Thomas Cook Group faces serious risks to its brand image

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For the company, attention to the Corfu hotel tragedy may have been replaced by concerns for more pressing strategic and financial difficulties.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

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Three Keys to Culture Transformation: Lead, engage, align

by Diana Rivenburgh

What causes cultures to run amok? Why do people do things they never thought they would? Perhaps the most important question is “what can we do to create ethical, high performance, engaged cultures?”

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

The 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

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

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?

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]

Black Friday battles become a test of Corporate Social Responsibility

England’s leading retailers embraced America’s Black Friday sales strategy violently as November drew to a close

Images of mob-battles in search of bargains suggest this will be a test of how companies will respond to a challenge to their claimed code of ethical practices. As this was our first serious attempt in the UK to import this innovation, corporate planners may have assumed that it would be greeted by the tolerance always displayed by the English citizen queuing for services.

Hand to hand combat

What happened was a display of desperate consumerism. As the doors to the supermarkets opened, patient hours of waiting ended as hand-to-hand combat broke out in the battle for plasma televisions.

Like a desperate struggle for famine relief supplies

It was like a desperate struggle for relief supplies you see in famine relief films, one observer said.

Minor battle, few casualties

There were surprisingly few reported injuries, perhaps fewer than during a Manchester United training session. One shopper was reported as bombed by a television, and a few cars were damaged on the fringes of the battle, but the casualties were light.

Social media quickly showed not dissimilar scenes from America. No shoot-outs were reported in the struggles to secure the last iPad on sale. The first martyr celebrating Black Friday has yet to be chronicled.

For students of leadership

For students of leadership there are several matters for reflection. Will leaders show any convincing commitment to their claims of putting the customer first and displaying high ethical values? The social media storm seems to have caught them unprepared.

To be continued

Dilma Rousseff: Guardian of the people outside the gates

In a tight electoral contest, Dilma Rousseff is re-elected as President of Brazil. She is the candidate of ‘the people outside the gates’

Dilma Rousseff presides over a gated nation. She has been re-elected by a narrow margin as the candidate of those living ‘outside the gates’. Her people’s party , PT, is committed to reducing the inequality gap.

A personal recollection

A personal image. In a side street in the financial centre of São Paulo, a little girl in a smart dark-blue uniform stands behind the security gates of a large house. As we walk past on our way to the University, a limousine pulls up in front of the house. The gates open, and the little girl gets into the back of the limo. As it drives off, the security gates close again. The image has stayed with me. The bustling streets seemed safe, in the early morning rush-hour. Yet Chris, our host, had insisted on meeting his two visitors from England, and escorting us from our hotel to the nearby lecture rooms. We just saw how the people within the gates protect themselves.

Dilma seen as anti-capitalist

The Economist has predictably seen Rousseff’s re-appointment as a rejection of the modernizing and pro-business policies of the defeated candidate Aecio Neves. The campaign was full of sleazy accusations, but arguably was no different to the balanced-free rants that come from America’s television coverage of the last two presidential campaigns.

Prognosis

The Western Press suggests that Rousseff is unable to introduce needed change to deliver economic and social stability. Her broad policy is considered to be shackled by a sympathetic stance to Latin American solidarity against the United States and supporting the strengthening of trade relationships with China.

To be continued

The story is developing rapidly, and will be continued with the Petrobras scandal this week and the mass demonstrations in São Paulo.

Nov 15th 2014

Bloomberg reports 10,000 demonstrate in streets of São Paulo.

Nov 18th 2014

Grace Foster, head of Petrobras commits to major change in the CSR of the state-owned oil company.

With Twitter, at least the abuse is free

Twitter disappoints market expectations and its share price slumps. Somewhere in the fantasy world of finance, perhaps the firm’s stance to on-line abuse is being factored in

This week [28th October, 2014] Twitter shares slumped as promise continued to outpace financial performance. Dick Costolo, Twitter’s chief executive remained upbeat.

The weirdo tweeters

I wondered what effect increased levels of personal abuse in the tweets from weirdo tweeters might be having.

The poisoning of online debate

The thought occurred to me after reading Twitter and the poisoning of online debate by the BBC Technology Correspondent Rory Cellan-Jones.

For anyone who believed the internet and social media would foster a new era of free expression and open debate, this is a depressing time. It seems no area of discussion is free from mindless and often vicious exchanges between people who have different opinions.

And there is wider concern about the future of online debate. Where now are the places that reasonable people can go to find discussion that does not quickly descend into abuse and flame wars?

For a long while, Twitter was different, a place where people were who they said they were and were aware that a tweet was a public statement for which you could be called to account. Now though, a rash of spam and so-called sockpuppet accounts have started to poison this well too.

When Cellan-Jones asked twitter to respond to criticisms they replied:

“Our rules are designed to allow our users to create and share this wide variety content in an environment that is safe and secure for our users. When content is reported to us that violates our rules, which include a ban on targeted abuse, we suspend those accounts. We evaluate and refine our policies based on input from users, while working with outside organizations to ensure that we have industry best practices in place.”

There is no such thing as a free tweet

A second thought. As economists might put it, there is no such thing as a free tweet. By which I mean even the innovators who gave us Twitter still operate a business model that has to satisfy the expectations of the all-powerful gods of the market place.

The Dilemma

The dilemma for corporate twitter is how to preserve its brand image of an altruistic, neo-capitalist cuddly big brother to its zillions of users at the same time as placating the gods of the market place.

NFL’s Roger Goodell in re-run of Custer’s last stand

The National Football League faces serious criticisms for its policy and actions against players found guilty of off-field violence. The specific case of Ray Rice of the Baltimore Ravens has opened up the broader questions of the competence of Commissioner Roger Goodell

The elevator punch

Ray Rice was videod knocking his then fiancée unconscious in an elevator of an Atlantic City casino. The assault on Janay Palmer took place last February. Initially, Commissioner Goodell banned Rice for two games for his off-field actions.

When the video appeared on the Internet in August, there was a belated reaction from Roger Goodell and the Baltimore Ravens. Rice was delisted from the club, and banned indefinitely from the league.

More abuse problems

More abuse problems were uncovered involving NFL players. Media interest in the story grew. Commissioner Goodell appeared to be ducking Press Conferences, and ‘went missing’ at a prestige event he was expected to attend.

The damaging press conference

When Goodell surfaced at a Press Conference, he was already appearing in the role of Colonel Custer with the Indians approaching rapidly. He appeared nervous and weakly apologetic. He is unable to explain his silence and unavailability for comment as the story developed. Videos of the event go viral.

The Media sound off

His conduct and competence become headline news. Rachel Nichols of NFL is among those in war paint. Goodell’s future as NFL’s chief honcho seems less than secure.

Leadership lessons

The conventional wisdom of Press Relations 101 is enough to start the discussion. Goodell allowed the story to build up by failing to make himself available to the Media. By the time he did face the press, he needed to have sorted out his symbolic acts of contrition. He missed his last chance to manage the dilemmas he faced.

Goodell could have taken lessons from the sad case of the even more beleaguered Rob Ford, mayor of Toronto, as he attempted to cling to power earlier this year. Ford, facing the media after his various misdemeanors had a wonderful line in self-criticism and contrition.

Acknowledgement

To LWD subscriber Mike Langley, who drew attention to the developing story.

The story will be followed

The story will be followed here in updates to this post.

26th October 2014

Goodell’s salary estimated at more than $200 million since 2007

Sporting leadership and the new CSR of Corporate Sporting Responsibilities

Sporting participants, coaches and administrators face a set of overlapping challenges which collectively could be described as Corporate Sporting Responsibilities

Take a look at these recent sporting stories.

Drug cheating in sport

Drug cheating continues to plague a range of sports since the monumental fall from grace of Lance Armstrong.

In cycling, of the nine fastest sprinters in history only two , the Jamaicans Usain Bolt and Nesta Carther, have not been found guilty of contravening the sport’s drug regulations.

Corrupt practices

Administrative bodies have been accused of various corrupt practices in the award of major global sporting events.

Qatar’s award by FIFA of the 2022 World Cup has defied rational explanations in failure to take into account the health dangers of extreme temperatures later conceded as requiring serious concerns. Corruption accusations have been backed by commercial sponsors calling for release of results of an internal investigation.

Further accusations have been levelled against FIFA’s President Sepp Blatter. A Government committee in the UK was told that the Football Association would not be ‘wasting its time bidding’ for the World Cup as long as Blatter remains in post.

The Olympic Movement has repeatedly found its idealistic vision at odds with harsh political and financial realities. The recent Winter Olympics at Sochi began with demonstrations against Russia’s recently tightened discriminatory laws. These are said to be contrary to P6, the anti-discrimination proposition in the Olympic Charter.

During the games, accusations of bias were made against a judge whose score elevated a Russian figure-skater to gold medal status.

Corporate sporting responsibilities

Coaching of young athletes has also come under serious criticism.

In researching coaching leadership, I came across an article on a website dedicated to sporting excellence. It suggested widespread coaching abuse of young athletes by bullying coaches obsessed with winning. This chimed which some of my personal observations of amateur coaches including over-zealous touch-line parents.

The article drew my attention to the broader responsibilities of sports coaches and administrators to address the issues and dilemmas outlined in the examples above. The parallels with the emergence of the Corporate Social Responsibilities movement were too tempting to resist.

This sporting life

Any efforts to rescue sport would have to deal with criticisms made by the sociologist Lasch, nearly fifty years ago. Lasch, in The Lonely Crowd, wrote a classic analysis of the development of a culture of narcissism. In a chapter on The degradation of sport he describes how the athlete was increasingly becoming an entertainer, open to being bought and sold in what he describes as in “antagonistic cooperation” to teammates.

Perhaps a movement is required, a new form of CSR, whose principles will be incorporated into sporting charters and declarations. Participants are likely to be leaders in such a movement. Athletes have already stood up in many demonstrations against perceived injustices when administrators have taken a more cautious approach.

More importantly it may, like the original CSR, find expression in the beliefs and actions of a future generation of administrators, coaches, and sports players at all levels of excellence.