Boots as we still think of it is no more

April 21, 2016

Boots, one of the UK’s venerable and iconic companies, has been the subject of two takeovers since 2007. The company appears to have retained public perceptions of its brand on the high street. Recent allegations against the parent company, Walgreens Boots Alliance, may be threatening its corporate reputation

The breaking story in the US concerns subpoenas concerning the corporate relationship between Walgreens Boots Alliance and a blood-testing company Theranos.

In the UK, the news focus is quite different. The Guardian broke the results from an investigation of mis-use of government funds by the Boots pharmacy operations:

Managers at Britain’s biggest pharmacy chain were found to be directing their chemists to provide medicine-use reviews (MUR) to customers who didn’t need them, in order to claim public money from the NHS (National Health Service) which pays £28 for each MUR, which is carried out by a pharmacist and intended to give patients professional advice on health, diet and how best to manage their medicines.

The Guardian has also seen a recent unpublished survey by the trade union, the Pharmacists’ Defence Association (PDA), to which more than 600 Boots chemists – more than one in 10 of the entire company’s pharmacists ­– responded. Asked “how often do you believe financial cutbacks imposed by your main employer have directly impacted upon patient safety”, over 75% of Boots chemists said that was true “around half” or more of the time. A number volunteered complaints about being “pressurised into conducting MURs whether or not patients are eligible to receive the service” and “Boots keeps asking me for more MURs”.

As subscribers to LWD will know, we have followed the fortunes of the iconic company over two takeovers in the last decade.

The first takeover (2007)

The first takeover in 2007 was seen as a bloodless coup:

Cherished British Drug company Boots merges with European partner, whose wealthy owner, Stefano Pessina, becomes deputy chairman in the new company, Alliance Boots.

The amicable arrangement suggested that in any leadership transition, Mr Pessina would be a cuckoo in the nest. In short order, chairman Sir Nigel Rudd resigned. further friendly discussions were followed by a takeover by private equity firm KKR. The move was presented openly as a vehicle which would install Pessina as its main driver.

KKR and Stefano Pessina had made it known that they wanted to keep the top team intact. But for all the continuing expressions of good will, the inevitable was to happen.

Thursday July 12th 2007, Richard Baker decided to accept a severance deal that would be worth some £10 million. It seems as if they made an offer for him to stay, or decline with honour

The second takeover (2014)

The second takeover is far from complete. This time it is with the mammoth American firm Walgreens, and was initiated in 2014

 

Walgreens Boots Alliance, has the new Nasdaq label WBA. [not to be confused with WBA, aka The Baggies, or West Bromwich Albion, another venerable brand in England, and a midlands- based Football club.] The merger was suggested to have been imposed on Walgreens by impatient shareholder activists.

The change had more executive bloodshed on the Walgreen side. The veteran Stefano Pessina of Boots Alliance again became the most obvious winner, just as he was when he engineered the Merger of Boots with his own Swiss-based operations earlier. The financing of the deal cost Walgreens five billion dollars plus shares.

National and International Issues

In the UK, liberal regulations encourage international takeovers, where investment and efficiency gains are prized until collateral damage to employees becomes contentious.

Only then is the rhetoric of corporate social responsibility really tested.

The case of Tata steel is still rumbling on. The Indian conglomerate Tata, hailed as a saviour of the aging British Steel Industry, announced closure of its UK operations. Tataa became the scapegoat for closures resulting from the global over-production of steel.

So far, ‘Boots the chemist’ has retained its positive image in the eyes of the public, long after Boots as a corporate identity exists as little more than a convenient product brand.  (Compare the national standing of Cadburys, another mythical beast masquerading as a much-loved national manufacturer of chocolate goodies).

Notes

I still think ‘Boots’ not ‘Alliance Boots’, just as I think ‘Manchester Business School’, when the new name is the ‘Alliance Manchester Business School’.

Ideas and cultures hang around a lot longer than brinks and mortar.


Berkeley group as a study of entrepreneurial leadership

September 15, 2015

Tony PidgleyBerkeley Group reports a profits surge as it prepares to enter the FTSE 100 index. This news is tempered by resistance from its instructional investors over its executive remuneration arrangements

The Berkeley Group corporate web page suggests this is a modern company complying with the ‘newer bottom lines’ of Corporate social responsibility. Its financial growth has been found attractive to institutional investors. Now the cachet of entry into the FTSE 100 as a solid blue chip company beckons.

Its situation is even more positive at present as government house building policies have given the sector a boost.

Read the rest of this entry »


Mike Coupe of Sainsburys shows how to deal with the media, avoids tricky questions

August 28, 2015

MIke CoupeMike Coupe, the CEO of Sainsburys, was on the BBC’s Wake up to money programme this week. His main objective was to present his company’s decision to pay employees a living wage.  He skilfully kept away from several potential pratfalls

It was an easy ride for the confident sounding CEO.  [I might recommend him for student study, I thought.]

Parson’s hand grenades

The interviewer, the thoroughly well-prepped Adam Parsons, had a few obligatory hand grenades to lob across the table.  The interviewee defused them skillfully.

The questions and answers

Basic wage payment? Part of a long term plan

Supermarkets screwing farmers over milk prices?  Some do, we don’t

Petrol prices at store are loss leaders.  Prices very competitive and (of course) good for the customers

Would your shareholders say you are paying out a lot of money?  [That’s an interesting question, I thought.]  I waited for a standard answer about Corporate Social Responsibility.  Instead, Mr Coupe briskly made his only obvious venture into Corporate speak territory.  He referred to the importance of maintaining the company’s reputation of having the highest level of customer satisfaction and the importance of motivated ‘inward facing staff’. In other words, the pay rise could be justified in financial terms in the long run.

Overall  impact of the interview

Mr Coupe would have been pleased to have kept away from contextual issues such as the tough trading conditions at Sainsburys, the recent laying off of nearly a thousand of those ‘inward facing’ employees as part of an efficiency drive, and pressures accompanying the decision to introduce the modest wage rise.

His answers were clear, coherent and confident.  If I had one concern, they seemed too well-prepared, too quickly delivered.  Getting leaders to sound empathetic  is harder than preparing them to deliver  a convincing rational set of answers in role playing  rehearsal. Terry Leahy when boss of Tesco managed it well, although Sir Terry’s style was more informal and a little warmer.

Student discussion questions

How would you evaluate the interview from the perspective of a media coach?

From Mike Coupe’s perspective?

From the interviewer’s  perspective?

Background materials

BBC’s summary of the interview

Management Today’s interview with Mike Coupe

Is the wage rise ‘a publicity stunt’?

 


Thomas Cook Group faces serious risks to its brand image

May 18, 2015

A highly damaging story had developed following the way Thomas Cook dealt with the deaths of two children on a package holiday in Corfu. The personal tragedy also threatens the reputation of the organization

The developing story

Approximately ten years ago, a family holiday turned to tragedy.

Last week [13th May 2015] an inquest in Wakefield Yorkshire found a verdict of unlawful killing, and that Thomas Cook had failed in exercising its duty of care.

Thomas Cook responded by sending a letter of apology to the parents who claim to have seen it only through journalists covering the story.

According to The Guardian

According to The Guardian, The apology was reportedly sent by Thomas Cook’s chief executive, Peter Frankhauser, two days before it was revealed that the company received £3.5m in compensation from the owners of the hotel in Corfu where the tragedy occurred in 2006.

Christianne and Robert Shepherd, who were on holiday with their father and his partner, were overcome by fumes from a decrepit boiler.

Sharon Wood and Neil Shepherd said in a statement on Sunday that they had not received the travel company’s letter, and had only been shown it by reporters. “It is disgraceful that after all we’ve been through Thomas Cook are still putting us last in the equation.”

The popular press began to call for reparations from Thomas Cook to the family.

Background to the Thomas Cook group

Over the last decade the company’s fortunes have fluctuated wildly. The venerable firm of Thomas Cook was the prey of financial takeovers which resulted in considerable reconstruction, although the value of the historical brand has been recognized.

Harriet Green was appointed CEO in 2006 at around the time of the Corfu affair. Her leadership has been widely acknowledged as the outcome of an outsider successfully brought in with fresh ideas for rescuing the new company.

In earlier posts, I wondered whether she would be able to make an impact on the strongly entrenched corporate culture.

Hariet Green was replaced in November 2014 by Peter Frankhauser. The company stated that it needed someone more familiar with the leisure industry. Exit Harriet with a controversial golden goodbye, and promotion for the Thomas Cook insider from his role as Chief Operating Officer.

The sleeping crisis for the Company

For the company, attention to the Corfu hotel tragedy may have been replaced by concerns for more pressing strategic and financial difficulties. But the family fight for support began to attract media attention. Four years after the fatalities, [in 2010] the BBC had reported that:

a Greek criminal court [has]convicted the manager of the Louis Corcyra Beach Hotel in Gouvia and two other staff of manslaughter. The travel representatives of Thomas Cook were not changed.

Thomas Cook said in a statement: “What happened in Corfu was a tragedy and the thoughts and sympathy of everyone at Thomas Cook will always be with the family and friends of Christianne and Robert Shepherd.

“We have always maintained that this tragic accident was the result of a unique set of circumstances, none of which could be the responsibility of the company or [of its representatives]

“We believe that they should never have formed part of this court case.”

Further delays had resulted in appeals for the intervention of The Prime minister David Cameron before legal aid was provided.

An embarrassing development at the inquest

As the inquest proceeded this month, it emerged that Thomas Cook had received compensation from the owners of the hotel. At the same time, the company sent a letter ‘saying sorry’ to the parents who had themselves narrowly escaped death in the original incident. The parents claim they learned of the letter from journalists covering the story.

“We are all deeply shocked and saddened”

I have not [yet] been able to read the letter. The company is refusing to comment further, although through a spokesperson has announced how deeply shocked and saddened the company remains over the tragic events.

Questions for students of leadership and CSR

Can you ‘read’ the story in terms of dilemmas facing Thomas Cook and its leadership?

What might have been unintended consequences of the decision to remove Harriet Green as CEO?

How might you as a new CEO dealt differently with the emerging story?

Why?

To be continued


Michele Ferrero (1924-2015): Obituary of a discrete global leader

February 18, 2015

Ferrero-Rocher-PyramidThe notion of servant leadership is open the accusation of self-serving hypocrisy masking as humility and piety. Michele Ferrero’s life refutes such charges in his case

The Guardian noted:

When Michele Ferrero took over his family’s confectionery firm on the death of his uncle, Giovanni, in 1957, he wrote a letter to his employees. “I pledge myself to devote all my activities and all my efforts to this company,” it said. “And I assure you that I shall only feel satisfied when I have managed, with concrete results, to guarantee you and your children a safe and tranquil future.”

Ferrero was an entrepreneur of a kind Italy throws up from time to time, inspired more by the social doctrines of the Roman Catholic church than by any belief in the merits of the free market.

The case of Nutella

Michele’s father Pietro converted a family pastry shop into a chocolate factory with what became a world-beating product in Nutella, a Business School case favourite. Pietro lived in a region south of Turin famous for its natural products including hazel nuts, a key ingredient of Nutella. Michelle demonstrated his flair for confectionery and marketing when he reformulated and re-branded the choconut spread. Today the product takes around 20% of the world’s supply of hazel nuts.

The Ferrero group

Pietro instilled in Michele a passion for confectionery and product innovation. His son converted the local business into The Ferrero group, a global giant, making him one of the wealthiest of the world’s billionaires.

The business he inherited stands alongside other firms with a socially responsible ethos which transcends the structure of a CSR department. There are parallels with the Tata group of India, and various firms founded under the spirit of what Weber called ‘the protestant ethic’  including another confectionery giant, the former Cadburys group.

Its treatment of employees is at very least of high quality and in many aspects best-practice. The firm initiated the practice of collecting and returning employees to their villages. Medical care and other welfare services are of high quality. Ferrero’s workers have never gone on strike. The organization is active in awareness of and sustainability in the developing countries from which it sources its products.

 The iconic praline

The Ferrero Rocher brand has produced one of the most famous of images, that of the gold-wrapped praline product served at the exclusive party to guests of his excellency. When shown at cinemas, the ad always produces a humorous if ironic response at the incongruance between the product and the intended imagery of top-of-the-market tastes in confectionery.

By your acts shall you be known

The actions of Bill Gates and other modern titans of industry have helped us rediscover The socially responsible entrepreneur. We need not look for other-worldly piety. Critics point to Michel Fererro’s decision to leave Italy for Monaco under threat from The Red Brigades. He remained in tax-enlightened exile. He made no efforts to project or protect his public image.

He deserves to be remembered for his contributions to the well-being of his employees, and the satisfaction of consumers of his company’s products.


City Link: Jon Moulton plays the Fighting Talk game of defending the indefensible

December 29, 2014

TO BE UPDATED AS THE STORY DEVELOPS

Fighting talk is a BBC radio comedy programme which includes a challenge to panellists to defend the indefensible. Entrepreneur Jon Moulton found himself playing a version of the game defending the closure of the delivery firm City Link over the Christmas period City Link Van

The breaking story is the closure of the parcels delivery firm City Link, with likely loss of over 2000 jobs. The firm was acquired by Entrepreneur Jon Moulton’s venture capital vehicle Better Capital from Rentokil, in a fire-sale offer eighteen months ago [April 2013]. The announcement of the firm’s foreclosure took place on Christmas Day. Employees, many unsuspecting the news, learned of this through the media.

It’s their fault

As every lawyer, politician, criminal and naughty school-child knows, defending the indefensible is a necessary survival skill. Success in the game often involves finding someone else to blame, or finding a less difficult position to defend.

In a press interview, Jon Boulton was reported as saying that the Unions were to blame for the company breaking the news on Christmas Day. His hand was forced, he insisted, by a Union message on Christmas Eve. Better Capital intended to make the official announcement on Boxing Day [the day after Christmas].

Now look what you’ve made me do

The BBC’s Today Programme is a more refined version of Fighting Talk. In a radio interview, Mr Bolton had a chance to reprise his defense of the indefensible. He continued to insist that he could not have behaved in any other way, without breaking the law.

The official announcement which was made public [on 29th Dec, 2014] outlines the matter in legal terms.

Learning from mistakes

Mr Moulton has a knack of learning for his mistakes. His company was named Better Capital, allegedly as an ironic statement of intent to better the financial performance of earlier ventures. Other people including employees of firms acquired by Better Capital are the more obvious losers.

Dec 31st 2014

Jon Moulton reported as having offered assurances to City Link of funding support for a year in September 2014

January 1st 2015

Redundant workers told to check Face Book for job opportunities


Uber’s image is taking a beating: How will the market react?

December 8, 2014

Uber barges ahead, picking up major criticisms of its business policies and practices. Will the marketplace result in a shift towards more responsible corporate behaviours?

The Uber story is heading for business case stardom. It started in 2008 as a brilliant ‘why didn’t I think of that’ idea of using new technology to revolutionize personal transport arrangements. The smart phone car service is now valued at $18 billion and rising.

Success factor no 1. Clever use of IT

The basic proposition is easy to understand. Personal travel could be revolutionized by the use of information technology.

Success factor no 2. The creative leap and ‘Why didn’t I think of that?’

The creative leap is easy to communicate if the initial AHA insight triggers the admiring and envious response ‘Why didn’t I think of that?’

Success factor no 3. ‘It’s so obvious. Why didn’t I do anything about it?’

Maybe the reception to its early adaption is the stronger if the now-obvious insight was already widely considered. Most of us might have speculated of using IT car-sharing. Über acted on the idea.

Success factor no 4. The founder and named executives are tennis nuts

Only partly true. The corporate web site introduces its team of dynamic young thrusters as sporting enthusiasts to a person.

The thumbnail sketch of CEO Travis Kalanick lists his achievements as founder of the first P2P search engine, and as someone who ‘racked up the second highest Wii Tennis score in the world’. It seems somewhat less keen to reveal that Travis is approaching 40, a rather ancient codger among the Wii-wielding juveniles of California’s Venture community.

No brainer or roller coaster?

Like all radical innovations, Uber looks to be thriving in crazily dangerous conditions, more roller-coaster than no-brainer for market activists.

The matter of corporate social responsibility

A highly damaging story is bubbling up [November 2014] over errors of corporate social responsibility. The whiff of near adolescent energy and self-confidence in the web-site is being linked to an apparent pride in a corporate skill at accessing information of potentially valuable but illegal kind from its customers. As such tracking is part of the Corporate USP, the story at very least suggests insensitivity to its CSR implications.

Maybe in the dash for growth, any publicity was good publicity. That has been the slogan of more than one successful entrepreneur who later modified the approach for pragmatic or ethical reasons. Meanwhile the Ubervolk continue their search for global success for a powerful idea.

Tuesday December 9th

Über ban in Delhi by Transport Authorities after an alleged rape in a Uber taxi, Friday December 6th.

To be continued

[Comments and suggestions from Uber users and leadership students are particularly welcomed]