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Power sharing is the key for EIC

PROFILE

Three families have run M&E firm EIC for two generations.But, as a gap in the family succession looms, the directors are planning to bring more non-family members forward on to the board. Steve Menary reports

SUCCESSION in a privately run business is never easy - particularly when three different sets of relations control the company.Yet, three decades after it was founded, M&E outfit EIC is still a family affair.

Two sparks, Ken Le Marechal and John Lyall, founded Stratford-upon-Avon-based EIC in 1971 and were joined shortly after by project manager John Howles.Now, 30 years later, EIC is turning over £50 million a year, the three founders have amicably taken back seats and their offspring are running the business.

'We have our moments where we disagree, ' offers Graham Lyall, without sounding very convincing.

Graham and his two brothers are on the board along with Mr Le Marechal's son and John Howles' daughter.The families even share leadership in a similar way to the rotating presidency of the EU.

Until recently Graham Lyall had shared the managing director's job with younger brother Ian, who is engaged to director of human resources Dawn Howles. But Mr Lyall has swapped the top job with Nigel Le Marechal's post as EIC's finance director.

'This is in keeping with a tradition passed down by the founders to rotate the responsibilities of key directors, ' explains Mr Le Marechal.

All five family members on EIC's board have children and the eldest, Ian Lyall's 15-year-old son, is doing day release at the firm, just as his father and the other EIC directors did, before finishing his GCSEs.

'The philosophy handed down from our parents was that you can't tell an electrician what to do unless you can do it yourself, 'Mr Lyall says.

He insists his sons - who are 11 and 13 - would do the same were they to join EIC. But that decision remains way off in the future.The board recognises that a gap will appear between the retirement of their generation of the family, of which Graham Lyall is the eldest at 44, and the next tier taking over.

Over the past decade, EIC has grown from a local electrical contractor to a more complex M&E outfit with offices in Midlothian, Pontefract, London, Lymington in Hampshire, Plymouth and Redruth.Much of this expansion has been the result of existing staff setting up operations out of the group's heartland.

'We've worked with all our regional managers before.

We had a guy on the tools in Stratford who wanted to relocate to London, now we've got an operation there that's turning over £12 million a year, ' Mr Lyall says.

Similar relocations led to branches in Redruth and Lymington.

The success of the Redruth operation also brought EIC back into mechanical contracting again.A decade ago EIC bought out Leicestershire-based mechanical subbie Crown Heating but the move was not a success and the business was eventually closed down and jobs cut.

'When you buy a company, you're really just buying the people and work and, for various reasons, it didn't work out, ' says Mr Lyall, adding ruefully: 'It was a bit of a nasty experience.'

More recently EIC has merged its Durham and Pontefract operations after the regional manager retired and a new appointment - again from outside the company - did not work out.

These experiences, allied with a period five years ago when the retirement of EIC's founders led to the business briefly being run by nonfamily members, have left an impression.

'There was an intermediary level of non-family management with a little too much aggression, ' says Mr Lyall.'They were trying to protect the company but didn't always recognise that if you fall out with a main contractor, that's your next job gone.

'To be fair, that reflected the industry at the time and the industry has changed.'

Those experiences could have forced the family to become insular. Instead, the directors want to use their successful regional expansion to reward one of its staff with a place on the board.

Director Peter Calverley is due to retire and this will reduce the number of non-family members on EIC's eightperson board to two, and both, John Harris and Alister Macaulay, are only in their 40s.

'We're looking at bringing non-family people on as the next generation will not be involved for a while, ' explains Mr Lyall.

Mr Lyall and the EIC board prefer to empower the staff and project managers are asked to buy in their own materials.

'We could probably do better if we had a central buying process, ' admits Mr Lyall.'But when a project manager goes to a client and is asked when a piece of equipment will arrive, that project manager will know, because he has ordered it.

'The clients seem to like it.Our guys aren't just buying the materials, they're liaising with the main contractor and pricing the variations.'

EIC employs around 200 staff, mostly in Stratford, and another 400-odd workers on an hourly rate around the UK.

In the past year the firm has taken on more staff as the board aims to expand the mechanical side, which is only offered in London, Lymington, Redruth and Stratford but will be rolled out to Leeds and Scotland over the next couple of years.

Recruiting more staff pushed pre-tax profits down from £1.3 million in 2002 to £381,604 last year but Mr Lyall is confident this will be remedied with a return to a seven-figure profit as turnover hits £55 million this year.

Profits were also hit by change in the supermarket sector. Safeway was an important client but, when it was taken over by Morrison, the firm experienced a hiatus in work.Tesco's policy of online tendering has also hit the firm.

EIC has kept turnover rising - up £1.3 million to £50.3 million last year - by moving into health and education and relationships with Amec and Willmott Dixon.

Mr Lyall says: 'Historically a lot of our growth had been in retail and we moved into combined M&E at just the right time. If we hadn't, we could have been in trouble.The big challenge for us now is to get the combination right.'