Employer profile: VT Group

The VT Group has moved from shipbuilding to a wide range of industry support services and is in the middle of a major restructure, says Nicola Sullivan

The VT Group is on the crest of change. Once synonymous with British shipbuilding, the firm will start to sink that part of its business this month and instead surge forward into providing critical support services across a range of industries, including defence, education and waste management.

Since the Cold War ended two decades ago and the bottom dropped out of the shipping market, the VT Group, which celebrates its 150th birthday next year, has found that support services provide a steady and growing stream of revenue and are now the largest part of its business, with 97% of it focused on government work. For example, the group provides training and management services for the Ministry of Defence, as well as providing aircraft and vehicles. It has also moved into the nuclear sector and will be involved in the decommissioning of nuclear facilities in the UK and overseas.

The group expects to have the opportunity to snap up more lucrative contracts as the government seeks to outsource more services to increase efficiency and save money during the recession.

But the downturn has presented its challenges. It has been difficult for VT to pursue private finance initiatives because of a lack of government funds and its waste management programme in Wakefield has been delayed.

Extensive restructure

On top of this, VT is undergoing an extensive restructure and rebranding process that will see its five divisions consolidated into three key business streams. The streams will be dedicated to defence and the US side of the business, as well as government and critical support services.

As a result of the loss of its shipping business and the restructuring programme, up to 390 management roles could be axed across VT’s US and UK workforces. The changes will also see its HR and finance departments become centralised. Zara Loughrey, director of reward, says: “As part of the restructure, whereas the individual divisions all had individual HR departments, we are now putting together a shared service approach.

“Under the group HR director, there will be a learning and development director, HR operations director and then director of the HR service centre. By using that approach and having a shared service centre with centres of expertise, we will be much more geared up for further acquisition.”

The new structure will provide greater flexibility to meet the needs of each business, she says. “Every acquisition brings its challenges, but having a centralised approach and overview will be really helpful.”

But the VT Group is not planning a huge benefits harmonisation process. “There is quite a big array of terms and conditions,” says Loughrey. “The company has doubled in size over the past five years and that has largely been through acquisition. We have had a huge swathe of people that have Tupe [Transfer of Undertakings (Protection of Employment) Regulations] into the business and we have had a lot of ex-public sector employees who have a wide range of terms and conditions.”

Core benefits

Having grown through acquisition, VT has already addressed and consolidated some of its core benefits, such as pensions. “We are looking at pensions, as all companies continue to do, but I do not think we are anticipating any changes,” says Loughrey. “We have already closed the defined benefit scheme to new members, so there is a relatively finite number of things I believe we can still do.”

Looking to the future, the company will adopt a total reward approach and plans to help employees understand the value of their entire package, including monetary and non-monetary elements – be it core perks paid for by the employer or voluntary benefits.

“What we will be looking at doing is pulling together information for people in an accessible way to let them know exactly what they can get and help them understand what they have,” says Loughrey.

Another way VT has tried to ensure all its employees are singing from the same songsheet was by introducing a sharesave plan to its entire workforce.

When the scheme launched in April, staff signed up to acquire a total of about 1.5 million share options at 479.97p (a 10% discount on the share price at the time of launch). This equates to a 21.5% take-up rate among the firm’s 7,777 eligible employees.

Shares have been a large part of VT’s culture since it was privatised. The group also runs a performance-based share incentive plan (Sip) that rewards staff with free shares depending on business performance.

“We have found that by giving our employees the Sip and because of the share options in the company, they have become more engaged in how the company is performing,” says Loughrey. “They can see the benefit of what they can do and how they contribute to that.”

Executive reward

When it come to performance-related reward, VT, like all companies, has had to examine its executive reward to see if it is appropriate for the tough business conditions ahead. “I have been doing a lot of work with the board and remuneration committee to clarify our policy on reward and improving the understanding of it,” says Loughrey.

Working with Hewitt New Bridge Street, VT has benchmarked its executive remuneration but has made no changes. “But in the light of the current economic climate, the group executives and the top 70 managers – that is, everyone who reports into a group executive member – had a pay freeze this April,” says Loughrey.

“We felt it was appropriate. Because there was a relatively limited salary budget across the rest of the organisation, we did not feel it was appropriate that senior people were getting an increase.”

Growth forecasts

Executive bonuses, especially at a senior level, are competitive and so will not be changed, says Loughrey. Neither will the company’s performance targets. “Our growth forecasts from the analysts are not being scaled back, so we feel we do not want to make any changes that would not be appropriate for us.

“I appreciate that other organisations, whose performance has suffered, are having to make different decisions, but this is not something that has impacted on us.”

This bullish mood extends across the company as it embraces major change and growth at a difficult time for the economy.

“There was a very high score of people – I think it was over 80% of staff – who understand what they have to do and how that contributes to VT’s success,” says Loughrey. “To have that at all levels of the organisation is fantastic.

“It is a really exciting place to work. From the chief executive down, it is very people-focused and it is a very successful company – and I think that people like to work for successful companies.”

VT Group at a glance:

VT Group is a leading defence and support services company providing engineering and other support services to governments and large organisations around the world. Primarily based in the UK and US, it employs more than 12,000 people.

Over the past five years, the company has doubled in size, and its 31 March 2009 accounts showed a turnover of more than £1 billion.

The VT Group’s roots go back to 1862, when John Thornycroft launched his first boat on the River Thames at Chiswick. Subsequently, the company, known as Vosper Thornycroft, was best known for its warships and became synonymous with British shipbuilding.

Over the past 15 years, the VT Group has seen tremendous growth, moving from being predominantly a shipbuilder to becoming a leading defence and support services company. This month, VT and BAE Systems will merge their shipbuilding and naval support businesses to create BVT Surface Fleet.

When the firm starts to sink its heritage business of shipbuilding this month, it will push forward with providing critical services for a variety of industries.

The group is involved in a wide range of market sectors, including aviation, broadcast, defence, energy, education and training.

Its head offices are in Southampton in the UK and Atlanta in the US.

Career profile: Zara Loughrey

Zara Loughrey is reward director for the VT Group. She joined the firm in 2008 after three years as reward and policy manager at National Air Traffic Services (Nats).

She completed a masters degree in HR and public relations during her time at Eli Lily, where she worked as HR and benefits manager from 1998 to 2005.

Before that, Loughrey held an executive HR role at NatWest Markets, and a compensation and policy role at IBM, and gained extensive experience in HR and benefits during seven years working in the City.

Loughrey, who studied personnel management at university, says the biggest challenge she faces is to ensure VT employees fully understand the benefits available to them.

“It is communicating with employees and helping them to understand more about their employee benefits package, while giving them perks they value and which will actually make a difference in their lives,” she says.

“Effective communication is particularly important when helping employees understand pensions.”

Case study: 

Bike perk pleases fitness fanatic Paul Beresford, survival equipment charge hand, works in the VT Group’s aerospace division, where he has specific responsibility for the ejector seats in Royal Airforce (RAF) aircraft. VT took over this contract in 1998, but Beresford has been involved in the work since 1994.

He has particular interest in keeping super-fit, and last year took part in the high-performance company team competition, the Microsoft UK Challenge.

Not surprisingly, his favourite benefit is his bicycle loan through VT’s Ubenefit voluntary scheme. “I like fitness, I like running, I like the outdoors really,” said Beresford. “So with this benefit, I can tie it into work a little bit as well.” On Fridays, he uses a combination of train and bicycle to make his 55-mile commute to work. He cycles 11 miles from his home in North Yorkshire to the railway station, and after a 30-minute train journey, he cycles a further 11 miles to VT’s premises in Linton-on-Ouse.

He also finds the company travel insurance useful to ensure his whole family is covered on holidays to Europe.

Benefits on offer:

• Defined benefits scheme closed to new members
• Defined contribution schemes: group personal pension or trust-based money purchase, depending on business division, for all staff
• Salary sacrifice benefits such as childcare vouchers and bikes-for-work
• Health benefits such as healthcare cash plan, online health and wellbeing tool, dental care
• Retail vouchers
• Payroll charitable giving
• A variety of retail discounts arranged directly with suppliers
• Each year staff can opt to reduce or increase their annual salary in exchange for buying or selling leave dates
• Employer-paid for middle to senior managers
• Sharesave for all staff
• Share incentive plan, with free performance-related shares
• For middle to senior managers and those with a business need to drive a car