Alan Middleton will have to keep up the momentum of record profits at the PA money machine
Timing is everything, particularly when you take over as chief executive. Stuart Rose timed it well when he joined Marks & Spencer, as did Justin King when he signed up at J Sainsbury. On both counts the share prices were low and profits depressed.
Alan Middleton, who is about to take over as chief executive of PA Consulting, the privately owned international consultancy business, may find things a little tougher.
Tomorrow the firm will unveil record operating profits of £40m on sales of £373m. It may be a perennial criticism that consultants often fail to deliver value – something PA fiercely denies – but you cannot dispute their profitability.
The profits have resulted in a £60m bonus shared among 3,000 staff. PA is sitting on a cash pile, including short-term investments of £245m, boosted by the sale of its London headquarters at a £45m profit.
Since 1992, when the firm was close to going under, PA’s internal share price has soared from 10p to 638p. Middleton’s job is to take on the task of retaining this momentum when the industry is becoming ever more price competitive.
Middleton, 40, who has been at the firm for 20 years, was handpicked to follow Bruce Tindale in an internal leadership programme. Intellectual challenges do not come much tougher. Middleton said the evaluation leaves candidates feeling very exposed: “It’s gloves off and quite a shattering event. You suddenly learn great things about yourself that you thought you didn’t have, but also lots of areas for improvement.”
PA knows to its cost the results of picking the wrong people.
Created in 1943, it became one of the world’s top two consulting firms. But by 1969, when Ernest Button, the founder, left, it had started to go off the rails.
Tindale said: “They were intelligent people, but they took a series of decisions that took PA from being a very successful business to one that was essentially bankrupt until Jon Moynihan arrived [in 1992] as executive chairman and chief executive. We had become a loss-making company with all the wrong policies. Successful people were moved away from direct interface with clients.”
To ensure that didn’t happen again, a leadership course was introduced. It has proved so successful internally that it has now been tailored for clients.
Middleton is confident that PA can grow. Consulting is polarising between the large systems suppliers, like IBM and Accenture, and niche practices such as PA or LEK, a business with 700 staff in 17 countries which recently won the Queen’s Award for Enterprise.
While government has been a mainstay of revenue for PA with big projects including the UK identity card, private-sector clients such as Fiat are becoming increasingly important.
PA has also built up another revenue stream through its self-funded technology arm in Cambridge, creating businesses such as UbiNetics, a wireless communications company that was sold for $135m (£67m) with a big windfall for partners.
Before Middleton takes over, he is going to Stanford, the US business school – drawing a line between his old and new roles. The course should provide him with new contacts and equip him with more skills to take PA into its next phase.
