Sports Direct and BHS: Everything must go

20 November 2016 -

British business mustn’t repeat Mike Ashley and Sir Philip Green’s mistakes

Stephen Martin

Two reports by MPs, one into working practices at Sports Direct’s Shirebrook facility and the other into the collapse of BHS, cast British business in a bad light.

In the first, Mike Ashley’s Sports Direct was accused of creating a culture where staff were so concerned about missing work that one woman gave birth in a toilet. In the second, Sir Philip Green was criticised for selling BHS for £1, only for it to collapse, putting the future of the employees and pension fund members on the line.

I don’t have to convince readers of Professional Manager that the vast majority of people in senior business positions take their responsibilities to staff very seriously. Unfortunately, many members of the public will take the behaviour of Ashley and Green to be commonplace.

This matters for all of us because business survives on the precious currency of trust. When people hear tales like these, that trust is eroded.

Ashley and Green: too powerful?

Ashley’s position as founder, major shareholder and director seems to have made him very dominant at Sports Direct. The Institute of Directors, where I take over as director general in 2017, had previously warned that the other directors did not seem to be providing an effective check on his power.

This is a serious concern for the board of a listed company, which is meant to protect the interests of all shareholders.

In the MPs’ report into the failure of BHS, they found “a prevailing culture in which a dominant personality at the top of a private limited company was able to get his way with little if any internal challenge”.

In both cases, it looks like Green and Ashley saw business leadership as being solely about strength and a single-minded focus on the bottom line.

Should Ashley have known what was afoot?

A contradiction emerged at Ashley’s committee hearing, when he was pressed by MPs on what he knew about the alleged mistreatment of staff at Shirebrook.

On the one hand, Ashley had built the business from scratch, and knew it better than anyone. On the other, he professed ignorance of what was going on inside his warehouses.

I am no stranger to the experience of being surprised, and disappointed, to find out what life is really like for staff.

Soon after I became CEO of the Clugston Group, I was asked to take part in a Channel 4 documentary, Undercover Boss, and hear the unadulterated truth about how employees were feeling.

We were still dealing with the great recession, and construction companies were having a particularly difficult time. Clugston has been a well-known name in construction since the 1930s, and I had to take steps to make sure it weathered the storm. That had included making redundancies.

I wasn’t expecting every employee I met to praise the management – far from it – but I was deeply saddened by how much the situation was unsettling my team.

At the first site I went to, one longstanding member of staff told me that morale was at an all-time low. This was doubly upsetting because so many members of staff whom I met had been with the company for many years, and were incredibly dedicated to their work.

The experience shook me up.

I went immediately to the board and told them we needed to change several things about the way we treated our staff. I was lucky to have had the experience of hearing the honest opinions of staff on the frontline.

With around 18,000 employees at Sports Direct, perhaps we shouldn’t be surprised that Ashley had become removed from the experience of his staff, but others in his management team would have known what was going on.

If the information didn’t get to him, that too was a failure of leadership.

The examples of Sports Direct and BHS are reminders that a leader will ultimately be judged on how they treat their staff. You may be able to make money in business by ignoring your employees, but you can’t be a success in the long run.

Stephen Martin is CEO of Clugston Group Ltd and director general designate of the Institute of Directors. He is also a Companion of CMI