To some of its staff, Rolls-Royce's announcement earlier this year that its profits for 2007 had risen by 13% to £800 million was rather insensitive. It came just two days after hundreds of workers at a gas turbine plant in Merseyside finally lost their year-long fight to safeguard their jobs. According to reports, the casualties came because the aero-engine manufacturer was planning to transfer production to Ohio, where labour is cheaper.
It is as clear a signal as any that sentiment still has no place in business when it comes to safeguarding long-term profitability. For although Rolls-Royce is weathering the economic storm better than most - mid-year sales are up from £3.59 billion to £4 billion, with a 17% increase in its order book to £53.5 billion - the management board has been asked to cut rising costs by £30 million annually.
Some 2,300 job cuts have already been announced since the start of the year, but it is minimising the effects of these headcount falls that is partly the remit of Margaret Gildea, executive vice president of HR, operations, skills and capability.
As this interview begins, Gildea receives a phone call on her mobile telling her that workers in Bristol have just accepted a 3% pay deal - something she describes as "excellent news" (the company currently has 38 ongoing pay negotiations and as recently as 2006, Amicus rejected a 3.5% pay deal). Yet, in her role as the person responsible for skills, she knows cost-cutting can only go so far.
"Most job cuts have been among white-collar, back-office staff," Gildea says. "As a UK-headquartered company, we've reached the point where we can no longer solely compete on price and costs. Someone, somewhere in the world will always be able to produce things more cheaply. The only way we can compete is through the skills we have to offer."
The 2002 Tomlinson Report was the first to warn that if current trends continue, Britain will be overtaken by India and China in the skills race by 2015. And despite Rolls-Royce having a 100-year tradition in the training of apprentices, Gildea has been influential in the development of the content of a new engineering diploma that started being taught to 14- to 19-year-old school pupils for the first time last month.
"We are having to take it upon ourselves to protect our future pipeline of talent," she says. "We invest £30 million a year in community training, but we can never quite prove cause and effect."
Students who study for the qualification will be able to work at Rolls-Royce plants as part of their course, a fact Gildea says will be vital to capturing potential recruits' enthusiasm when it comes to them looking for employment. "The current education system promotes the intellectual side of engineering too early and turns people off (proved by the fact that only 45% of those who start apprenticeships actually finish them). This diploma enables students to choose the path they want to follow."
Gildea adds: "My vision for the diploma is that students will not be forced into making choices so early. At the same time, it will grant us the first look at them, and it fits our philosophy of wanting people to get excited by the prospect of engineering."
As the person responsible for anticipating Rolls-Royce's skills requirements for the next five to 10 years - each division has 'skills owners' who report to Gildea - she admits she is sometimes depressed by school-leavers not knowing what they want to do. "One of the wastes in today's system is that youngsters take A-levels and even degrees but still have no idea what they want to do," she says. "We'd rather take people who have made conscious decisions from a point of real knowledge."
Rolls-Royce will not be the only engineering company seeking to woo the students of the future who come through the diploma system, but the company is leading the way in developing career opportunities. As well as presenting to schools and universities and running science prizes, the company is pledging to help train other - potentially competing - organisations' staff. Gildea is currently brokering a deal with the Learning and Skills Council to do just this, because, she says, "we also care about the levels of skills in our supply chain".
Currently, Gildea oversees the training needs of more than 200 apprentices each year. They finish their training with skills levels of 3 and 4, equivalent to three good A-levels and a degree. They become Gildea says, "what used be called technicians". Even in times of economic uncertainty, Gildea says she has stood firm on maintaining the number of trainees coming into the company. "We can't afford to endanger the lifeblood of the company," she explains. "Even in some of our darkest days, such as in the aftermath of 9/11 when orders crashed globally, we kept all of our apprenticeship deals going, and in some years even increased our intake."
Ironically, despite Gildea's long service (she has had a 30-year career at Rolls-Royce, having started in industrial relations in 1978), she still believes loyalty at the company is a transient thing. "Long service is indicative of what people used to do," she says philosophically. "It won't tell you anything about future behaviour."
But she admits that several factors play in Rolls-Royce's favour. "I think if employees can say they have a qualification from Rolls-Royce, that would speak for itself," she says. "It's why I'm particularly pleased that the new school diploma has been accredited by Cambridge University, while all our own courses are accredited by Semta, the Sector Skills Council for science, engineering and manufacturing technologies."
Gildea also believes that because many of Rolls-Royce's products have a long development gestation, staff want to stay and see the fruits of their efforts.
She argues that both of these factors contribute to Rolls-Royce's remarkably low staff turnover rate - just 4% a year.
Even recent joiners are encouraged to become 'skills ambassadors' and go back into schools and colleges to spread the Rolls-Royce message. "Many employees mentor school children, while our 300 trainees each year are typically given a project to work on with a school to complete a task of some sort," Gildea says. "It's used as part of their induction. It energises the new joiners and shows potential recruits what Rolls-Royce is all about from a training and development point of view."
The aero-engine manufacturer's commitment to training is clear for any joiner to see. This interview with Gildea takes place in the company's £5 million dedicated training centre in Derby. Its reception is festooned with awards and certificates, from the East Midlands Apprenticeships Awards' Employer of the Year 2007 trophy, to Open Industry's Supporter of the Year, as well as the British Learning Association's Certificate for Continuous Improvement in Learning.
Training has historically been strong in Derby (in contrast with the Rolls-Royce car marque, which only launched an apprenticeship scheme in 2006), but Gildea says it is only recently that the significance of this has truly been grasped.
"The company has been totally transformed in the time I've worked here," she recalls. "We've gone from being a publicly owned, UK-centric, bureaucratic small-time player - albeit one with heritage - to a global leader. I believe we are finally taking skills far more seriously. I see a chief executive who is now passionate about skills, and we are moving from a graduate intake to a global intake."
Ironically, Gildea was rejected by Rolls-Royce when she first applied to work there in 1976 - something she often reminds her bosses about. Her perseverance paid off, but luckily for other new joiners, the recruitment process finds the right candidates first time round.
The success of Rolls-Royce's apprenticeship and community endeavours means that today, the percentage of non-graduates coming to the company is about 50% - a change from a 90% graduate intake 20 years ago. Yet Gildea is convinced HR has retained its identity.
"Rolls-Royce has acquired some other companies along the way, but we are not a General Electric-type of organisation that says 'we do it this way, and this way only'. We've seen our HR strategy change from being a police-force-like admin function to one that is genuinely up to date.
"Right now we're going through the process of introducing the Ulrich model to the business. I wouldn't say we are demonstrating HR excellence, but we're certainly on the journey towards it."
Gildea has more targets in her sight though. She thinks there is a dearth of women in the company - despite accepting that engineering is a highly male-dominated industry. "This is my next real hope for the diploma," she says. "That more women become interested in this business naturally. I'm not in favour of positive discrimination - my mantra has always been to judge people on their performance or potential performance.
"With any luck more females will come through. This can only be a good thing for the future of this company."
CV
1954: Born in Yorkshire; first class degree in English from Cambridge; MBA from Loughborough University
1978: Joined Rolls-Royce, worked initially in employee relations
1998: Was appointed HR director for operations
2002: Director of career development
2005: Executive vice-president of human resources -operations and skills and capability.
