Marc Bolland joins M&S Xmas party

December 15, 2009

Marc Bolland joins Marks & Spencer earlier than planned to join in the Xmas festivities. Share price swings lead him to be dubbed the billion dollar man

So what do we know about the new leader, and the task ahead of him? Websites, usually reliable fast access to such information, are a bit sluggish at present. The Guardian has been following the story more carefully than most, and offered a snapshot view

The 50-year-old Dutchman has certainly been a crowd pleaser at Morrisons, which he has quietly reinvigorated in the past three years. When he arrived in 2006, profits had crashed to a low of £54m after the botched takeover of Safeway. This year, profits at Morrisons are expected to top £750m, well ahead of larger rival Sainsbury’s, which is expected to make £540m. Such was the impact on the share prices of both companies following the announcement of Bolland’s appointment – Marks surged 6% while Morrisons sank 5% – that he is being dubbed the “$1bn man” in the City.

The article went on to outline the challenges facing M&S.

Food

M&S used to lead the market here, but has been left behind as rivals have raised their games. This area should be Bolland’s forte. But he must decide whether to plough funds into online delivery – where no one makes money apart from Tesco – and its convenience chain Simply Food.

Ageing customers

According to research by Datamonitor, more than 75% of shoppers in the food halls are over 45. In the fashion department the problem is worse: 65% of its main clothing shoppers were aged over 55, as were those who accounted for 48% of spending on M&S clothing last year. Bolland will have to find a way to make the stores, the ranges and the brand appeal to younger shoppers, particularly those with young families.

International growth

[Sir Stuart] Rose reckons his predecessor’s decision to shut down its European stores was an act of retail vandalism and has been busily re-opening branches overseas, many as joint ventures and franchises…A much-hyped first store in China had a disastrous first few months…Analyst Katherine Wynne at Investec reckons overseas growth is vital for M&S’s future and expects Bolland to beef up the retailer with international expertise.

Brand values

For a while, after Rose and his marketing sidekick Steven Sharp moved in, the tired old brand did look a little different but recently it has been back to dull old Marks with little brand appeal…Bolland – who learned about marketing in the beer business says he has “worked a lot in re-energising brands” . Bolland will have to repeat [his success at Morrisons] at M&S.

Distribution

Since May, finance director Dyson has been leading an internal project updating M&S’s systems and distribution network. When he unveiled the first results last month, the reaction of some analysts was: “Why didn’t Rose tackle these problems earlier?” The network of 110 warehouses has to be reduced to four “mega-shed” distribution centres. Too many stores in the wrong place – on high streets rather than retail parks – and its internet sales are far lower than they should be, reflecting the age profile of M&S’s clientele.

A Xmas Story

There was another Xmas story at Marks. I add it as it may offer an insight to the corporate culture. I must have watched a typical treacle-sweet advertisement. but my attention span hadn’t taken in its so-called offensive finish. This involved a model (presumably) prancing briefly and ironically (presumably) through a pantomime-style forest in her M&S lingerie (presumably).

Somehow the slow build-up to its ‘offensive’ end seems to me to typify the struggles and conflicts at the company as it tries to modernise its image while holding fast to its traditions.


Toyota’s Business Model on Trial

January 7, 2009

toyota-i-unit
Toyota’s business model comes under increasing scrutiny as auto sales plummet around the world. Its reaction to a forecast billion-dollar loss suggests it has a promising long-term survival plan that contrasts with its American and European rivals

Update

This gloomy report [Jan 2009] was followed by a more upbeat one six months later.

Original Report follows

Leaders we deserve has made no secret of its respect for the creative management shown by Toyota over the years. We even helped coin the term Toyotaoism (with Professor Xu) for its unique management philosophy.

The sternest test of a business model is when it has to deal with external threats to its core products. That is the situation facing all auto-manufacturers. Toyota is hurting, and Company chief Katsuaki Watanabe recently announced a projection for a first annual trading loss in its seventy year history.

And what a loss: 150bn yen (£1.1bn) in yearly operating profits from its core operations, attributed to an unprecedented global financial downturn coupled with a rising yen. Its December 2008 US sales fell faster that than those of GM or Ford

But Toyota’s pain still seems likely to be more sustainable than that being suffered by its rivals, whose fate is one of the urgent problems facing incoming President Obama, and who are pressing (begging?) for state bale-outs. For Chrysler, and GM, job losses are inevitable, while even survival in their present state seems increasingly unlikely.

In contrast, Toyota appears to be confronting its short-term problems in light of a longer-term strategy. Its reaction to over-supply is to announced a temporary suspension of production for 11 days [in Feb-March 2009] in all its 12 Japanese production units.

The old and the new

In some ways the response is one consistent with the Japanese cultural tradition which regards employment as a life-long two-way contract. Toyota’s business model preserves that deeply-held cultural value. On the other hand its success is strongly linked to its capacity to innovate. Innovation has been incremental and remorseless, and at time radical. Professor Xu’s analysis of creative organisations in China and Japan identifies Toyota as an example of a one such organisation.

The creativity is manifest in a culture within which ideas are expected from all employees, and reinforced through leadership support providing both intrinsic and extrinsic rewards. A worker in an automotive plant is still expected to pay vigilant attention to repetitive regimes and demanding quality targets. However, the creativity (that word again) which establishes teams with a degree of involvement and control over their activities (for example through the cell system, and its quality circles) comprise a genuine innovation which contrasts with the celebrated Fordist production line, with its direct connection to Adam Smith’s principle of division of labor.

Built to last

To use the terminology of American business theorist, Toyota is a built to last company. Its leaders may or may not be charismatic, but the results speak for themselves. Toyota has to be studied in the context of its cultural setting, and care must be taken in making comparisons with firms such as GM. It is even more difficult to make a simple comparison with Marks & Spencer, which according to Sir Stuart Rose [7th Jan 2009] faces its financial crisis by closing 27 stores, 25 of which were the Simply Food group opened recently, and quickly recognised as ill-matched to the company’s strategy needs (too small, poor and locational access).

What is no longer in doubt, is that the longer-term perspective offered by the Toyotaoism model provides a compelling case for creative leadership of creative organisations. Curiously, the current financial crisis may also bring (force) opportunities for new organisational structures in the future. That is the implication of the notion of innovation arising from what Schumpeter called creative destruction


Battle of Ideas: Picking on the Apprentice

October 19, 2008

Alan Sugar acts out the leadership myth

Alan Sugar acts out the leadership myth


Creative leaders are idea warriors. Which is why many will be found engaging in the debate on bullying at work organized by The Institute of Ideas

The Fourth annual Battle of Ideas will involve over 1500 participants including strands on bullying at work, biomedicine, the family and (inevitably for election week).

The bullying at work session has marketed itself as Picking on the Apprentice. Leaderswedeserve has had a few points to make in the past on the television program. Like ourselves, The Institute of Ideas is more interested in hitch-hiking on the over-publicized programme to get at a far wider wider range of issues.

The bullying event will examine the recent case when a Marks & Spencer employee was fired for whistle blowing. And the example of Jason Toal, a black fireman bullied by colleagues who hurled racist taunts at him and allegedly soaked him with water and binned his paper work.

Other sessions will explore whether management consultancy and the professionals are in need of a stronger moral compass in the interests of the community, and (if that appeal is not enough) for their own post-credit crunch survival.

Political correctness running sane

Many people have developed a kneejerk reaction to describe their feekings of frustration and anger under the catch-all phrase political correctness gone mad. It might be interesting to trace the origins of this.

I have no doubt that themes within the Battle of Ideas will attract the inevitable media take of political correctness running mad . Which is OK. It is a comfort to think that debate offers a chance to develop more balanced views, and more importantly to act accordingly. On balance I’d say that is political correctness operating in a socially healthy way.

Acknowledgement: The Institute of ideas for the press release which prompted this post


Governance Issues at Marks & Spencer: Clarifications or Concessions?

April 5, 2008

Departing Chairman of M&S, Lord Burns

For an update to this post, July 9th 2008 : see the news item on the shareholders’ resistance to the dual role of Sir Stuart Rose.

Original Post

Lord Burns, the departing chairman of Marks & Spencer, writes with the clarity of a former Whitehall mandarin. But his message to shareholders seeking to clarify the company’s succession plans has been interpreted by the BBC as acknowledging concessions after protests from its major shareholders

Last Month [March 2008] Marks & Spencer announced that Stuart Rose would stay with the firm for an extra two years, until 2011. In view of Sir Stuart’s reputation, the move was seen as one aimed at reassuring various groups of the future of the firm under difficult trading conditions. However, the move was also seen as raising governance issues of one person as chairman and interim CEO. In a letter to shareholders, Chairman Lord Burns subsequently clarified the situation.

The BBC reported the statement, with quotes from the M&S chairman Lord Burns, but an examination of the original document suggest the BBC report should not be taken as a reliable summary of its contents.

In somewhat picky fashion, I’ll comment on the BBC report, point by point, which shows how much of such a report derives from an assumption which goes beyond the established facts.

I am now writing to provide some detail of the Board’s deliberations prior to making that announcement [over the interim appointment of Rose as executive chairman and CEO].

[All O.K. so far. No problems with the BBC report]

Marks & Spencer has offered shareholders concessions over controversial plans to name Sir Stuart Rose as executive chairman.

[Wrong. The letter offers clarifications not concessions].

In March, M&S said chief executive Sir Stuart would stay with the firm for an extra two years, until 2011, and be made executive chairman from 1 June.

[Correct. Well done, BBC]

But shareholders criticised the plan saying it gave too much responsibility to one executive.

[Wrong. See above. Nothing in the M&S statement. ]

There are speculations around that have been picked up by the BBC when it suggests that

Legal & General Investment Management have aired concerns that corporate governance standards should not be diluted “particularly in leading UK companies”.

[Maybe. It would have been nice to learn where the BBC obtained the information.]

…Concessions include yearly elections for Sir Stuart and no pay increase.

[Wrong: The M&S statement does not mention concessions]

Other measures proposed in the letter to shareholders, include appointing Sir David Michaels as deputy chairman while maintaining his position as a senior independent director. The retailer also said two new executive directors would be appointed and “significantly enlarged responsibility” would be given for the group finance and operating director. And to ensure the board has a majority of independent directors, the firm would hire an additional non-executive director

[That assumption again. As the BBC writes it, we are following the assumption that these are new concessions to shareholders, rather than clarifications of the status quo. Maybe I am missing something?].

Sir Stuart was initially appointed for a five year term in 2004, to turn around the business. But no obvious candidate emerged to take over in 2009 said M&S and given the recent uncertainty in the retail environment, the firm decided to extend and expand his position.

[Correct. Well done, BBC]

But leading investors opposed the move, with Legal & General Investment Management, which holds 5% stake in the firm saying corporate governance standards should not be diluted “particularly in leading UK companies”.

[As mentioned above, this is dodgy. In the letter released on the M&S website, fLord Burns acknowledged the plan would give cause for concern, and goes to some lengths to explain how the decisions were reached, and what safeguards were included to deal with any concerns about governance. But there are no specific details of shareholder opposition in the letter.

As the BBC writes about it, the letter is a response to events after the recent announcement, rather than clarification. The mention of Legal and General leads to the possibility that the BBC has acquired some information that they are reluctant to provide in a manner that reveals its origins]

What’s Going On

The Telegraph’s Damian Reece gets far more deeply into what happened. He outlines an explanation based on leaks and fear of leaks. There clearly has been a lot of activity behind the scenes since the original announcement by M&S. It would have been helpful if the BBC had found a way of differentiating between signalling what was believed to be going on, and what could stand scrutiny as substantiated facts.

Does any of this matter?

Maybe I am being pedantic. I am concerned that the BBC appears to be dropping below the standards I expect of it as a leading component of the Brand UK

Who owns the problem?

In preparing this blog post I wondered who was credited by the BBC for its report. Interestingly, it has no names attributed to it. Nor did the earlier BBC report a few weeks ago

Disclaimer

After my snidy remark about the anonymity of the BBC reporting I thought I’d do the honourable thing by accepting authorship of this blog, which is claimed by Tudor Rickards. Views expressed are his own, and have been made on a personal basis.

The post was prepared solely from information available in the public domain.