Examination of Witnesses (Questions 460
- 480)
WEDNESDAY 31 JANUARY 2001
MR JOHN
MCFALL
AND MR
KEN ROBERTSON
Miss Begg
460. Mr McFall, you have perhaps half-answered
the next question already. You described the actions taken to
alleviate the impact on the local community, which you said was
devastating. Can you tell us a little more about the formation
of the local development company and any other initiatives that
you have not already mentioned?
(Mr McFall) There are two stages: the establishment
of the task force and the formation of the Strathleven Regeneration
Company. The establishment of the task force was an element of
good practice, with different groups getting together. I believe
that, as a company that undertakes its social responsibilities,
Diageo would in any event have done quite a lot of work that we
did on the task force. Given that we had the major players in
the task force, the job was made easier. For example, we undertook
consultation with the community. We also had task force sub-groups
which dealt with local suppliers of J&B whose businesses would
also suffer. Diageo worked with us on the task force sub-groups.
461. How easy was it to pull together the task
force? You make it sound easy.
(Mr McFall) It was definitely not easy. There were
many ups and downs in getting it together. All of us came to it
with different agendas. For example, the council might say, "Look,
we are involved in planning. Wait for someone to come in to develop
the site, and then we shall become involved, but not before."
Scottish Enterprise Dunbartonshire might say, "We are the
economic development arm in the local community. We shall become
involved when there is anything that is concerned with economic
development." Some might say that the MP was upfront and
ask what he was doing there. I was in a good position to influence
people and bring them round. From a situation in which people
had, say, six or seven agendas, two years later the people involved
have only one. Relationships between the different organisations
are now the best they have ever been, because we have been through
the pain to get the gain.
(Mr Robertson) Remember that we are well into our
third year, so it has not been the easiest of processes. One of
the unique factors in this situation was that we sat around the
table with everyone involved. To have the unions there in particular
was immensely powerful; they played a major role from start to
finish. We were able to see changing attitudes. Positions might
have been entrenched before but later there was no room for it:
all of us had to get together and do something different. Looking
at how the example can be used, one of the trickier parts is leadership.
There is no doubt that in John McFall we had someone who not only
had a vision but tirelessly pursued it. He was determined to bring
about change. In the circumstances we had the right person in
place. In other communities one of the first things to be done
is to find that kind of dynamic leadership. Whether that leadership
comes from politicians, the business community or the public sector
is to an extent immaterial. However, one needs someone to keep
driving it, and that was one of the key roles performed by Mr
McFall. The ability to sit round the table together and, at the
end of the day, to be pragmatic is critical.
(Mr McFall) That personalised it, which was very important.
People suggested that perhaps Diageo would walk away. I said that
it would not because Ken Robertson had given me his commitment.
It was important to emphasise Ken Robertson's name all the time.
With regard to West Dunbartonshire Council, its leader, Andy White,
gave me his commitment; Dan Henderson, Director of Planning, and
his subordinate Ian Hodgson also became involved. As for Scottish
Enterprise Dunbartonshire, Dave Anderson and Alan McQuade have
been supportive and given a fantastic amount of time. Therefore,
the whole thing has become very much personalised. That is very
important when people suggest that things are not moving along.
We all know each other and are all signed up to the same objective.
462. Therefore, it is a matter of putting trust
in the individual rather than the organisation or agency that
he represents?
(Mr McFall) It is not that we do not place trust in
the agency, but by naming the individual there is someone there
with a personal stake in the task force.
463. You make it sound very rosy. Was there
anything about that approach which was unsuccessful?
(Mr Robertson) We had to do a considerable amount
of learning and return to a number of matters again. We did not
get everything right. If we started it again, undoubtedly we would
do some things differently. We had a couple of setbacks; for example,
early on we had a buyer lined up for the plant, but the deal fell
through just before Christmas. That cast considerable gloom over
the whole process. It was by no means rosy or easy. However, over
the piece the process itself allowed us to deal with that. To
have everyone there with a commitment and an open manner meant
that those adversities could be dealt with.
(Mr McFall) You may study a subject for a year and
the night before the exam say, "To heck with it." I
felt like that. Ken Robertson or others would say, "Settle
down; we're getting there." In the two-and-a-half years there
have been ups and downs, but when we look at the global picture
tremendous moves have been made. The task force has done good
work, but the Strathleven Regeneration Company has a vision for
the economic redevelopment of the area. I commend that model to
government. I am putting it to John Reid and Stephen Byers and
suggesting that when a tragedy strikes a particular community,
for example Vauxhall in Luton, such an approach should be attempted.
It is not just a matter of putting people together; it is a new
model.
464. Do you agree with the report of the Fraser
of Allander Institute that the whole was more successful than
the parts?
(Mr McFall) Very much so. At times when one is right
at the centre of it one can be a bit down, but when one stands
back one realises exactly what has been achieved. We have achieved
that because people have kept their word. Years ago Allied kept
to its word and invested £20 million. Ken said that the company
would keep to its word, and it has.
465. Assuming you had not set up that task force,
what would have happened?
(Mr McFall) The company would have been on its own
in carrying out its objectives to retrain people and try to put
them into jobs. We would have had, not simply the 90-acre J&B
site, but a 400-acre derelict site, with no plan or vision. With
the establishment of the regeneration company we have the land
put in by Diageo, West Dunbartonshire Council and Scottish Enterprise
Dunbartonshire. The regeneration company is at the centre of it.
We are now talking to an inward investor to persuade him to go
to the J&B site. That would not have been achieved had it
not been for the task force. The plans for redevelopment include
the main trunk road: we want to develop a new roundabout on the
A82. We want roadside development and access to Allied's plant
and the Vale of Leven industrial estate so that we market the
area as a place to which people go for jobs. That could not have
been achieved had we not established the task force.
(Mr Robertson) We would have done everything for employees
in the normal way and the site would have been sold commercially.
The town would have lost not only the jobs but the opportunity
to think about its future. There is a dynamic here with which
we are all too familiar: the decline of industry in Scotland.
Industry evolves, grows and ultimately declines or moves out.
The difficult task is to get communities to readjust to that.
A lot of modern thinking is to ponder what the community needs
to do to adapt to changed circumstances. Had we not had the task
force the story in Dumbarton would be much the same as it was
after the last closure: we would not have had the necessary fresh
thinking and dynamism to try to approach the future in a different
way. Frankly, two-and-a-half years ago a good many attitudes were
set or atrophied; now people are much more flexible, particularly
in relation to what the town has to offer. At the point of closure
the first thing that Mr McFall would have heard would be a list
of Dumbarton's disadvantages, whereas now people are much more
energised in thinking about what the community has. The community
can build on that and look at how to do things in a different
way. Without the task force that change would not have occurred.
(Mr McFall) Perhaps one of the inspirations which
drove me at that time was the job that I held as Minister for
Economic Development in Northern Ireland. People came to see me
about their areas and as a Minister I knew just how little I could
help. I thought that, surely, there had to be something better,
and that was why I wanted the task force to look elsewhere. It
went to England and visited Lancashire Enterprise and the Republic
of Ireland. One thing in the Republic which energised the task
force was that everyone in the community got together, even the
local bishop. They asked where the road was leading. It led to
Dublin and then Europe. That impressed upon people exactly what
the situation was so that the community got something better out
of it.
Chairman
466. Mr McFall, you laid great stress on the
fact that named individuals were, almost by implication, known
and trusted in the community. Just how important was it that those
named individuals were also the leading people in their respective
organisations? You mentioned the leader of the council, the director
of planning, the director of Guinness UDV and yourself. We have
all seen projects, perhaps on a smaller and less important scale,
where the participants are much lower down the tree; they may
be third, fourth, or even lower-tier, officials who cannot make
decisions but are there only to take part in discussions. How
important is it to have the decision-makers participate in the
process?
(Mr McFall) I cannot emphasise enough the need for
those at the top to have been there. For example, the political
and administrative leadership in West Dunbartonshire Council was
signed up. A number of the issues that we raised with the council
regarding the land perhaps run against the local plan. It is important,
therefore, to ensure that the council are aware of such issues
early on. The director of economic development and his staff will
be the ones to deal with the new site. To establish a master plan
and point the way forward is very important. From day one of Scottish
Enterprise Dunbartonshire there was contact with Scottish Enterprise.
Scottish Enterprise Dunbartonshire submitted a document entitled
Lifting the Rock which illustrated the impact on the wider
area. As a result, £1 million came in for the area. That
helped us considerably. If we had not had those at the top involved
in it it would not have worked. If Mr Robertson had not been there
representing, and giving the opinion of Diageo's board people
would have said, "Don't believe him. I've dealt with so and
so at such and such a level, and nothing will happen."
(Mr Robertson) Everybody is busy. A massive commitment
in time is required. If one is not prepared to make that commitment
while it may work ultimately it will take a lot longer and the
decision-making will be fairly tortuous. That was a key factor
in the success of the project.
(Mr McFall) The management and officials have given
more than adequate time. There has been an unfair burden on all
the organisations. I do not think I can compute the amount of
time that has been put into it, but it could not have been achieved
without them.
Sir Robert Smith
467. You may not want to answer the next question
because it may undermine what has been achieved. Did the different
organisations worry slightly about the long-term justification
of their roles; namely, that by coming together they would lose
some of their identity or credit for their participation?
(Mr McFall) Yes. Right at the very beginning everybody
was paralysed. They asked themselves what it meant for them as
separate institutions if they entered into it. Would they be subsumed
within the task force? Would it take over where they had left
off? The key to it was to sit around with others and say, "If
you come into it your strategic role elsewhere will be maintained.
You have freedom when you come in and, since everybody will be
putting something in the pot, you will be able to pursue your
own ends." For the council it meant that it would have economic
development and the land would be used; it would not be a blight
on the landscape. Scottish Enterprise Dunbartonshire would have
the opportunity to attract inward investors to that site; it could
trumpet the success of the task force and the regeneration company
which would be in line with its aims and ideals. Diageo could
say that it had given a commitment to stay with the community
and had shown its corporate and social responsibility. I cannot
praise Diageo enough for its commitment: its word is as true now
as it was the first day.
468. How important was it that a local approach
was taken to deal with the closure?
(Mr Robertson) It was extremely important. Literally,
around the table we had representatives of the people most directly
affected. We had links with the suppliers who were affected, the
local college, employment services and so on. It was absolutely
critical to deal with it there. We received support from further
afield as and when we asked for it, but basically it was driven
at the meetings held on site.
(Mr McFall) As to the unions, Tony Davies, John Toal
and Willie Glover took a hit on the first day; they had to explain
to the workforce exactly what they were involved in. I remember
that on one occasion they were terrified about going to the Republic
of Ireland. I did not go there. Some people suggested that they
had gone there for a freebie and there was nothing in it. I do
not believe that John Toal went as a result. We said that it was
not a freebie; it was important to see how other communities could
do it. They had to show their strength of purpose, and they did.
Had we not had them the whole thing would have been lost. All
of them had different points of view. Indeed, one of them, who
shall be nameless, told me that he was a Tory trade unionist,
but he signed up to the aims and objectives of the task force.
469. How did the approach adopted in Dumbarton
differ from that following closures in other areas?
(Mr Robertson) Having looked at others, in part there
was a difference in the allowance of time. A two-year period implies
a different discipline. To have everyone one needs around the
table is critical. There was an evolution from the task force
into the regeneration company. We looked at the strengths of Dumbarton
and tried to see other possibilities. We considered a major development
at Lomond Shores where £60 million had been invested in a
new tourism project at Loch Lomond. There is potential for town
centre and other redevelopment in Clydeside. There was a feeling
that the move from task force to regeneration company would provide
the opportunity to approach it in a joined-up way for the purposes
of planning. I believe that one fundamental difference is that
the agencies that have become involved are now much better able
to handle the wider issues and look to the future of Dumbarton
in a more strategic way than was ever possible before.
(Mr McFall) Diageo has had deeper involvement in this
exercise than in anything else. It was a measure of Mr Robertson's
ability that he was able to persuade the board that this was the
right strategy to adopt in Dumbarton. There was a tentative approach
at the very beginning. At the end of the day, it will give the
different organisations a little more confidence to deal with
things in future. They have now taken the plunge and find that
they can still have their own identity and integrity, which is
extremely important.
470. You mentioned the closure in Essex. Do
you have much understanding of what happened there?
(Mr Robertson) I was also involved in that. These
things differ from place to place. The plant which was located
in Basildon New Town, Essex, had been there since the early 1980s
having moved out of old premises in the centre of London. The
mood there and the industrial set up were very different from
Dumbarton. We did not have a task force because the demand for
it was not there. However, we worked closely with the local council
and economic bodies. There was not a big issue about finding jobs
for people. Ultimately, there was no question about the future
of the site: it went straight into industrial redevelopment to
provide different factory units. It was a totally different situation.
The basic principles adopted in handling our employees in the
community were the same but the execution was different.
Mr Tynan
471. Obviously, other plant closures may take
place in the whisky industry. Is this a unique model because the
circumstances have driven it, or can it be used to identify lessons
to be learnt in other communities where there have been merger
or closure programmes? I think of Corus which has serious problems.
Obviously, there are steel plants in places like Clydebridge and
Motherwell. There may be a problem as a result of a closure programme.
Do you regard this project as unique, or can it be transposed
to other areas?
(Mr Robertson) I do not think that you can drop it
in as a blueprint. On the other hand, there are some lessons to
be learnt which can help. Obviously, different companies approach
these matters in different ways. Our view in UDV and Diageo has
always been that we will talk to the community and political leadership
as far in advance of the event as possible. Obviously, our prime
responsibility in that situation is to our employees; they must
be the first to know what is happening. You must talk to everybody
to prepare them for what is about to happen. We did not get everything
right first time, and hopefully the blind alleys that we followed
will be avoided by people who tackle it again. There were specific
factors: the leadership supplied by Mr McFall; the willingness
to look at other models; the bringing together of the key players,
which was of critical importance; and getting local agencies,
which sometimes do not always work together, to think about a
different model and submerge their individual needs for the collective
good. One needs someone to fund and support that, which was our
role as a company. Therefore, the role of the company is very
important. Fundamentally, what sticks in my mind is the engagement
with the community. We had two community days: one with the business
community and the other with the wider community. We got them
to think as well. You cannot drive a solution if people are not
prepared to work with it. Therefore, it is the response of the
community to the issue which is the most important element.
472. Therefore, you believe that there are lessons
to be learnt?
(Mr Robertson) Yes.
473. You do not believe that it is unique; it
can be used as a model for other situations?
(Mr Robertson) I hope so. One of the reasons we wanted
a report to emerge at the end was so that we had a formal record
of what was done. The report does not say that people have to
go off and do this or that; it sets out the narrative for people
to look at. They can say, "There are some good things here
which can be used in our situation, but there are other things
that we do not want to do."
474. I should like to deal with the question
of corporate responsibility. It appears that the company took
on the responsibility and did not just walk away. While companies
in any industry will always be a very significant part of the
local economy and closure decisions will almost inevitably cause
severe local difficulties, in situations where large-scale closures
are inevitable what type of corporate responsibility should large
companies have towards the local community? Do you think that
they should do more in that respect?
(Mr Robertson) We have to start with definition. In
Diageo we use the phrase "corporate citizenship". That
is very different from "responsibility" which always
implies an onus on someone to be charitable, or whatever. We have
always felt that "citizenship" implies that the company
has those responsibilities but also rights and an active role
to play. The company draws its employees from large or small communities,
whether in an urban or rural setting. It works in partnership
wherever it can with local authorities and other local agencies.
If something happens and the fabric of the local community must
change in a major way the only thing you can do is go in and take
a leading role to try to provide solutions to the problems which,
to be frank, we have helped to create. Companies must take their
roles very seriously, and that is something which we have always
demonstrated. That problem also exists across other companies,
but others approach it in a different way.
475. Do you agree that other companies should
do more in that respect in relation to "corporate citizenship",
or whatever expression is used? Companies should take on that
responsibility in an area where for many years they have been
able to utilise the local community and create profits?
(Mr Robertson) The company must have a relationship
with the community that supports it. You cannot be an island;
your employees are part of the community. They may be your employees
but when they go home at night they are part of the local community.
That community supports and nurtures the plant and in turn the
plant helps to drive the local economy. In the case of Dumbarton,
it supported the people who worked there and the local supply
base. In answer to an earlier question, there was great pride
in the J&B product which went around the world. In all these
things you must take into account that when you close the plant
it will not be easy. Any company that does it must carefully think
through all the impacts. One of the first things to happen in
the decision-making process, certainly in our company, is to think
through the impact on the community. You must put in place sometimes
quite considerable resources and budgets to deal with it.
(Mr McFall) Like Mr Tynan, I have read a lot of annual
reports of companies which talk about corporate citizenship. As
far as I can see, a lot of companies will sometimes, not often,
dip their toes in the local community and so do something called
"corporate citizenship". I believe that Diageo has lived
up to that concept. There is a story to tell. With the establishment
of the task force we got right into the local political environment.
Not many companies want to get themselves deeply into it; generally
speaking, they do not want to know. I had said to Mr Robertson
that I thought it very important for Diageo to get in and understand
the local political environment. I did not mean simply "party-political"
but how the community worked, who were the people with influence
and how it could be taken forward. To understand the local community
the company must be in there. Perhaps to begin with one or two
people in Diageo did not want to get into it to that extent. However,
Mr Robertson had given his word and persuaded the board of the
merits of it. Therefore, the company was in deep. To me, that
represents good corporate citizenship. While the company has left
Dumbarton, its presence is still felt. The company has generated
surpluses for the area. The land is now at the disposal of the
regeneration company, and that is a huge commitment. I believe
that corporate citizenship has merit. We have looked beneath the
surface with Diageo, whereas perhaps in some other companies it
is expressed by a few lines in an annual report.
Sir Robert Smith
476. How do you think the shareholders measure
the benefit of corporate citizenship? Is there a way of quantifying
what would have happened had you just done the bare minimum and
walked away?
(Mr Robertson) I think that that can be answered at
two levels. John McFall put his finger on it right at the beginning.
If we had gone straight into confrontation there is no doubt that
we could have had walk-outs, strikes and the place could have
been closed for weeks on end. The resultant impact on the supply
of Europe's number one scotch whisky brand would have been immediate.
Therefore, from a business standpoint what we did was absolutely
right. At a second level, the company has been able to live up
to its values and beliefs, which is important these days. People
who invest will look much more at the ethical dimension of the
company and how it behaves in terms of the environment, the people
and so on. Some shareholders may not view it in that way but others
will. I think that Diageo is able to say that it acted responsibly
and fully in line with its policies throughout. When one intends
to close down a plant one must look at the full cost, which includes
working on the solutions with the community. There will be massive
write-off and redundancy costs, and to that you must add all the
other costs of time and money to be spent in helping repair the
damage done and allow the community to continue. Hopefully, the
shareholders feel that the right thing has been done in terms
of the business generation and the company's reputation.
477. Do you believe that, given the nature of
your product and the company's image from the point of view of
the consumer, what was done had greater driving force than if
the company had acted more at arm's length?
(Mr Robertson) I do not believe that there has been
such a linkage, particularly in the case of J&B which by and
large does not sell in this country: it sells in Spain, the USA
and so on. We have never made that kind of linkage. However, the
company is known by its brand, so arguably there may be something
in that. Certainly, we did not set out to do that.
(Mr McFall) I believe that the company could have
walked away with less of an impact because J&B is not sold
locally. However, the possibility of a strike was a very real
one in the first few days of the announcement. The trade unions,
the management and ourselves sat down and asked ourselves what
a strike would achieve. There was a unanimity of view: it would
not achieve anything. If people keep their word they can get something
better out of it.
(Mr Robertson) The first thing that people ask is
what they can do to change the decision. My experience is that
when a company plans something like that the decision will not
change. What one must then do—the model was led by Mr McFall—is
accept it and not waste time and effort in constant head-to-head
confrontation to try to reverse the decision. We had to try to
drive something different for the future.
Chairman
478. You have referred to problems and difficulties.
In my experience, you just cannot please everybody. Was there
much opposition to what was proposed, as against uncertainty and
perhaps unhappiness? If so, is it ongoing? Is everyone happy with
the activities of the task force and the Strathleven Regeneration
Company; if not, what problems do you still face?
(Mr McFall) I do not know that I would use the word
"happy". I should like the company still to be there,
but the reality is that it is not. The workforce to whom I have
spoken are very happy about the way that Diageo has discharged
its responsibility as an employer. Let me give you a light-hearted
example. I was in a local pub a couple of months ago and a man
said, "John, if you tell me that J&B is going to open
I'm going to throw this whisky over you." It was a good deal.
479. Apart from the workforce, was every section
of the community behind it? Were there some individuals, organisations
or groups opposed to what was going on?
(Mr McFall) Every section of the community has been
behind it. The local newspapers were behind it, because we sat
down and explained to them where we were going. The council received
the Task Force delegation. We gave our views to the council. The
council comprises many political parties and independents. That
was accepted unanimously. People signed up to it because they
realised that it was for the benefit of the whole area, that each
was subsuming his own particular agenda for the big one: economic
regeneration in Dumbarton. Earlier Mr Robertson alluded to the
fact that the attitude of some communities was perhaps a bit depressive;
they felt that there were high levels of unemployment and not
much future. I believe that since the advent of the task force
there is a buoyancy which has not existed before. There is also
an outward-looking element which was non-existent in the past.
(Mr Robertson) We have not finished the job yet. We
must still get jobs back on site, which was the first objective
of the task force. We need to get the site redeveloped. Until
we can hand over a report which says that that is what has been
achieved we are not finished. There will always be cynical people
who doubt it, but overall the response has been extremely positive.
We will wait until we get the job finished.
(Mr McFall) Diageo will be involved for years to come.
480. We have exhausted our questions. Are there
any final comments or questions that you would like to make?
(Mr McFall) I should like to thank the committee for
the opportunity to come today. The drinks industry is a global
market. This could happen elsewhere and there are lessons to pass
on. I am delighted that you have given us this opportunity.
(Mr Robertson) Thank you for the time.
Chairman: In turn, on behalf of the committee
I thank you both for asking to be heard and giving us a copy of
the report, which is perhaps an example of how partnership between
employers, employees and the local community can overcome adversity
and achieve a great deal.
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