FDM's CFO on creating profit and social good

When Mike McLaren was offered the chance to become CFO of FDM Group, the IT services firm that specialises in skilling up graduates, he jumped at the chance.

McLaren, who had previously spent two decades at IT giant Alphameric, recognised the unique opportunities that FDM provided to not only create profit, but to do good at the same time.

The firm has grown at a rapid clip to become a FTSE-250 stalwart with a market value of around £1bn, but at the time of McLaren’s arrival it had just been taken private by investors Inflexion at a cost of £35m.

Four years later FDM went public for a value of £305m, delivering the owners a healthy 16-fold return on their investment, and since then the firm hasn’t looked back- as solid growth has come on the back of a unique model.

In its last full year results (2018) adjusted operating profit rose 8 percent on the previous year to £51.3m on revenue up five percent to £244.9m.

The group, which services the IT demands for companies in a broad set of sectors, takes in 2,500 graduates a year and after a three month training programme, across various applications in the software development life cycle, in both modern and ‘old-fashioned’ languages’, puts them on two year contracts.

Thereafter, many join their clients. “On average, four out of five people internalise with the client. We don’t charge a fee for that, it’s something we encourage. We’ve launched 10,000 careers globally over the past 30 years,” says McLaren.

This cohort and the 4,000 staff who have stayed at the group after the two years make up a workforce that is largely drawn from graduates who may not have had natural advantages in life. “We are about finding those kids that weren’t born with a silver spoon in their mouths and training them. 90 percent of what we do is graduates, 10 percent is ex-Forces and people who have served their country, looking for a second career with 84 different nationalities on our payroll globally,” he says.

McLaren is delighted that the firm is seen as delivering social good. “We are three years on the bounce now zero percent gender pay gap, zero percent ethnicity pay gap, we are 50 percent female in our management representation, we are 38 percent female in our on-site representation, which doesn’t sound great but trust me in IT is pretty awesome,” he adds.

More recently the group has added a division focused on bringing ex-military staff into IT consulting, with 500 or so candidates passing through so far. “They might be out of Royal Signals, out of the Intelligence Services, or a squaddie who has a penchant for technology,” says McLaren.

There is also a recently developed back-to-business programme, that has attracted 100 candidates so far. “It’s for people who have taken a planned career break, who are planning to get back into the workplace, so typically people with a background in IT and finance,” he adds.

Another area being looked at is the apprenticeship space. “We would desperately like to go and help some of those kids who need a start, who can’t afford or don’t want to go to university. I suspect some point in the next couple of years, I think we can build something that will help apprentices get roles into the future,” says McLaren.

Because of its model, the average age of staff at FDM is very young, so MacLaren plays a key role in mentoring workers, especially those in the finance function. “We have a business where the average age is probably 22 or 23 and I’m nearly 60- the age you’d expect of senior management.

“So you have to impart knowledge, wisdom and experience and train those people who work for you, be they on sales or finance, business support and demonstrate you’re part of the team to deliver, because FDM is about delivering those career opportunities for folks.

“I typically travel between three and five months a year, spending on average two or ideally three weeks in different territories. I recently spent three weeks in Australia, where the oldest person in the office is 28. That’s important, as all parts of the finance function are in the UK,” he says.

Starting out

McLaren’s career has been closely tied to the UK IT sector. After leaving Birmingham’s Aston University he joined accountants Clark Whitehill, but left within a year of qualifying in the mid-1980s, to join United Leasing, which became Meridian Computers. “I’ve always had an interest in technology, so I was very attracted as a job that had pan-European travel,” he says.

When Meridian’s parent company got broken up three years later he joined listed IT group Alphameric in 1990. “It had done incredibly well in the 1980s developing systems for Big Bang, but had overstretched itself when it got to the end of that decade,” he says.

When turnaround specialists Drs Geoff Bristow and Robb Willmot stepped in they hired McLaren as the group’s financial controller, in a time when many of the group’s 30 or so companies in the group were being sold off to return the business to health. “The experience taught me a lot of good lessons about preserving cash,” says Mclaren.

Over the following years, Alphameric swung back into profit, through developing leading edge technology around communicating data, “before the internet the group’s competence was in the ability to shift data around. Clients were retailers, bookmakers, banks, entities with a large number of branches,” he says.

In 1995, Maclaren was made finance director of the group that by then was delivering rapid growth, into the dotcom boom, until he says the group overstretched again. “Raising money was easy, buying businesses was easy, and again you learned good lessons by going through all of that. It was an exciting and interesting time,” he says.

After continuing into the 2000s with divisions focusing on retail, hospitality and bookmaking, Alphameric was acquired by billionaire Joe Lewis in 2011, and immediately, McLaren joined FDM. “They wanted someone who was very commercial. I fitted as I had spent all my working life as much time in sales as in finance.

“I’m not a typical FD. I like to be in and around the commercial parts of the business, where selling is what drives everything. Alphameric had a strong technology background, and at FDM there is a strong technology education background, so there was another strong fit,” he adds.

“When I first heard of FDM I kind of didn’t understand it. I liked the energy of people like the founder Rod and his wife Sheila who is the COO. He’s been here 30 years, she’s been here more than 20 years. Andy who is the sales director has been here 25 years,” he adds.

Rebooting finance

On arrival at FDM McLaren set to work developing the finance function. “I took apart finance and put it back together again, in a way I thought was more appropriate for the business,” he says.

“Some of it looks at the past and some of it looks at the future, in financial accounting and management accounting. So rather than have one person report to me, I have two people report to me, of equal status.

“One person runs financial accounting and everything historic and one person runs management accounting and everything prospective. And if you work for me in the finance in the prospective part, I’d expect you to be on the sales floor at least two days a week on average, seeing how the business works, how it ticks.

“We have 19 locations across 10 countries. I’d expect our people to go out and visit those countries, and be engaged with those businesses as the finance function is centralised in the UK,” he adds. We’ve updated the technologies and in finance we’ve brought far more people in who are qualified, or who are looking to qualify.

“We’ve built a finance function with an approach that says four eyes is better than two, and is built with resilience and to be scaleable. I have two reports under me and they each have two reports under them.

“So it breaks down into two ways of tracking, in case there’s a failure, and there’s two different routes to get to the same answer. It’s scaleable in that its quite easy to add people into the finance function because there are obvious and logical slots where they fit in, and logical and obvious ways they can move up. Most of the people who work for me in senior finance roles are under the age of 35,” says McLaren.

How much scope is there for further growth? McLaren says that given competitors such as Tata, Wipro, Infosys and Cognizant combined employ 2m staff,  FDM’s staff of 6,500 at any one time means it has a long way to go, because of client demand. “Organisations that have got a big, lumpy IT function, that churn their people at a minimum of 10% a year, all need entry level graduate talent. We will find people that are quite often less advantaged, and therefore with more to prove, he adds.

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