Forward thinking

Turning ideas into commercial success relies on aligning HR policies to
business plans, as Silicon Fen firms can testify

In the early 1990s, Jon Sparkes set up a Derbyshire company which gave
employment opportunities to the long-term unemployed, a local fore-runner of
the Chancellor’s New Deal. Since 1995, at Scientific Generics in Cambridge, he
has helped promote innovation and employee ownership in the hi-tech sector. As
last month’s Budget made clear, this is the other main strand of Brown’s
employment policies.

Scientific Generics, which last month announced plans to go public, is a
star performer in "Silicon Fen", one of the few parts of the economy
to have overcome Britain’s failure to convert inventions into commercial
success.

Spearheading the rapid growth in the region are personnel policies.
"One of the key drivers is the innovative capability of our people,"
says Sparkes.

"Human resources has to be closely aligned to the business. In
providing services to clients we have a massive training challenge. We are
taking people with superb academic backgrounds and throwing them into a
situation where they are serving clients directly."

Personnel factors played a major part in the decision to go public. "We
are looking to get liquidity into the shares so that we can reward people
better," he continues. Brown wants to see a stronger link between employee
share ownership and company performance. His all-employee share ownership will
benefit from reductions to Capital Gains Tax.

Sparkes welcomes the announcement. "Anything that frees up either the
business or individuals from regulation or deductions to gains is going to be
of potential help."

As share ownership spreads and markets change rapidly, the Cambridge model
is likely to become a pattern extending to other parts of the economy.
"What is happening in Cambridge is, in some ways, ahead of what the
Government is trying to stimulate," he explains. "Provided we get the
infrastructure right, this pattern of development is going to be very positive
for the economy."

What defines this almost mythical "Cambridge phenomenon"? As in
Silicon Valley in California it is characterised by close links between a top
university and companies, and incentives to set up firms quickly to exploit new
technologies.

Many firms start as spin-offs from larger companies, or get help from
business incubators. If you work for Scientific Generics and develop a
commercially viable new technology, the company will help you set up on your
own. It will also throw in consultancy and subsidised central services like IT
and personnel administration.

What does the parent get in return? In some cases it owns the intellectual
property; and has an equity stake in what are typically successful,
fast-growing enterprises. Moreover, the offer of help to set up on your own can
be bait at the initial recruitment stage.

Developments like these now have their own momentum. Walter Herriot,
managing director of Cambridge-based business incubator St John’s Innovation
Centre, says, "If you talk to a significant number of start-ups it is not
the tax that started or helped – there are other issues, like satisfaction and
return. Tax will reward people more, but I would have thought that the impact
would be marginal."

Herriot believes that the main bonus from the Budget is in the other main
change to Capital Gains Tax – the new low rate of 10 per cent for assets held
for four years. "People will be encouraged to invest, and this will help
companies to invest," says Herriot. "We want to see more investment
at the earlier stage. That is where there are problems. Once companies have a
track record the mature venture capital industry comes into play."

The St John’s Innovation Centre, started by St John’s College at Cambridge
University in 1987, helps the very early-stage hi-tech companies. It
accommodates around 50 new businesses at its premises, and advises a larger
number of other small firms. For the 150 or so companies to have begun life in
the St John’s incubator, he reports that 135 have survived.

They do not all stay as minnows. St John’s helped Zeus, founded five years
ago by Adam Twiss, who has the potential to become a British Bill Gates. Zeus
is now the world’s fourth Internet server provider, gaining market share from
Microsoft and Apache. Its technology provides fast Internet connections, and as
a specialist in e-commerce solutions, it is set for further dramatic growth.

Traditional personnel problems do persist in the region, but Cambridge firms
are proving equally innovative in tackling them. In recruitment, the
conventional approach of waiting for a vacancy, assessing the skill mix and
putting out an ad does not apply. "If we can see an opportunity to develop
the business in another area that will mean inevitably recruiting people when
you do not have immediate work for them," says Sparkes.

In an example of this, Scientific Generics made a strategic decision to
recruit industrial designers before there was any work for them. "Now, six
months on, they are very busy," says Sparkes.

He recruits globally, and welcomes the loosening of immigration controls
announced in the Budget. "We were in discussion with a candidate in India
last week who has now accepted a job in the States. It was taking us longer to
work out if we would be able to employ him."

Global recruitment, cutting-edge technology and helping start-up companies
may seem exotic tasks for most personnel directors. But these are specific
solutions to generic problems. By putting people and personnel management at
the centre of business development Cambridge has a few lessons for the rest of
the economy.

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