The Postal Strike and the Horsemen of the Economic Apocalypse

The twenty-four hour postal strike in the UK is the type of ‘little local difficulty’ large enough to require an immediate response from a new political leader. Even with his formidable energy, Gordon Brown could do without confronting an industrial dispute so soon into his leadership. There are echoes of the Airbus conflicts that captured the attention of Nicholas Sarcozy in the first week of his Presidency.

Why strike? Why now?

The strike, which began at 3 am on Friday June 29th 2007, involved some 130,000 members of the Communication Workers Union who have issued the following statement

The CWU’s Negotiating Team met with the Royal Mail’s Chief Executive Adam Crozier, and his Senior Management Team yesterday. The CWU reiterated to Royal Mail that it was prepared to reach an agreement that would move forward both the Union and Royal Mail’s position … The CWU impressed upon the company that there was no possibility of Royal Mail management successfully transforming the business unless both parties could reach an agreement that galvanises the workforce too. During the course of the meeting the Union set out its position and expressed its genuine concern about Royal Mail’s business plan and how it would result in a spiral of decline for the company, and the workforce … The CWU reminded Royal Mail that the Union was not alone in severely criticising Royal Mail’s business plan. A recent all-party Select Committee criticised Royal Mail’s leadership for lacking vision.

Chief Executive Adam Crozier, responded by rehashing all of his previous statements and refused to enter into meaningful negotiations with the Union.

The strike on Friday 29th June 2007, will go ahead.

Technology and jobs

The old debate about technology and jobs continues. Innovation accompanies creative destruction, like Horsemen of the Economic Apocalypse. Maybe ultimately the job losses are compensated elsewhere. Which is no consolation to threatened workers. The perceived grievances of Royal Mail workers are easy to identify. As with Airbus, competitive pressures have triggered plans to reduce costs which threaten jobs.

The Royal Mail leadership team

Royal Mail has a high profile leadership team within the UK business world. Chairman Allan Leighton has been persistently linked with stories of his intention to head a lucrative buy-out initiative. In an earlier post I noted:

Allan Leighton has an appetite for self-publicity, as inspection of the Royal Mail website reveals. He presents himself as a dynamic (and somewhat terrifying) leader. In public he attempts to soften the image by implying he is very much one of a team, operating closely with CEO Adam Crozier.

Their styles remind me of an earlier high-profile double act, Lord King and Colin Marshall at British Airways. The pugnacious King had also been confronted with an ailing BA facing vigorous competition. Like Leighton, King presided over job cuts on a similar scale, and had serious internal morale issues and Union conflicts. Colin Marshall, like Adam Crozier, had a more urbane style.

Since his arrival, the Royal Mail has cut 30,000 jobs, shut thousands of post offices, and moved away from record annual losses that had reached £1bn. The various changes have been forced through against considerable opposition internally and externally.

The changes have not resolved the fundamental problems of the corporation which remains in dire financial circumstances. It recently announced that the gap in its pension funds would be tackled by ending the corporation’s final wage pension scheme, another unwelcome move and one described as unilateral bullying by its Union leaders.

Amazon and The Economist on-line

In preparing this post, I held off from ordering a book from that well-known e-business Amazon. It could wait. Co-incidentally, Amazon could not wait for a better deal from The Royal Mail, and has recently switched a lucrative contract away. If the management’s resolve needed stiffening, that would have done the trick.

Yesterday, those nice people from The Economist sent me an email. It apologized for any inconvenience caused by today’s postal strike, pointing out that I am eligible as a subscriber to access their on-line version, if I can’t wait for the delayed delivery through the Royal Mail.

Globalization as economic apocalypse

Royal Mail employees, like the rest of us, are facing an economic apocalypse. The current wisdom of the tribe is that we are seeing consequences of globalization. My examples illustrate some of the threats and opportunities cropping up, as the horsemen of the apocalypse gallop about, and technological changes sweep the countryside.

Card-carrying optimists hold to the view that the human spirit, creativity and morally-grounded leadership will help us through the crisis.

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

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.

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