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Any successful company ignores the value of its workers and employees perilously



 

In any organisation, you have to wonder whether the employees are valued, apart from a mechanism for the shareholders of that company to generate a profit.

Yesterday, Marks and Spencer reported that it had still made a profit. The company made an underlying pre-tax profit of £706m, but it was down from last year £714m.. Marks & Spencer was once Britain’s most profitable listed retailer, and the first to ever make more than £1bn in a year but it now makes less money than Tesco, J Sainsbury, Wm Morrison and Kingfisher, the owner of B&Q.

According to an article in the Telegraph by Harry Wallop yesterday, Marc Bolland, the chief executive, said:

“Marks & Spencer performed well in a challenging economic environment, growing group sales by 2pc and holding market share. We also made good progress with our strategic plans.”

He further said: “We are making good progress but successful execution of our strategy requires us to adapt to both market opportunities and current market conditions. In November 2010 we set out a target to grow our revenues by £1.5bn to £2.5bn over the next three years. As a result of the deterioration in the economic environment since we set out our plan, we now expect to achieve £1.1bn to £1.7bn increase in revenues. While conditions in the UK are predicted to be more difficult than originally forecast, we are on track to deliver both international and multi-channel targets.”

In 2008, in “Personnel Today“, it was reported that Marks & Spencer’s (M&S) HR director “categorically denied there will be any job cuts despite the retailer experiencing falling sales”. Shortly later, Sir Stuart Rose claimedthat, “M&S boss Stuart Rose has told Sky News the company is “just being sensible” in axing 1,200 jobs and closing 27 stores.” However, Sir Stuart remained optimistic, reported later in the article: “Sir Stuart told Sky he did not see the economy improving until spring 2010 – and could not rule out further job cuts and store closures.” At that stage, it had described its half-year profits had fallen by 44%, but it was still in profit.

This leads me to the hugest tragedy of all. Companies can get focused on ‘cutting costs’, including laying off employees, while still being profitable. It will be noted that Marks and Spencer has continuously blamed in part external economic conditions. Sir Stuart Rose was one of a plethora of business leaders who wrote in the Telegraph:

“SIR – Between us we run some of Britain’s largest companies and employ over half a million people. We are responsible for ensuring that our businesses and our employees come through the recession in good shape. The Government’s proposal to increase national insurance, placing an additional tax on jobs, comes at exactly the wrong time in the economic cycle. In a personal capacity, we welcome George Osborne’s plan to stop the proposed increase in national insurance by cutting Government waste. In the last two years, businesses across the country have cut their costs without undermining the service they provide to their customers. It is time for the Government to do the same.”

In May 2010, the Government took a conscious decision to engineer a serious of steps which directly culminated in the ‘double dip recession’. They starved the construction industry of investment (for example through scrapping ‘Building Schools for the Future’), they squashed consumer demand by increasing VAT, they started public sector cuts without the private sector being able to take up the slack; unemployment went up, tax receipts went down; unemployment benefits went up, and the UK doubled its deficit in one month earlier this year.

Unsurprisingly, the IMF, amongst many others, has been urging the economically incompetent Government to try to encourage growth through any means possible, and improving consumer demand must be one of the mechanisms (reported yesterday).

Companies which fail to understand the value of workers, for which we have trade unions, to ensure that they are not exploited by shareholders wishing to maximise their shareholder dividend are living dangerously. Corporate investors are becoming increasingly concerned about corporate social responsibility, and this indeed has been unilaterally championed by Ed Miliband as an important theme of his opposition (for example here). The Conservatives failed to win a majority in 2010, and yet they are with unjustified optimism and arrogance trying to force the agenda into an environment where even Vince Cable has warned they are in dangerous territory in an article yesterday:

“Vince Cable warned that controversial “fire at will” proposals would “scare the wits” out of workers before the plans were even published yesterday. The Business Secretary’s remarks highlighted deepening divisions between the Liberal Democrats and their Conservative Coalition partners over the issue. LibDem MPs lined up to attack the proposals by venture capitalist and Conservative party donor Adrian Beecroft, which were condemned by the STUC as an “attack on employee rights”. But Conservative MPs and business leaders defended the recommendations, warning reform was necessary because business red tape was costing thousands of jobs.”

 

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