Select Committee on Agriculture Appendices to the Minutes of Evidence



APPENDIX 7

Memorandum submitted by Dr George Thorburn (D 24)

INTRODUCTION

  I am George Cumming Thorburn and was recruited by HRI as their first New Business Development Manager and Managing Director (designate) of HortiTech in February 1997 until I was wrongfully dismissed without notice or leave of appeal on 15 October 1999.

  This evidence is factual and I am prepared to swear it on oath should it be necessary.

  I am a qualified and experienced Commercial Manager and Director in the horticultural industry with 35 years international experience. I am the founder and Managing Director of Global Horticulture Limited and its wholly owned subsidiary Hi-Tech Horticulture Limited which owns 50 per cent of a large scale micro-propagation business specialising in High Health plant production in China.

  I shall present my evidence in three sections:

    1.  HortiTech and how and why it failed.

    2.  The current situation at HRI.

    3.  Recommendations for the future.

HORTITECH AND HOW AND WHY IT FAILED

  The purpose of this section of evidence is to provide information and facts relating to the failure of HortiTech and to ask that steps be taken to prevent HRI, or indeed any other public body from mis-directing and mis-managing such an important strategic change in an organisation again.

  Back in 1995, the HRI Board, MAFF and the Science Council realised that Government funding was diminishing so quickly that by the end of the decade the organisation would be insolvent unless some drastic and challenging action was taken. The Board invited PA Consultants and various other consultants, accountants and advisors to help them put a plan together to avoid insolvency and achieve the objectives set by Government.

  The plan involved consultation with staff, industry and Government and included a round of redundancies financed by MAFF. Dr Tony Burne, the MAFF official with several hats who is now an HRI Board member, together with Dr Shannon and the Financial director of HRI, Mr Tom Heller were all at the forefront of the plan entitled, HRI—The Way Ahead 1997 Onwards. It was approved by various Committees and the Board and by Ministers and became policy. Obviously the compilation of this plan cost a considerable amount of time and money and commitment. Any suggestions that the "unrealistic targets" and budgets prior to Professor Wilson's arrival were not approved by the leaders of MAFF and the Board are quite incorrect. Indeed it was Professor Wilson's and Peter Siddall's responsibility to ensure that HortiTech not only survived but also succeeded. It is unacceptable for any of the HRI Directors to suggest that the initiative was not their concern. Mr Heller, Dr Burne, Dr Shannon, Mr Siddall and Professor Wilson in particular were responsible for making the changes necessary to allow HortiTech to succeed.

  The plan stated quite clearly that a commercial subsidiary of HRI was required to capitalise on the resources of the establishment and to earn profits from the sale of products, services and commercial sector research contracts.

  Advertisements (attached) [not printed] were placed for a Commercial Director of New Business who would also be the Managing Director designate of the new subsidiary. After an extensive series of interviews and psychometric tests and medicals, I was offered the position and commenced my duties on 1 February 1997 after the plans for the future had been debated and approved. I was told that I would have a subsidiary company by June 1997 at the latest.

  I was also given The Way Ahead report and accepted that the commercial objectives and challenges therein made up my remit. The result was the formation of HortiTech and its launch in January 1998. Unfortunately the plans for the company were based on HortiTech being a subsidiary limited company within HRI, operating under commercial private sector parameters. This, apparently was exactly what Non Department Public Bodies were established to do. To this day however, the limited company has not been formed largely due to internal Civil Service politics and the unwillingness and inability of the senior administrators in MAFF and HRI to allow a private sector company loose in their ranks. After all commercial efficiency could jeopardise careers, pensioners and public sector perks!

  I made it clear that the Sales and Marketing plans I put forward for HortiTech could only be viable if the operational work at HortiTech was run on private sector lines with private sector remuneration, financial controls and working practices. I was assured by the Board and by the Senior administrators that the delivery of private sector products, services and research would not present HRI with a problem and that I should concentrate on Sales and Marketing until the limited company was formed.

  By late 1998 and into 1999 I was frustrated by the failure of HRI to deliver and manage private sector work. Many of the Business Units never got off the ground because they were not operationally resourced and customers were being let down by failure to deliver and by delays in obtaining answers. Efford, the High Health propagation centre of HRI was prevented from exporting liners and cuttings because MAFF issued an export prohibition order for pests and disease in the stock. There was open hostility from many scientists at HRI regarding the formation of HortiTech and the working practices were more akin to a University existence than a disciplined commercial business. The over bureaucratic administration and consultation system ensured that decisions were painfully slow and difficult to make work rates and output compared to the private sector were totally unacceptable commercially. It was obvious that without a limited company independent from the academic and public sector stranglehold and inertia in HRI, HortiTech would fail.

  Peter Siddall was first apprised of the HortiTech plans in mid 1997 when HRI were looking for a new Chairman. I had met Peter Siddall in 1995 and corresponded with him on various research issues. I suggested that he might be worth interviewing for the vacancy although I did not know him very well. He was not appointed and Mr Valentine was made Chairman. Sadly he took ill within a month of his appointment and died. Dr Burne of MAFF took the Chair as an interim measure between September and January 1998 when Mr Siddall joined HRI. Chris Payne and I met him on several occasions and sent him copies of The Way Ahead Report and more information on HRI. When he became Chairman in January 1998 he was well acquainted with the policy and strategy and only changed his mind and attitude when a number of senior basic scientists met with him in secret and complained about the commercialisation initiative and drive behind HortiTech. It would appear that this meeting with the scientists convinced him that basic science was the purpose of HRI and commercial trading of products and services and research along with development of technology was something to dismiss. Indeed he publicly stated that at the last Select Committee hearing.

  Malcolm Bradley, a fellow Director and I brought the problems to the notice of the various committees and boards we had to report to including the main HRI Board. We received no understanding or support from Mr Siddall or the Board and were ostracised as troublemakers.

  Eventually, in September 1999 when Professor Wilson was by this time the CEO, Sarah Hughes-Clarke my Sales manager and I gave a presentation to the Executive Directors which basically said that unless HortiTech became a private sector organisation, it would fail and we gave notice that the Sales targets could not be achieved in the current organisation. We also put a proposal forward to float HortiTech as a private sector company and contract with HRI on such favourable terms to give them first choice to undertake work from the company. HortiTech Limited would take over all of the development sites and execute the development work of HRI. It would maximise sales by sweating the assets and acting as sales and marketing agents for commercial science contracts. HRI would receive a "royalty" revenue stream as well as be main contractors.

  Shareholders and financial and commercial partners were all in place but the plans which had been drawn up in consultation with several Directors including Dr Tony Burne and Mr Tom Heller, were dismissed as too radical, entrepreneurial and commercial. I made my feelings clear at the HRI Board meeting in September 1999 and provoked by the Chairman's now well known aggression, engaged in a bad tempered clash with him and Professor Wilson who were still adamant that I was scare mongering and "HRI were in a very good position for next year and beyond". Shortly afterwards I was dismissed without notice and eventually negotiated compensation for wrongful dismissal.

  The papers I submitted to the Board, the Executive Committee and to the HortiTech Working Party (Shadow Board) [not printed] are enclosed in support of my evidence.

  I was criticised by Directors and Senior Managers at HRI for being "a disgruntled ex employee" when I provided Mr Curry and the Committee with evidence and supporting documentation earlier this year. That is far from the truth. I have a very successful business, Global Horticulture Limited with its High Health propagation subsidiary Hi-Tech Horticulture Limited geared to sell over £1.5 million of tissue cultured stock globally in 2001 and have no regrets about leaving HRI. It is however concerning to know that people in command at HRI can trivialise constructive criticism. I believe that HRI is not in a position to trivialise or ignore criticism and should take heed of the comments being made.

  As a tax payer and a member of the Horticultural Industry, I am fearful that the Government will yet again pump more money into the sinking ship of HRI when frankly all the industry wants and needs is the Government's financial support in R&D.

  HRI was fudged together by government and forced to operate with two employers, two opposing Ministries and no commercial freedom to work. The turf war between The Office of Science and Technology and MAFF was and still is a National Scandal with both sides showing no responsibility for the mess they have contrived between them.

  Basic academic scientific research and development research and technology transfer are not the same. The mindset, motivation and working practices of each group are at opposite ends of the spectrum. The establishment and operation of a Private Sector business in such a structure is also totally alien and unworkable and should never have been conceived unless there was a resolve to make things happen by the implementation of change operationally, a discipline Mr Siddall apparently is an expert in.

  The financial management and control of the organisation was non-existent as far as commercial business was concerned. Time and job recording did not exist, costings did not relate to benchmarked and targeted budgets. Commercially acceptable Purchase ledgers and Sales ledgers were not available; purchasing was ad hoc and not centralised; there were no controls on invoicing for work done and many "customers" got very cheap or free services. Monthly management accounts were never produced. The most concerning issue financially however was that HRI were drawing cash from their employees pension funds on an annual basis to prevent the organisation from running out of money. This "loan" was re paid before the year-end every year so that it would not appear in the books. I was only made aware of this practice in late 1998 and after considerable lobbying; the Board agreed to stop the practice last year and have now ring-fenced the pension fund in a separate account. This however is yet another reason for HRI running out of Cash this year!

  Over £350 million has gone through the accounts of HRI since it's inception, much of it in the form of restructuring and redundancy payments. Consultants have been paid for Business Plans and strategic analysis and planning, staff have been moved around the country and new offices, laboratories and other facilities have been built.

  Ten years on however, it has failed to deliver and to balance its books.

  Six years ago the public sector cuts were envisaged and, wisely, the then Chairman and CEO began planning for the future. The plans were taking root and if the commercialisation proposals I put to the Directors in September 1999 (attached) [not printed] had been implemented, HRI would be a prosperous and hopeful organisation providing the balance of products, services, technology and basic science its customers required. It is unacceptable that Professor Wilson and Peter Siddall made a drastic and dramatic decision to dismiss me and in effect destroy HortiTech without consultation or debate and without envisaging what damage their decision last October would cause.

  In my opinion their actions were inconsidered, reckless and taken without the expected due diligence required of a Chief Executive and a Chairman of a public body.

  It is however not surprising that HRI has fallen when the method of recruiting and filing key posts is analysed. I was the only manager/director in HRI to have been recruited by psychometric analysis and skills matching after interviews. This is a common method in business and ensures that the skills, experience, mental attitude and motivation triggers and drive fit the key competencies of the job description and requirements. Any responsible employer will use these tools to ensure that the job is matched to the best candidate. HRI is run by Academic Scientists, Public Servant bureaucrats and a Management Consultant. If the key competencies of the job each does was analysed and psychometrically tested I believe that none of the key positions in HRI would prove to have the correct incumbent for the job in hand. Worse, I believe that several key competencies and motivating and drive attributes would be missing. I am sure that this is probably the case in most Public Sector organisations. It is very irresponsible and slipshod way to recruit and it is unacceptable for MAFF and HM Government to condone such practices which inevitably put taxpayers funds at unacceptable risk. To play game with taxpayers money and allow this practice to continue is not showing due diligence and is probably the key reason that Government organisations such as HRI and the Dome fail.

THE CURRENT SITUATION AT HRI

  The announcements of restructuring HRI made recently have been full of rhetoric and posturing without any real confirmation of direction and strategy.

  The only clear things that have come out are the closure of Stockbridge House and 150 redundancies being paid for by MAFF.

  The CEO stated that the redundancies would cut his staff to around 500 and his press release a few days later stated that HRI will be growing from a less than £20 million turnover at a loss to over £24 million turnover at a profit. This sounds fine but we have no explanation of exactly how this is to be achieved. This would mean an increase in efficiency of over 73 per cent in two years. Turnover per employee would grow from the present £27.7k per annum to over £48k. Is this feasible or are we just being comforted by being told what we want to hear?

  A new business development manager is to be recruited at a salary of c £60k. The science fraternity and unions at HRI have already complained about this to Mr Siddall and Professor Wilson and the advertisement called for a very entrepreneurial individual who will have the freedom and presumably the resources to succeed. Is this simply a repeat of previous mistakes or has HRI changed and become more commercially friendly than previously? I believe that the appointment of another new business manager has not been thought through and that there is no business plan or forecasts and estimates to support the appointment.

  Professor Wilson has recently told the Efford Advisory Committee that he is in negotiations with a Canadian science organisation and with Southampton Science Park in an effort to convert the site into a Bio Science Park. This is strange as he has also stated that HRI will continue development research and the Efford site will stay open. If however it is going to stay open as a Bio Science Park where is the development research going to take place. I also understand that MAFF has agreed in principle that HRI and or a.n.other may buy the site on favourable terms. If this is the case, why has it not been made more public?

  Is it appropriate to have a Bio Science Park in the New Forest and does HRI need a Bio Science Park to fulfil its remit? Why has MAFF agreed to a sale on favourable terms? Why will MAFF not offer Stockbridge House to The Stockbridge Trust on favourable terms? Is the Park going to be a private sector or public sector concern? Who are the investors and Directors and are they linked to any existing Directors of HRI or to any Government officials?

  When Professor Wilson joined HRI he was quite convinced that a Swiss/German bioscience organisation was going to invest heavily in HRI and everything in the garden would be rosy. Nothing has happened in the twenty months since he first informed us at HRI.

  When he left STRI in Scotland he left a very embarrassed Scottish Office and considerable unrest because another scheme involving mystery investors failed to materialise.

  I believe that it is essential for the Committee to obtain the truth about this situation as it could have a major impact on HRI's ability to deliver its remit and it could also have yet another negative effect on the balance sheet and cash situation at HRI.

RECOMMENDATIONS FOR THE FUTURE

  The current situation is untenable and shows a complete lack of understanding and ability by the Board and the Senior Executives of HRI. HRI has not listened to its customers and appears to have lost its ability to understand and deliver its remit. The situation cannot be allowed to continue.

  The organisation is in effect bankrupt and only held together by government handouts. It is obvious to those of us who know the organisation well that the so called re-structuring taking place at the moment is no more than a cry for more money and no real, commercially acceptable plans are in place to prevent a re-occurrence of this scenario or to make HRI self financing.

  The organisation has appeared to re invent the wheel every two or three years and now that Mr Siddall and Professor Wilson have killed HortiTech they are already planning another game plan. If HRI gets another business consultant to replace Mr Siddall will we be subjected to yet another restructure and new business plan?

  Frankly, it would be better to wind up HRI and re-think the way that government could support horticultural R&D in this country.

  The recommendations I put forward are:

    1.  Place a winding up order on HRI and dismiss the Board and most of the Senior Executives. Put the organisation into administrative receivership with a qualified receiver.

    2.  Re-organise HDC so that it becomes "lean and mean" and extend its right to collect levies from wholesaler and retailers as well as growers. Empower HDC to provide R&D and generic marketing support for the industry on the same basis as the Dutch, Britain's main competitor.

    3.  Agree to allow MAFF to grant aid the levy board on a two or three pounds for every one pound collected basis so that the levy board can commission, control and manage R&D. Civil servant scientists and bureaucrats have no place in modern business to manage, commission and control research. The levy Boards should be accountable and authorised to commission research.

  4.  There are over 30 organisations in this country other than HRI which are capable of carrying out R&D in horticulture. There are hundreds of organisations globally and basic science can be brought and commissioned anywhere. HRI's basic science ability is far behind many commercial and public laboratories at home and abroad. There is no sound reason for British Research to require the services of a specific laboratory. Market forces will ensure that the R&D is efficient and effective and the need for government officials to meddle in everything will be curtailed.

  5.  The financial management and obvious lack of care and concern about waste of resources and cash is very concerning. Working practices, which do not improve efficiency and the inability to work at commercial pace, is something that needs to be investigated. I recommend that the National Audit Office be asked to make a full and detailed audit together with recommendations to prevent such waste in the public sector in the future.

  6.  Care should be taken in listening to the evidence and speeches of HM Ministers of agriculture on the matter of HRI as, it is quite obvious from recent reports that the Civil Servants responsible for HRI or who sit on the HRI board and advise Ministers are also the same people who write the speeches and advise the speech writers of content. In such circumstances, the Ministers statements must be deemed to be flawed and they certainly cannot be declared impartial. Consideration should be given to stop the nepotism in such situations.

  7.  This sorry tale has shown that Non Department Public Bodies are a complete waste of time and money. Government should either make something a Public Body or put it into the private sector. Half way houses are fudges and disasters like this are inevitable. The quango type of Board is also totally ineffective in managing and running a business or organisation dependent on "sales" and being operationally efficient. The HRI Board costs well over £160k per year in fees, expenses and administration costs and no one is held accountable or responsible for results. The Nolan/Cadbury rules prevent continuity and allow maverick like changes to policy to occur without question until disaster happens. The recommendation here is to disband all Non Departmental Public Bodies.

  Finally, I recommend that all senior public sector employees are given psychometric tests and their key competencies are matched to their job requirements. All recruitment and promotion should also be similarly tested to protect the interests of the taxpayer.

18 November 2000


 
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