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The Financial Director interview – Return to spender

Variety is the spice of life, but you don’t need to change company every two years to add depth to your CV. So says Alison Reed, who has been at Marks & Spencer for nearly 20 years, having joined in 1984 as a finance manager after six years in accountancy practice at Touche Ross.

At Marks & Spencer, she has worked in several positions, including executive assistant to the chairman, head of home furnishings, logistics, group financial controller and eventually group FD in 2001. “I love retail, and I don’t subscribe to the culture that says you must move companies all the time to get experience,” she says.

“If you look at all the great businessmen today – guys like John Browne (BP) and John Bond (HSBC) – they have all been with their businesses since year dot,” she says. “To be a strong high-flyer, you need commercial experience. You can do that here. We are involved in manufacturing, clothing, food, home furnishings and financial services. You can start to appreciate the scope of roles available.”

Another of Reed’s passions is the interaction she has with the public. Over 50% of Britons shop at Marks & Spencer and a large proportion of the company’s shareholder base comprises small retail shareholders – the very customers who buy the knitwear, underwear and food that made the brand famous.

“Small shareholders are a part of what makes the Marks & Spencer brand so strong,” Reed says. “If you want to give your children some shares on their 21st birthday, you often give a Marks & Spencer share. People feel it provides steady growth. Marks & Spencer is not risky, but you are going to make some money out of it. It is part of the British culture.”

Marks & Spencer’s annual general meeting fills the Royal Festival Hall and Reed says every small shareholder has an opinion about retail because every one is a customer. She considers it part of her job to field questions about particular stores or, for example, why men’s trousers aren’t as good as they used to be – whether it is at an AGM or at a dinner party.

“People care passionately about this brand and that is what makes it so exciting and unique.”

But the wheels have wobbled on the Marks & Spencer trolley of late. In the 1990s, boardroom in-fighting and reliance on cosy relationships with UK suppliers made the retailer uncompetitive.

Marks & Spencer chairman and chief executive during the 1990s was Sir Richard Greenbury – a man with nearly 50 years in the company. He had managed several years of almost unbroken growth. But in 1994, Greenbury created four managing directors reporting to him. The idea was to select his successor based on individual performance.

In the ensuing political melee, internal competitive pressures started to destabilise the company. Keith Oates, a company managing director and FD when Reed joined the business, aggressively championed the idea that Marks & Spencer should expand into Europe (M&S was later to close its European operations). But Marks & Spencer left the supply chain untouched.

While rival retailers were sourcing cheap, quality items from overseas, Marks & Spencer was filling its extra floor space with synthetic fabrics and gaudy colour ranges that were made by UK manufacturers at uncompetitive prices. The nation started to shop elsewhere.

To compound matters, Oates failed in his attempt to spring a boardroom coup in 1998. The company’s share price slid from over 650p at the end of 1997 to under 200p in late 2000. Throughout this period, Reed was group financial controller of the company. But she says it doesn’t pay to dwell on the past – especially, perhaps, as Oates gave Reed her first job at M&S. “We tried really hard at that time. But … the business has now moved on and we should leave the past behind us.”

Despite her reluctance to discuss boardroom battles, Reed has a reputation for speaking her mind behind closed doors. Reed worked closely with Greenbury as his executive assistant in 1990. He was later quoted in a Financial Times interview as saying: “She (Reed) had very strong opinions about what was right and what was wrong … She was quite stubborn in her views and I liked that.”

And in Judy Bevan’s book, The Rise and Fall of Marks & Spencer, Reed comes across rather well. “Alison Reed … bravely pointed out … that financially Europe (for M&S) had been a disaster,” the book reads.

Reed laughs at the Bevan reference. “I think that is the only line I am mentioned in,” she says. But she does admit she saw the writing on the wall early. “The finance team sees things going wrong before others. We see things more easily because we are constantly looking at the statistics and numbers.”

She dismisses the notion that Marks & Spencer’s financial team or its financial systems were in any way to blame for bad decisions being made at board level. “I don’t believe it to be true. We had all the data we needed, but it just depends how you use it.”

Reed admits they didn’t always use that data well enough but, she adds, if the finance team had been doing a bad job in the 1990s, she would never have been appointed group FD in 2001, shortly after Luc Vandevelde came on board as chairman to steady the ship.

The trick for Reed, Vandevelde and the Marks & Spencer board was to marry the old company culture with a new commercial thinking. Vandevelde joined as chairman and chief executive but soon split the roles with ex-McKinsey and Kingfisher man Roger Holmes taking the latter job. Later, 4,000 staff were made redundant in an effort to drive out costs, and designers such ASDA’s George Davies were brought in to overhaul Marks & Spencer’s tired product lines.

Reed’s job was to motivate internal teams and provide a bridge between finance and commercial operations. “It is not finance’s job to select fantastic products, but we can make sure the price we are paying for goods is the right one, that we don’t buy too much stock and we don’t hold things for too long,” she says. “I am absolutely focused on the here and now of the business … We need to make this retailer great again.”

Marks & Spencer was the best-performing company in the FTSE-100 in 2001, albeit bouncing back after underperforming the index for three years. And Reed has brought a more prudent attitude to spending shareholder money.

“We need to find out where we are spending money on things that add no value. In the 1990s, the business wasted so much capital. We spent money that could have been spent on driving growth,” she says.

That’s not to say that Reed is holding back on the purse strings. Preliminary results for 2003 revealed that Marks & Spencer’s pretax profit had almost doubled from £336m in 2002 to £678m, and also showed that the company has increased capital expenditure from £303m to £540m going forward. Most of the money will be spent on a new portfolio of large Home stores and warehousing capacity in the UK to improve logistics. And a £45m cost for moving the company’s HQ from its Baker Street offices to Paddington later in 2003 may represent the final nail in the coffin of the old Marks & Spencer culture.

The company has even started to glance oversees again. Continental stores, Reed says, were not a bad idea because they were overseas. They just couldn’t fill the stores with the right product at the right price.

“We are careful not to say that we are going global in so many years. But we do want to build a fantastic business again so what we create has the potential to work internationally,” Reed says. “So I try to drive hard the idea of what makes our business tick. If we are going to become a leading world retailer again, we have to make sure we are efficient in world terms. And unless we can buy as efficiently as the Wal-Marts, we will never be one of the world’s best again.”

Apart from helping to streamline the company’s cost base, Reed’s other preoccupation is investor relations. The first thing she did for investor confidence after becoming group FD was to return £2bn of cash to them that was clogging up Marks & Spencer’s balance sheet. Reed also engineered a complex capital restructuring of the company so shareholders avoided losing out in heavy tax charges.

“Returning cash to shareholders was a fundamental part of the repositioning of the business,” Reed says. “We were seen to be sitting on too much cash. Our balance sheet was not efficient; we did not have plans to utilise it, so we gave it back. But it was important that we found a way of getting all the money into their hands rather than half the money lost in cash.”

Reed has also been heavily involved in a recent successful claim made by Marks & Spencer against the Inland Revenue that it is owed £30m in overpaid corporation tax because it was not allowed to offset loses sustained in European subsidiaries against UK-earned profits. But she says she really doesn’t like to get involved in technical financial issues and leaves the technicalities to her team, which includes a chief accountant with 35 years of service in the company and her two direct reports, both of whom have been at the company longer than Reed.

“The finance group today is the same finance group that went through the difficulties in the 1990s,” she says. “I have fantastic colleagues, who have given me the time to get the infrastructure sorted out.”

For Reed, the most successful businesses operate on trust and team members who have plenty of experience working with one another – something she has experienced as non-executive director of the UK banking subsidiary of HSBC. There she sits on a board with directors who have dozens of years of banking experience between them.

“To sit on the board with guys like Sir John Bond has been fantastic. The HSBC board is full of great mentors. John Bond has a great phrase: ‘Today a cockerel, tomorrow a feather duster.’ There is no preening in that company and no room for arrogance,” Reed says.

Reed is trying to instil some of HSBC’s thinking into Marks & Spencer, where the company is driven by team spirit towards common goals – a far cry from the Marks & Spencer of five years ago. Sometimes, Reed says, Marks & Spencer will fail to meet those goals, but the company needs to have a culture that keeps staff motivated.

“We still have the biggest market share, but we want to get even more of the customer’s wallet. If you look at Tesco and Wal-Mart, that didn’t stop them going for more market share,” she says. “We are a fashion retailer, so we will not always outperform (expectations) every quarter. But it is all about doing better than your competitors everyday. We have some fantastic competition and sometimes we don’t achieve it. But you go back and work harder.”


Name: Alison Reed
Age: 46
Qualifications: ACA

2001-: Group finance director, M&S
1999-2001: Retail finance director, M&S
1996-1999: Group financial controller, M&S
1991-1996: Executive, home furnishings and divisional director, logistics, M&S
1990-1991: Executive assistant to chairman, M&S
1978-1984: Touche Ross

Biggest challenge in your job?: We need to make sure we focus the business on clear goals we can all get behind. When you have lots of exciting opportunities, it is easy to step outside the business line.

Biggest hassle?: Trying to stop my day being taking over by the thousands of emails I receive.

Which company would you like to be FD of?: I absolutely love my job. Why would I want anyone else’s? I want mine.

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