for himself and fellow industrialists. When order books start to fill again, he says, “it’s skills where we have a real problem. New machines aren’t the issue: we can go out and buy new machines – you just borrow the money. But if our economy is going to expand, the first obstacle you hit is skills . “The education system in my opinion has failed abysmally over the last few years – It’s been kicked around like a political football. They’ve let the basics go, but we need to teach kids the skills of learning how to read and write, and work a computer and be of some use to an employer. “ Grove reveals a surprisingly detailed knowledge of specific examples of where his companies have struggled to find skilled staff to cope with increasing demand, but also enthuses about seeing young people grasp the challenge and thrive in a modern engineering career. Of the skills shortage, he says: “Now what we do about that, I don’t know. I think people like me should do more. But we can only do more if there’s a willingness elsewhere.” “There are all sorts of initiatives going on. We’re trying to get schools into plants and the workplace, to realise what an exciting innovative environment the modern factory is.” And then he says: “But I don’t pull my weight, I’d be the first to admit.” If building a £300m engineering conglomerate and employing hundreds of people in the sector isn’t doing enough for the manufacturing sector, one could be forgiven for despairing that the industry is lost. But the modest David Grove is doing more than most in this regard, and is quietly leading the way in leadership style, strategy and canny financial management. If the West Midlands had a few more David Groves to rely upon, we’d be unbeatable.
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But that variety in a portfolio doesn’t suit everyone, especially in the City of London, says Grove. In an age of constant consolidation, the City wants companies to be focussed on the One Big Thing, and Grove experienced that pressure when running engineering group Hill and Smith, of which he is still a shareholder. He led the engineering group for more than 10 years, growing it through expansion and acquisition to become one of the UK’s largest suppliers of galvanised steel.