Burberry, Treorchi: Do not go gentle into that good night

March 30, 2007

Burberry announces the closure of a factory manufacturing its polo shirts. The story has familiar features to it. The factory is the main source of jobs in the former mining village of Treorchi, in South Wales. The company is pursuing a globalization strategy. After a local campaign which attracted celebrity support, the factory closes.

treorchy_station2.jpg

Today a local community completed the first stage of its grieving over the loss of the Burberry manufacturing site. The march by the workers from the gates of the factory was accompanied by many from the community and the internationally celebrated choir associated with the village. The action was in the first instance for those directly affected, and caught out the media circus that had pitched up to witness the event.

Not for the first time, I remember lines from Dylan Thomas

Do not gentle into that good night..
Rage, rage against the dying of the light

The Original post

A month ago I wrote how the closure came as a shock to the community. The high-profile company had been recording successful financial returns, and had been expanding internationally. A well-organized campaign seeks to reverse the company’s closure decision.

Burburry has been around for a century and a half, during which time its products have become associated with a special aspect of British cultural life, the Establishment as fashion- setters. Its high profile brand image and its luxury clothes and accessories can be found wherever celebrities and gentry gather together. Even its recent embrace by members of that recently identified sociological group the chavs seems somehow an inevitable if unhelpful endorsement of its essential Britishness.

Over the last few months, a high-publicity story has developed after the company announcing its intentions of closing its factory manufacturing polo shirts, in South Wales, with the intention to shift manufacturing to China. The reaction against the decision quickly grew, and gained support from a range of celebrity figures (with rumours that a certain member of he Royal Family with Welsh connections was far from pleased with the decision).

To assess the developing story, a little history will not go amiss. Burberry was founded in 1856 by the young Thomas Burberry, an ambitious Draper’s assistant. By the 1870s the firm had specialized in clothing for outdoor pursuits catering to the well-off to such good effect that its wares became increasingly fashionable. Thomas strengthened his reputation through his invention and patenting of gabardine with its unique characteristics of water resistance and yet moisture permeability. By the turn of the century Burberry was providing extreme climate gear for intrepid Arctic and Antarctic explorers. In the First World War, the thriving firm supplied British Officers with trench coats, an item that has been reinvented as a fashion item ever since. The famous Nova plaid pattern arrived in the 1930s, emerging from its discrete location as a lining for those elegant military trench coats.

In 1955, the firm was acquired by Great Universal Stores, the conglomerate that had developed from the Manchester based mail-order business of Abraham and George Rose founded in 1900, and transformed since the 1930s, by Isaac Wolfson into one of the great British institutions and the source of wealth of the Wolfson foundation.

For several decades Burberry retained its increasingly plaid and staid image until the late 1990s with the arrival of a dynamic American fashion expert. Rose Marie Bravo had been a well-regarded President of the Saks Fifth Avenue fashion outfit, having worked her way up the firm. She brought additional wide fashion experience to Burberry, and and succeeded in transforming the brand using top models such as Kate Moss, and Footballer David Beckham. Fashion insiders considered that another important factor was the contributions from the top fashion designer Christopher Bailey whom she head hunted from Gucci in 2001. Share value was to increase eightfold in five years.

Corporate Governance at Burberry

In 2003, one of the earliest of shareholder protests in the UK was led by The National Association of Pension Funds (a pressure group) against the financial package agreed by Burberry with its American CEO. The arrangement would have paid her in excess of £13 million on dismissal. The NAPF made it clear that they had no concerns about Bravo’s remuneration, and her high worth to the company. Their concern was the lack of performance incentives in the overall package. Bravo was clearly an extremely valued asset to the company. In retaining their prize asset, Chairman John Peace said at the time that the group was aware that some aspects of its executive pay policy “might be construed not as best practice from a UK perspective”.

The Difference for Treorchi

By that time, there had been repeated stories that GUS (as it had renamed itself) was preparing Burberry for its sale. And so the spin-off from GUS took place, in late 2005, followed by the decision to close the Treorchi factory.

The economic argument was made that the Polo shirts produced in Wales were costing nearly three times as much as they would if manufactured in China. This has been a familiar story as countless manufacturing jobs have been lost to the Far East over the last decades. Why should this be different?

Several factors are deployed by the vigorous campaign against the decision, which attracted widespread celebrity support and which spread internationally. First, the firm continued to report growing profits, and the Factory in Wales could not be shown to be making a loss for the group. That alone has not protected units from dismemberment within a company under pressures to achieve ‘the numbers’. Here, however, the Company brand rests on its unique heritage, the quality of its goods, and their Britishness. Will this brand image survive a campaign pointing to the willingness of the Company to source overseas? M&S grasped that nettle some years ago, and the decision may or may not have contributed to its subsequent bumpy financial ride.

Corporate social responsibility

In reading the current report from Burberry I was struck by the Corporate effort to address matters of Corporate responsibility. It has strengthened its executive efforts in this area. The Keep Burberry British campaign on its home webpage simply let the Burberry statement on Corporate Responsibility speak for itself.

‘ For Burberry, corporate social responsibility (“CSR”) involves considering those social, environmental and ethical issues that if managed improperly could pose a threat to the Group’s assets, reputation and the Burberry brand.. Michael Mahony, the Company Secretary, is responsible for CSR matters and chairs the CSR committee which meets regularly ..[The company is dedicated to] maintaining acceptable labour, environmental and social practices in the Group’s supply chain, and to providing a working environment that is conducive to the recruitment and retention of the widest possible range of talented staff, and which is a safe and healthy place to work …New members of the CSR committee in 2005 include a dedicated CSR Manager, focused on ethical supply chain issues, the Director of Audit and Risk Assurance and a Quality Assurance and Supply Operations Manager. The Group continues to draw support from a team of external CSR advisers’.

A critical theory perspective

Reading the company report I had been struck by the corporate claims of social responsibility. Many social scientists are turning to critical theory to explain such behaviour. Writers such as David Collins and David Boje would have a field day starting from an examination of the Burberry CSR statement. It struck me as one that will require a great deal of explaining by the Corporate PR agents (and its leaders). a web-based issue of campaigning interest, has drawn public attention to the story.

Do not gentle into that good night…
Good men, the last wave by, crying how bright
Their frail deeds might have danced in a green bay,
Rage, rage against the dying of the light


Local pain, global protest for Burberry. Endgame?

February 15, 2007

Burberry announces the closure of a factory manufacturing its polo shirts. The story has familiar features to it. The factory is the main source of jobs in the former mining village of Treorchi, in South Wales. After a local campaign which attracted celebrity support, the factory closes. (Updated posting)

treorchy_station2.jpg

Today a local community completed the first stage of its grieving over the loss of the Burberry manufacturing site. The march by the workers from the gates of the factory was accompanied by many from the community and the internationally celebrated choir associated with the village. The action was in the first instance for those directly affected, and caught out the media circus that had pitched up to witness the event.

Not for the first time, I remember the words of Dylan Thomas

Do not gentle into that good night..

Good men, the last wave by, crying how bright
Their frail deeds might have danced in a green bay,
Rage, rage against the dying of the light

The Original post

The closure comes as a shock to the community. The high-profile company had been recording successful financial returns, and had been expanding internationally. A well-organized campaign seeks to reverse the company’s closure decision.

Burburry has been around for a century and a half, during which time its products have become associated with a special aspect of British cultural life, the Establishment as fashion- setters. Its high profile brand image and its luxury clothes and accessories can be found wherever celebrities and gentry gather together. Even its recent embrace by members of that recently identified sociological group the chavs seems somehow an inevitable if unhelpful endorsement of its essential Britishness.

Over the last few months, a high-publicity story has developed after the company announcing its intentions of closing its factory manufacturing polo shirts, in South Wales, with the intention to shift manufacturing to China. The reaction against the decision quickly grew, and gained support from a range of celebrity figures (with rumours that a certain member of he Royal Family with Welsh connections was far from pleased with the decision).

To assess the developing story, a little history will not go amiss. Burberry was founded in 1856 by the young Thomas Burberry, an ambitious Draper’s assistant. By the 1870s the firm had specialized in clothing for outdoor pursuits catering to the well-off to such good effect that its wares became increasingly fashionable. Thomas strengthened his reputation through his invention and patenting of gabardine with its unique characteristics of water resistance and yet moisture permeability. By the turn of the century Burberry was providing extreme climate gear for intrepid Arctic and Antarctic explorers. In the First World War, the thriving firm supplied British Officers with trench coats, an item that has been reinvented as a fashion item ever since. The famous Nova plaid pattern arrived in the 1930s, emerging from its discrete location as a lining for those elegant military trench coats.

In 1955, the firm was acquired by Great Universal Stores, the conglomerate that had developed from the Manchester based mail-order business of Abraham and George Rose founded in 1900, and transformed since the 1930s, by Isaac Wolfson into one of the great British institutions and the source of wealth of the Wolfson foundation.

For several decades Burberry retained its increasingly plaid and staid image until the late 1990s with the arrival of a dynamic American fashion expert. Rose Marie Bravo had been a well-regarded President of the Saks Fifth Avenue fashion outfit, having worked her way up the firm. She brought additional wide fashion experience to Burberry, and and succeeded in transforming the brand using top models such as Kate Moss, and Footballer David Beckham. In should be added that fashion insiders considered that another important factor was the contributions from the top fashion designer Christopher Bailey whom she head hunted from Gucci in 2001. http://www.bockinfo.com/041116postcard.htm Share value was to increase eight fold in five years.

[A leadership note: Aside from the main story, the changes at Burberry offer plenty for the student of leadership. Attempts to explain the changes as coming from a superleader seem less convincing than approaches involving a complex mix of leadership roles, i.e. distributed leadership]

Corporate Governance at Burberry

In 2003, one of the earliest of shareholder protests in the UK was led by The National Association of Pension Funds (a pressure group) against the financial package agreed by Burberry with its American CEO. The arrangement would have paid her in excess of £13 million on dismissal. The NAPF made it clear that they had no concerns about Bravo’s remuneration, and her high worth to the company. Their concern was the lack of performance incentives in the overall package. RMB was clearly an extremely valued asset to the company. In retaining their prize asset, Chairman John Peace said at the time that the group was aware that some aspects of its executive pay policy “might be construed not as best practice from a UK perspective”.

The Difference for Treorchi

By that time, there had been repeated stories that GUS (as it had renamed itself) was preparing Burberry for its sale. And so the spin-off from GUS took place, in late 2005, followed by the decision to close the Treorchi factory.

The economic argument was made that the Polo shirts produced in Wales were costing nearly three times as much as they would if manufactured in China. This has been a familiar story as countless manufacturing jobs have been lost to the Far East over the last decades. Why should this be different?

Several factors are deployed by the vigorous campaign against the decision, which attracted widespread celebrity support and which spread internationally. First, the firm continued to report growing profits, and the Factory in Wales could not be shown to be making a loss for the group. That alone has not protected units from dismemberment within a company under pressures to achieve ‘the numbers’. Here, however, the Company brand rests on its unique heritage, the quality of its goods, and their Britishness. Will this brand image survive a campaign pointing to the willingness of the Company to source overseas? M&S grasped that nettle some years ago, and the decision may or may not have contributed to its subsequent bumpy financial ride.

Corporate social responsibility

Another factor may also come into play. In reading the current report from Burberry I was struck by the Corporate effort to address matters of Corporate responsibility. It has strengthened its executive efforts in this area. The Keep Burberry British campaign on its home webpage simply let the Burberry statement on Corporate Responsibility speak for itself.

‘ For Burberry, corporate social responsibility (“CSR”) involves considering those social, environmental and ethical issues that if managed improperly could pose a threat to the Group’s assets, reputation and the Burberry brand.. Michael Mahony, the Company Secretary, is responsible for CSR matters and chairs the CSR committee which meets regularly ..[The company is dedicated to] maintaining acceptable labour, environmental and social practices in the Group’s supply chain, and to providing a working environment that is conducive to the recruitment and retention of the widest possible range of talented staff, and which is a safe and healthy place to work …New members of the CSR committee in 2005 include a dedicated CSR Manager, focused on ethical supply chain issues, the Director of Audit and Risk Assurance and a Quality Assurance and Supply Operations Manager. The Group continues to draw support from a team of external CSR advisers’.

A critical theory perspective

Reading the company report I had been struck by the corporate claims of social responsibility. Many social scientists are turning to critical theory to explain such behaviour. Writers such as David Collins and David Boje would have a field day starting from an examination of the Burberry CSR statement. It struck me as one that will require a great deal of explaining by the Corporate PR agents (and its leaders). Increasing it is a web-based issue of campaigning interest, and one that is coming more and more to public attention.


You heard it here first: How blogs are beating BBC battalions

February 1, 2007

Bloggers take for granted that blogging is transforming the communication and generation of information. A typical case occurred this week, as Tata took over steel manufacturer Corus. The traditional media had been following the story for months, but the first analysis of Tata in this context was arguably in a WordPress blog that appeared hours after the merger was formally announced, and before the BBC’s report on the Tata organisation from its correspondent in India.

Bloggers know it intuitively. Something special is happening in the communication and generation of news. The upcoming revolution is partly masked by the denial from opinion leaders in the traditional media of the reliability of stories initiated on the web. They point to the unruly, unsubstantiated, and sometimes illegal nature of much of its the content. Scientists have taken a similar stance over claims that are not first made through the professionally approved channels of peer-reviewed publications. The political nature of this stance becomes clearer when you consider that even publication in web-based peer reviewed publications is still being dismissed by scientists and other academic scholars as a poor alternative to publishing in printed page journals.

But the state of denial is having to carry the weight of more and more examples of the power and legitimacy of the outputs of countless thousands of able bloggers. Traditionalists can still point to the obsessive nature of blogging. And yet, obsessive commitment to campaigning ideas has always been a journalistic staple too. The web is as transparent in revealing the nature of the conspiracy theorist as is the newspaper banner headline.

The Tata case

The Tata takeover this week is a case in point. In following the business headlines, I have developed the habit of scanning the BBC site on line before obtaining a hard copy version of the Financial Times. These are both great and overlapping sources of up to date news. In coffee breaks at work, the streamers from Bloomberg’s drift past my more relaxed view.

It was from these sources that I knew, along with most business world commentators that the Anglo-Dutch firm Corus was a much desired takeover target, and that the Indian conglomerate Tata was a likely predator.

Why Tata was important to me

There were probably half a dozen other stories that caught my eye yesterday. Tata was different to me because it was the company I had some first-hand information about from several sources. I had visited their premises in Mumbai, talked with their executives, and been entertained by former students who had gone back to India to work for Tata. I had brought back several books from India outlining the company’s history, reading much of the material on the flight back to Manchester.

As a former editor of a business publication, I would in days gone by considered commissioning a piece on the emerging story. That was then. Now I could refresh my memory and get myself updated in a couple of clicks…

Something to say

Maybe I had something to say. The BBC report was, as ever, informative and convincing as far as it went.

It told me that Tata Steel, part of the Indian conglomerate Tata Group, was last year ranked 56th in the list of steelmakers around the world with output of 5.3 million tonnes, that The Tata Group owns Tetley tea and Daewoo trucks and has operations in more than 50 countries.

But it did not say that Tata was perhaps the biggest single biggest factor within Indian economic growth for over a century, as well as being a fascinating example of social innovation.

That prompted me to blog. I blogged fast and furiously. Tata, I argued, was a bit like Tesco, but a bit more like Unilever. I saw thelink with Tesco in Tata’s impact on the economy, and with Unilever for its corporate culture and history of philanthropic leadership.

The BBC quickly filed its own report on Tata The corporation was quickly able to call on its own correspondent in Mumbai to provide a superb overview of Tata.

But for a while I was ahead of the game. I had already filed in the morning when the BBC report hit the web. My urgency was not so much to claim a scoop as an effort to deal with my increasingly serious blogging addiction getting more in the way of things I am paid to do.

And I did have some first-hand knowledge that would have justified the posting, even if it had followed BBC’s piece which arrived in early afternoon GMT.

Let’s not be triumphant

I feel good about ‘beating the BEEB’. It’s a tiny personal triumph. If my blogstats multiplied a thousand time over they would not match the daily visits to BBC web sites. But I did get there first. Which is not say that I can scoop the professionals on a regular basis.

Two of my top blogs for UK political and business stories are written by BBC aces Nick Robinson and Robert Peston. Each week they open up stories that will be starting points for others to follow. But even Robinson and Peston can only cover a handful of stories at a time. And even the BBC’s battalions can not follow-up to match the collective power of the web-networkers. My triumph is one small step for blogger, but it’s being replicated more and more. That’s one giant step for Blogkind.


Tata bags Corus. Think Tesco, think Unilever

January 31, 2007
Jamsetji Tata

Jamsetji Tata

Update

Eighteen months after the original post of January 2007, Tata has acquired more global visibility through its acquisitions policy [Jaguar and Land Rover from Ford] and the launch of ‘the world’s cheapest car’.

The original post follows:

Indian company Tata Steel has won the battle to buy its Anglo-Dutch rival Corus. But what’s Tata like? In scale, Tata’s impact on the Indian economy at present can be likened to Tesco’s in the UK. But in other ways the company’s historic leadership and culture are better compared with those associated with the global conglomerate Unilever.

After a long running battle between rival suitors, The Ango-Dutch steel-maker Corus has been bought by the Indian company, Tata [January 2007]. Corus is itself a relatively unfamiliar name in the UK, in comparison with the historic British Steel organisation. This to some degree reflects Tata’s unobtrusive move to the centre of attention as a global player.

So what’s Tata really like?

Business travellers in India are quickly made aware of the country’s industrial success stories. Close to the top of everyone’s list is the Tata group. Visitors to Mumbai learn of the origins of Tata, perhaps first through ‘the other Taj Mahal’, the luxury hotel built by Jamsetji Tata, the founder of today’s corporate giant. They will perhaps be driven (definitely not drive!) in a company car, perhaps one such as the Indica better known in the UK as the City Rover. The will be unlikely to leave without being tempted into acquiring a Titan watch, another success story for Tata. They will learn how a familiar ‘British’ product, Tetley tea has been acquired by Tata Tea. They may also visit Jamshedpur, the model town founded by Jamsteji Tata, and the centre of Tata’s world-class steel operations. The town itself is an obvious parallel with the social vision of William Hesketh Lever, founder of Unilever, at Port Sunlight, on Merseyside.

The Tata dynasty

Jamsteji was to found not just a company, but a dynasty. Both sons (Sir Dorab and Sir Dorab) were to progress the company, and establish huge trusts). Later, JRD Tata (a son to a relation to the pioneering line of the family, and his French wife) founded Air India. He had progressed from his start as an apprentice, to lead the company over five decades.

The era had also seen the impact of another industry giant, in the romantic figure of Nathan Tata who had been adapted by Lady Tata after spending his early years in an orphanage. Through a combination of ability and more than a modicum of charm and charisma he was to become a major national figure and diplomat, sporting administrator as well as a business leader.

Today there is still a Tata at the head of the group. Ratan N Tata is a Cornell and Harvard graduate and continues the family’s involvement in the social as well as the economic well-being of the country. Unsurprisingly, he is a Tata ‘lifer’, having joined in 1962 and seen through his time the transformation of the company into a global player.

Tata and Unilever compared

An immediate comparison, based on scale can be made with Tesco, for its national impact, with its £1 of £8 in consumer spend passing through its UK tills. Tata contributes nearly 3% of India’s GNP. However, I am more taken by its similarities with Unilever. For example, Unilever employs more than 206,000 people and had a worldwide revenue of US$50 billion; Tata claims 2,46,000 people and revenues of $22 billion

The obvious product link is between Tata tea, now owners of Tetley’s. Unilever’s Lipton is still the leading brand internationally. However, for me, the link is not so much in products as in culture.

Unilever was also founded by a pioneer who started a dynasty. William Hesketh Lever (Lord Lever) created a model village, Port Sunlight, which still can be found a walking distance from the soap ‘manufactury’, and Unilever’s modern research laboratories. The Leverhulme research trust is one of the nation’s greatest philanthropic institutions; Tata’s trusts are as significant for India.
.
Assessment of corporate culture is a tricky business, and coming under increasingly scrutiny from campaigns promoted through the internet. However, Unilever and Tata have both largely escaped the vituperation heaped on other global giants.

Through my observations and contacts with both companies, employees and managers reflect a healthy culture.

Their leaders have at critical times followed a sense of ‘duty to history’
akin to fifth-level leadership principles and also to servant leadership.

By and large, this has protected the company from the damage that can be caused by Mandrill management

Students of leadership may find it constructive to reflect on the patterns of leadership found in Tata and Unilever in achieving ‘built to last’ companies.


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