Tuesday 6 September 2016

UnSporting Direct

I once worked for Sports Direct. But by accident. I was a senior manager in another clothing company that had got into trouble. Mr Ashley knew the owners and made them an ungenerous deal that they eventually accepted. 
He took over the chain. Took the leases of the best ones that were then made into Sports Direct stores, and there was deal where the rest went back to the original owners. 
But he kept the branded labels. Which is what he really wanted all along. All in all, a good bit of business on his part. 
The SD team thought very, very little of us. They were dismissive of everything. From warehousing to distribution to employment. And, mostly, with good cause. Because whatever else Sports Direct may be, it is a slick operation. Very organised. Very focused. Very well run.
They had turnaround times half of ours. Superior inventory systems and logistics. They had and have plenty of resources and plenty of cash. According to the board of the company I worked for Mike Ashley was one of the nicest guys you could ever meet. And they said that about him in a very genuine way. They liked him.

I only worked with them for about a year. And mostly indirectly. Just helping out with the transfers of sites and stocks etc. But, in my opinion, I'd say they were the lousiest company I've ever worked for. 
Not because they were ungenerous. My company was ungenerous.  Not because they were tough, which they were. Most retail companies are tough. But because they were a nasty company.
An unpleasant bunch. Coming from the top was a terrible attitude of my way/high way.
All the time about all things. And with that winners arrogance too A slightly bullying undercurrent. Something that often occurs if the top tier is of an uncompromising, do it or you're out attitude. No compassion. No compromise. No choice.
 I suspected, that this came from the tier of management just below the leader. The people who report to the boss. And know what he likes to hear and doesn't like to hear. What he wants done and what he doesn't want to occur. And those people translated the wishes that eventually caused the rather ugly attitude to workers that is being discussed in the media now.

I would not be in the least surprised if Ashley genuinely didn't know of much of what has been revealed. Its a common occurrence in a company with a powerful boss. A dictatorship mentality eventually forms. The power below the throne fears rivals and needs to keep itself popular and secure. The best way is to hit targets, lower costs, increase profits and eliminate problems.

There was a report about Tesco{might not have been them, but I think it was. let's say it was}  a long while back. It emerged that the night shelf stacking staff were not permitted to talk to each other. Just a 10 minute break to have a coffee and a pee. 
This shocked Tesco, who, despite their 1990's greedy-grabby reputation, are generally well thought of by their employees. It was just a manager misunderstanding and seeking to improve performance. Other managers had heard about the results and copied the idea. And it spread. It was never Tesco policy that people be silent. And they ended it as soon as they were aware.

Sports Direct is a bit of a bogey company at the moment.  Zero hour contracts mainly the reason. SD have announced they will end them for their directly employed people and put them on a 12 hour contract. That's 18,000 workers off of zero hour contracts.

Still sounds bad. But it is a big change. A lot more rights with a part-time contract. Especially holiday pay. And, these people are working what amounts to full time anyway. The contract is zero. The actual hours are more like 30 to 40. Some 70% of all UK zero hour contact workers surveyed said they had as many hours as they wanted. Only 16% wanted more. And among those 16% will be a high percentage who the employer feels aren't up to it. So they are standby workers. With their phone numbers locked away in the Break Glass In Emergency cabinet.
Even the Unite rep on the TV, as he complained about working there never knowing how many hours a week he could plan for, said he had been there for three years, working 40 hours a week!
Zero hour contracts are a mechanism to get around the very onerous costs of employment, especially hiring and firing and redundancy. Zero hours followed the minimum wage legislation as the Government was well aware.

It isn't Sport's Direct fault they had tens of thousands of workers on these contracts. It is the fault of government. The government, Tory and Labour, should long, long ago have insisted that zero hour contracts were unlawful. Or could only exist short term. Or the rights were the same as employed.
Instead, they did very little indeed. 
Mr Ashley did well to control himself at the select committee. he must have been very tempted when asked if he thought zero hours were appalling, to reply it was not up to him to comment on the government's employment laws. and when question what was he going to do about it, he might have replied "what are YOU going to do about it?"
Sports Direct must have worked out they will probably benefit from having a more secure contracts system. Costs go up. but so does loyalty. Its far easier to retain people on a contract, even for 4 hours, than it is on a zero.

However, it IS the fault of Sports Direct that they let other aspects of their employment become so bad. 
It is the fault of SD that they never felt the need to address their employment practices properly until a critical situation, minimum wage not being paid, occurred. And it occurred through error, not malice. Management are salaried and are expected to stay behind and work late or deal with a problem. Sometimes they simply expected their wage employees to do the same.

Sports direct is a very big firm and will manage these changes well. it will probably in the long run, be strengthened by them. The unwelcome glare of the media spotlight will make it a little more worker friendly in the future.

And, it is well worth pointing out, that the original company that I worked for, a much nicer company to work for, which was taken over by Sports Direct, and then split off  from them again, went bankrupt.
It was bought out of administration by the original owners, and flailed about for another few years before going bust a final time and disappearing forever with the loss of 1,000 jobs.

Many of those 1,000 odd workers would have preferred their same job on a zero hour contact, to redundancy on a guaranteed 40 hour one.


Anonymous said...

From the heart, Bill. Seems you hit the spot with that. The only bright spot is that many of the employment laws come from Europe - despite the French being revolting. Brexit may give us the chance to bring in responsible employment contracts where there is mutual obligations (RTM please note)

Anonymous said...

The company I work for has previously been in the spotlight a little over zero hour contracts.

So they're running a test to offer staff the option to move from zero hour to guaranteed fixed hour contracts (of various options available).

The % of staff in the test that opted for the fixed hours contract? About 12%.

It seems most prefer flexibility to be able to request more hours one week and less another or to be able to work certain days or shift times.

My experience of zero hours when I was hourly paid was that I could always work as many hours as I wanted - I nearly always worked 40+ hours a week (I remember once doing a 36 hour shift - this was obviously before labour laws became so strict (and this was entirely my choice)) and have never experienced a time where I felt I wasn't scheduled enough hours.

So I don't think there's anything intrinsically wrong with zero hour contracts - only how they're implemented.

But even then, if you work better/more efficiently than the person next to you, then few (sane) businesses will offer more hours to that person over you.

Bill Quango MP said...

Anon: Agree. However, here at BQindustries, we have very few zero hours. Shed loads of 4 - 6 - 8 - 12 ones. That's really my preference. I need to know a minimum cover is available. By having fixed minimum, someone is always available at every station at every hour.
In reality most work far, far more hours.

I wrote a few pieces in defence of zero hour and minimum hour instead of F/t contracts here. When Miliband was making a big deal out of it when he was pointing at various things and saying "bad thing."

The readership was split. Those on full time contracts were appalled at the idea of a zero. Those on or with knowledge of a zero, were mostly fine about it.

Other anon: The french in particular have caused themselves endless problems with their employment laws. They work splendidly for employers in work. But are so restrictive that a company has to be 100% sure it needs another worker before even considering about having one.

CityUnslicker said...

200% sure Bill, that is the cost of a new employee in France...

Jan said...

A very good explanation of how the structure of such a company operates. I imagine it's very common eg in banks where the top brass never really know what's going on beneath them and there are bullying managers to get the necessary results. Then if a problem occurs which comes to light a junior is sacrificed and hung out to dry (jailed).

The Channel 4 series called "Back to the Floor" where the boss went undercover to do the lowly jobs in their company was a real eye-opener and the bosses generally made a lot of changes afterwards. However I would imagine very few big bosses are prepared to do that and would rather just take the money while the going's good.

Steven_L said...

I bailed out of them after the market took a hissyfit at their results and stomached a 30%+ loss on that one. They were pretty damned good results for a retailer as far as I could see. Turnover was up, EPS was up, but the city (apparently) didn't like the fact he hadn't hedged against a decline in sterling.

So I assumed they were going to be in the doldrums a long time and sold them to buy stuff I thought would recover faster. 'The City' just seem to have a problem with Mike Ashley basically. Which seems mad to me, as Ashley made Sports Direct what it is today. Him running the company was the main reason I believed in its long term growth prospects. So if he's being pushed out I doubt I'll invest again.

Bill Quango MP said...


A colleague being booted off the firm told me that he'd said to Ashley's right hand woman that 'she was unpleasant,superior and arrogant."

And added that "I know..because I am arrogant, superior and unpleasant. That's why I'm sitting here waiting for you to tell me I'm no longer needed.
And its why it will happen to you too. And even when you see it coming you won't be humble enough to admit you were wrong and change direction in time."

Steven_L said...

Watching them interview the fund managers at Sports Direct's AGM last night is just struck me. It's perhaps in Mike Ashley's interest to depress the share price.

I mean, what is the exit strategy for the likes of Standard Life and Hermes? They want Ashley (or some PE house) to buy the company. Either that, or they want Ashley to take a back seat, hire a more conventional CEO, and start paying a juicy dividend.

Assuming Ashley does want to buy it back (I know he denies this but you would wouldn't you) the cheaper he can buy it back, the better for him surely? So I'm not sure how this drags on, or what 45% institutional/individual shareholders can do about a 55% owner who ignores them.

I think the company has a very attractive valuation, and I'm only investing long term atm, but these shenanigans 'shook me out' pretty quick. I'm actually starting to think there might be value either way here. If Ashley's staying long term and does want the company back, there's an upside. If he decides to exit/take a back seat/retire then the brands side of the business could be a lot more valuable if the brands were no longer associated with Ashley.

People used to associate Slazenger with Viv Richards when I was a kid. Firetrap jeans had some kudos and USC was a upmarket shop.