1.25 business management
duty13
Week7Seminar_MarksandSpencercase.docx|
|
Marks and Spencer |
Activity 1:
Answer Questions 1-4 of: Case Study: Marks & Spencer, pp. 38-41 (Please see page 2 below for further detail)
Discussion questions
1. From the M&S experience described above: a. Discuss to what extent an institutional perspective would have assisted management in analysing and understanding cross-national employment relations. b. Discuss to what extent a culturalist perspective would have assisted management in analysing and understanding cross-national employment relations. 2. What appear to be the overarching ideological frames of reference employed by institutions in France? Give examples for your answer. 3. In your opinion, what is the ideological perspective in which M&S were operating? Give examples for your answer. 4. As the HR manager of a multinational organization, which analytical approach would you adopt when considering employment matters in a country different from your own? Explain your reasons.
|
Case Study: Marks and Spencer
‘FROM CONTINENTAL CHOCOLATES TO CONTINENTAL CLOSURE’
By Moira Calveley, University of Hertfordshire Business School The company background
M
arks and Spencer (M&S) is a well-known high street retailer in the UK with stores nationwide. It was formed in 1894 by a partnership between Michael Marks and
Tom Spencer and became a public company in 1926. During the 1970s the company began to expand on a global basis, opening its first overseas store in Canada in 1973 and in France and Belgium in 1975. In the late 1980s it acquired stores in the USA (which remained trading under the Brooks Brothers name) and opened stores in Hong Kong. By the mid-1990s, M&S had stores in around 30 countries worldwide, incorporating Europe, North America and Asia.
Known for its high quality, good service and value for money, the company developed into a highly profitable organization, even branching out into financial services in 1985. M&S was to become one of the most profitable retailers in Europe. However, when the recession hit the retail industry in the UK in the late 1990s, M&S began to make the news as its profits dropped sharply.
In 1999 M&S responded to the fall in profits by reviewing its management structure, stopping recruitment to its graduate training programme and reviewing its business operations. The first major overseas investment to go was in Canada, where in 1999 it closed its 38 stores, reportedly cutting approximately 900 jobs and paying around $35 million in severance payments and closure costs (Warson, 1999). It also sold its Brooks Brothers stores in the USA in November 2001. It was, however, the closure of shops in France and Belgium in March 2001 that put M&S in the headlines, as we shall see below.
M&S’s approach to people management
The company takes a paternal approach to managing people and, although not without its critics, it is often viewed as a ‘good’ employer. M&S prided itself on introducing staff ‘welfare’ services in the early 1930s that included the provision of pensions, subsidized staff canteens, health and dental care, hairdressing, rest rooms and camping holidays.
Such practices have continued over the years and the company works at being seen to be fair with people. For example, when it was decided to freeze graduate recruitment in 1999, as a gesture of goodwill it gave the equivalent of one month’s salary (around
£1,500) to each of the graduates to whom it had withdrawn its offer of employment (Welch, 1999).
The company has promoted good human relations because, as Lord Sieff a former Chairman explained, ‘we are human beings at work not industrial beings’ (1984, quoted in Blyton and Turnbull, 1998) and ‘good human relations at work pay off; they are of
great importance if a business is to be efficiently run’ (1990: 245, quoted in Blyton and Turnbull, 1998). The company’s approach to trade unions is that employees have a ►
right to join one, but that unions are not recognized for negotiation purposes – except where legislation requires them to do so, as in mainland Europe. With good HR practices, M&S believe that trade unions are not necessary. However, although M&S have traditionally put a strong emphasis on personnel management, giving it strategic importance (Blyton and Turnbull, 1998), Clara Freeman lost her position as Executive Director for UK stores and personnel in September 2000 as part of the management restructuring programme (Cooper, 2000). An M&S spokesperson denied that the HR function was being downgraded as HR was being represented at executive level by the chief legal adviser and company secretary; nevertheless, a company analyst commenting on the situation suggested that ‘personnel directors do not make money’ (Cooper, 2000).
Continental closures
In order to retrench and cut costs, in 2001 M&S decided to close stores across Europe, and an announcement was made on 29 March that the shops in France and Belgium were to close. It is estimated that this restructuring involved around 38 stores in total and upward of 4,000 employees; in France, the numbers were reported as 18 shops and 1,700 workers.
The announcement caused great controversy and uproar, particularly in France. It was alleged that managers were informed by email and that the closure announcement took place only five minutes after the initial, informal, meeting with worker representatives, which reportedly did not constitute a consultation that conformed to the French work code. The timing of the announcement corresponded with the opening of the London Stock Exchange, 8.00 a.m.
Although trade unions are not recognized by M&S in the UK (as discussed above), some French workers were. On their behalf, several trade unions filed a complaint against M&S, claiming that it had broken French labour law by only informing the staff at the same time as it informed the UK Stock Exchange of the decision to close the stores. A French court later ruled that M&S had acted illegally by not consulting with employees before announcing closure; the company was told that it had to suspend its plans until a full consultation had taken place.
M&S denied having acted in any way to contravene legislation in France, claiming that it was abiding by UK law and the rules governing listed companies. It argued that under these rules a quoted company has to inform the market of any major developments in its activities without delay. Further, it was only announcing that it intended to close stores by the end of the year. The implication is clearly that worker consultation would have leaked the news and this may have affected stock market activity and share prices; as it was, M&S shares jumped 7 per cent on the day.
M&S appealed against the ruling that was later overruled. However, the jobs were saved as the stores were bought by the department-store group Galeries Lafayette
which, as part of the deal, secured the jobs of the workers. Both trade unions and
works committees in France were consulted prior to the deal. ►
Reaction to the closures
Following the announcement of the store closures, emotions were running very high. It was perceived that M&S was intent on restructuring due to a business crisis, but with little thought for the French workers. The French government encouraged trade union action against M&S’s decision: the Labour Minister called for a Europe-wide trade union protest; the Prime Minister, Lionel Jospin, described the company’s actions in closing the stores as ‘unacceptable’ and called for the Labour Ministry to launch its own enquiry.
In protest over the closures, M&S workers took to the streets. It was reported that more than 1,000 workers from across Europe protested outside the company’s main UK store in London on 17 May 2001. There were also protests in Paris and at the European Parliament in Strasbourg.
In the UK, the French workers were supported by the Trades Union Congress (TUC), who supported the London demonstration. The TUC General Secretary was reported as saying, ‘M&S thought they could export the UK’s easy hire-and-fire rules to the rest of Europe’ (Benham and Freeman, 2001). Contrary to this, an M&S spokesperson is quoted as saying, ‘We’re convinced that we complied with all legal requirements … we’re surprised by the reaction of the authorities’ ( The Guardian, 2001b).
French labour law, custom and culture
The French government takes an interventionist approach to employment relations. Their reaction discussed above was partly as a result of their drive to reduce unemployment in the country. Works councils were created by law in France in 1945 and are one of the channels of worker representation, the other two being workforce delegates and trade unions. In most companies these organizations coexist; however, works councils are playing an ever-increasing role. They are made up of elected employee representatives and they have the right to information and consultation that includes issues such as redundancy (EIRO, 1998; Hollinshead and Leat, 1995). It was the perceived failure of M&S to follow these consultation laws that caused unrest following the announcement of store closures.
Although not a direct result of M&S’s action but spurred on by it, the French government rushed through proposals to increase employment rights in order to protect workers’ jobs. The resulting ‘social modernization’ bill included: the doubling of minimum redundancy pay; increased powers for works councils with regard to redundancy and a longer time period for consideration of redundancy plans; and
nine-month redeployment leave for redundant workers (EIRO, 2001a).
One of the factors that M&S may not have taken account of in its decision to announce the shop closures the way it did is the culture of the French people. The French are renowned for ‘taking to the streets’ to demonstrate for social and political reasons. In 1968, 10 million people went on strike to demand a fairer form of capitalism that would create an economy to benefit all; in June 2003, people took to the streets to demonstrate over pension reforms. The French people believe that organizations have a social responsibility. Books of condolence were set up in M&S shops and were filled by people who had empathy with their fellow workers. The
feeling of the people was perhaps summed up by French Prime Minister Jospin when ►
he stated, ‘the employees who enriched shareholders deserve better treatment. Such behaviour should be punished’ ( The Guardian, 2001b).
Sources: BBC (2001a, 2001b) CNN (2001a, 2001b) EIRO (2001a, 2001b) Marks
(2003) People (2001) The Guardian (2001a, 2001b, 2001c).
Discussion questions
1 From the M&S experience described above:
a Discuss to what extent an institutional perspective would have assisted management in analysing and understanding cross-national employment relations.
b Discuss to what extent a culturalist perspective would have assisted management in analysing and understanding cross-national employment relations.
2 What appear to be the overarching ideological frames of reference employed by institutions in France? Give examples for your answer.
3 In your opinion, what is the ideological perspective in which M&S were operating? Give examples for your answer.
4 As the HR manager of a multinational organization, which analytical approach would you adopt when considering employment matters in a country different from your own? Explain your reasons.
Source: Adapted from Calveley (2005).
