PracticeAccounting FirmsTenon’s odd couple

Tenon's odd couple

Consolidator Tenon broke the mould when it began trading as a national provider of accountancy and business services, and buying other firms. But when old-school chairman Neil Johnson and straight-talking CEO Andy Raynor took the reins, it was clear they would have to start afresh to turn the company around.

The careers of Neil Johnson and Andy Raynor

You can’t help but spot the buzzwords. When Tenon’s new chairman Neil Johnson and chief executive Andy Raynor discuss the company, their speech is littered with talk of ‘reinventing the management’, ‘ivory towers’, ‘sea change’, ‘opening doors’, ‘transition’, ‘disenfranchisement’, ‘grasping the nettle’ and ‘dark days’ of February.

And the message is that Tenon has changed. A radical overhaul has been made, mindsets have been altered and brand new structures have been assembled in a bid to put the start of the year’s crisis far behind them, which had many wondering whether the firm would survive until summer.

Well here we are. It is mid-summer and Tenon is still trading. The new chaps in charge are selling the message that the company is on the up, back in good shape and the staff, despite redundancies and last year’s £114m loss, are a lot happier than before.

According to the new management team, the secret is in improving communications and empowering those who had previously felt cut out of the decision-making process. It’s been tough, but now they want everyone to know that things are different.

‘The changes centre on the fact that any individual at Tenon will work through people who have run businesses like this before. That wasn’t the case previously. My belief is that we’ve made profits out of businesses like this before and we can do it again, but we don’t have to reinvent the management in order to do so,’ says Raynor.

To understand where Raynor and Johnson’s ideas come from, a bit of Tenon history is necessary. Launched in Spring 2000, Tenon arrived with much fanfare and a ledger load of claims that it would change the face of the accountancy industry.

Instead of having the traditional partner structure, Tenon was a plc listed on the Alternative Investment Market. Flotation quickly gave the outfit a £50m budget to enable them to buy small but well-run firms to turn itself into a national provider of accountancy and business services.

What was later known as the ‘consolidator model’ became the talk of the sector, with many an accountancy old hand convinced that this was the profession’s only way forward.

Ian Buckley, Tenon’s chief executive and founder, proclaimed that the company would post a profit of £6m for 2001 and would become one of the nation’s top 10 largest accountancy businesses.

However, the boasts soon seemed overstated. The company turned in disappointing profit figures of £678,000 on turnover of £55m. Despite recording a profit, financial director Jonathan Freedman quit. Interim results looked good, but by November 2002 there were warnings that profits would be below market expectations.

Then the situation seemed to spiral out of control. Chairman Eric Stobart departed early in February 2003, citing pressure of other work commitments.

Four days later, another profits warning was issued revealing 2002 would not be profitable at all. CEO Buckley resigned the same day, leaving observers reeling.At this point, Andy Raynor and Neil Johnson took over at the head of the business and, as far as they are concerned, Tenon history began on 11 February 2003.

It’s clear now that many within Tenon were deeply unhappy with how the company was run under Ian Buckley. For some time, there had been talk, especially among small shareholders and former employees, that the integration needed between all the acquired business units had not taken place, and that communication between them was about as effective as a game of Chinese whispers.

Added to that was the problem that key people with experience in business management appeared to be disconnected from the centre, playing little part in the running of the company. It looked like a recipe for commercial failure.It’s a problem Raynor and Johnson recognised immediately. For them the problem and solution were clear: to improve communication and get people involved, they needed to restructure the senior management team.

Between them, they have taken Tenon from having only a plc board to having three main bodies supporting each other. The plc board remains, but now an ‘operating board’ made up of Tenon’s service line heads runs alongside it making the commercial decisions.

Then, in a radical departure from tradition, the third body is the senior management group (SMG), where figures within Tenon, termed ‘key influencers’, get to hear about, discuss and offer advice on the decisions made by the operating board.

This additional support is crucial for Raynor and Johnson. Under the ‘old’ Tenon, the experienced former partners and managers of the acquired firms had no management role, but the SMG involves them. However, it’s a reciprocal relationship. In return for the operating board sharing information, Raynor says the SMG has a ‘duty of care’ to pass back plans and ideas in an effort to aid management make the right decisions about investments.

Raynor and Johnson emphasise that the SMG is intended to bring on board the otherwise concealed ‘movers and shakers’ within the company. ‘There’s always a group of people who actually make things happen, and the aim is to have that group around a table when we need to communicate with them.’

Communication is now occurring in all directions, not just from the centre to the periphery. The Dover Street head office has been abandoned, and staff have been brought into the main Chiltern Street office. For Johnson, this was crucial for Tenon’s culture to change for the better.

‘It would be fair to say that there was a suspicion of an ivory-tower management style in old Tenon. We were both committed to sweeping that away,’ says Johnson.

Now staff are happier. The feeling of being kept at a distance has apparently gone, and the employees are aware of the ‘sea change’ that has taken place. That’s important for Raynor and Johnson, because the communication and culture problems were getting in the way of developing the business.

Raynor and Johnson have experienced a steep learning curve in creating the best management team. But then change is in the nature of Tenon. It was a new model that broke ground and, whatever the initial plan, it was almost certain that further refinement would have been needed at some stage.

However, the changes required ran deeper than that – after all the company is a plc run by people with much more experience in the world of traditional partnerships. No sooner had they started to adapt to the plc, than they were asked to leave their office for a new one.

Johnson confesses that being in old Tenon may have put the former partners under a lot of stress. ‘Overall the transition has been pretty good. Where it had holes was when this structure wasn’t working. You had people at the edge who had been used to making decisions, running their businesses very successfully, day in and day out, and making profits. Suddenly they had become employees, they weren’t partners any more, but neither were they doing the things that turned them on – running a business,’ reveals Johnson.

But if the situation is better on the inside, on the outside it is better still, especially for external shareholders. ‘This business explains itself better than it has done before to the market place. The dynamics of this business are now better understood and we certainly have a better dialogue with our external shareholders than before,’ says Raynor.

This dialogue will be a central requirement for the business to go forward. Around 40% of the stock in Tenon is held internally, and so building shareholder value will be crucial to the partners, who sold their firms for shares when they signed up with the company.

And that presents an interesting predicament for the new chairman and chief executive. Certainly they might get flak from the institutional investors in the future, but when they do, they know it will be met with equal unhappiness within the company. That’s when the effectiveness of those improved lines of communication will reveal whether the changes in Tenon have really been successful.

Neil Johnson and Andy Raynor

Neil Johnson and Andy Raynor come across as an unlikely pair at the head of a public company.

Raynor is the straight-talking, working-class boy from Rotherham made good, sometimes blunt, but never brusque.

Meanwhile Johnson appears to come from much more old-school business stock, more at home when immersed in the esoteric traditions of the boardroom. Born to be on company boards, he chooses his words carefully, preferring a diplomatic turn of phrase.

That said, the two have clearly forged a bond while diagnosing the problems at Tenon. Raynor speaks enthusiastically of his chairman’s qualities, while Johnson takes care to point out how much he and the chief executive agree on the way forward.

Of course, this may be a front for the workers and the public, but from their emphatic tone it appears to run much deeper.

Raynor began his career in 1979 at KPMG. Seven years later, he was a partner with BDO Stoy Hayward in Nottingham after joining the firm in 1983. There followed 17 years with BDO, a period that included spells as head of corporate finance and head of business development.

He became managing partner in 2000 and played a significant role in the deal that took the practice into Tenon two years later.

Johnson, on the other hand, had a varied career since leaving the army in 1974 to join BLMC (now part of Rover). He held various director level positions – technical service, sales and marketing, engineering and manufacturing – before taking over strategic planning for the chairman’s office.

In 1981, he joined the board of Jaguar and there then followed a spell on secondment to the Ministry of Defence and then another on the board of Rover group.

He was the chief executive of the RAC that led the demutualisation and sale of the motoring services business. He has started his own trade promotions business and is currently chairman not only of Tenon, but also of Hornby, CybiT and Motability Finance.


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