Sterling Performance

British Gas has become embroiled in a labour dispute which serves as perfect example of how employee disengagement can expose your business.

The GMB union sent out a questionnaire to 9,000 members working at BG about working conditions and got 3,000 responses back, with the majority voicing serious complaints about the management regime.

Much of the complaint is around skilled engineers feeling overworked and made to up-sell to customers while they are working in their homes.

BG workers said in the survey that they were being micromanaged and subjected to a draconian disciplinary regime over the slightest infringements.

A spokesman at GMB said many responses mentioned threats of being put on disciplinary review for the next 12 months if engineers missed performance targets for the first time.

The real pity of the situation appears to be that many of the respondents to the survey said the company was a great place to work in the past, heightening the levels of dissatisfaction now the regime has changed. As one respondent put it:

• “I used to love working for British Gas, but I haven’t felt like that for a long time. They don’t value an engineer who can repair a boiler, although they value an engineer who can sell a boiler. Now, it’s all profit and no customer service”.

BG drafted a response to the statements made by GMB’s members at the company, who are so disengaged, the union is due to ballot for strike action in protest at their treatment. The response, however, doesn’t mention the management regime, only the accusation of impending job cuts.

However, in the interests of balance, here’s the statement:

“We are extremely disappointed that yet again the GMB is repeating accusations about job cuts at British Gas, which are simply untrue.  They continue to quote from an e-mail from June last year relating to reductions in headquarter costs which were announced last August.

“Claims of 5,000 job cuts are frankly ridiculous.  These scare stories seem purely designed to stir up discontent in a successful British company, which is growing customers and creating jobs - including 1,100 new roles for insulation technicians in British Gas’ new insulation business, which we announced last month. This is in addition to the 2,600 jobs we recently announced in our smart metering division.  It is notable that these new jobs have received no welcome from the GMB.

“Whilst we wrote some time ago, we have still not heard from the GMB as to what specific trade dispute they plan to strike over.

“We have in place robust contingency plans to ensure that, in the event of any industrial action, our service to customers is unaffected.”

Whether or not BG employees have a justifiable complaint, what is clear is there is a very high level of dissatisfaction among them. The GMB spokesman said he’d never had such a big response back from a survey before.

On top of that, a surprising amount felt driven to offer their own comments on top of their responses, many of which are in public domain.

What is apparent is these employees feel the pride in their jobs is being eroded.  If it becomes too obvious, it’s BG’s reputation with customers that could suffer.

Instead of making sure its most important customer touchpoint (engineers in customers’ homes) gives off a positive view of the company, the business runs the risk that they’ll complain or under-work and leave the customer with the wrong impression. This statement from one survey respondent is extemely telling:

• “I feel we are now putting our customers in danger. The engineers are put under great pressure day-in, day-out. There’s not enough time to complete jobs and corners are being cut. It’s the customer that doesn’t get the service. Our jobs are not safe. All this will result in someone getting hurt or worse”.

Getting your staff to deliver good customer service is very much about them feeling comfortable and happy to work for you. If they are not, it’s bound to show up in the way they deal with your customers.

BG recently put in glowing company figures. If the sentiments reflected in GMB’s survey represent the general view among this key section of its front-line employees, it will be interesting to see whether customers start drifting away as a result.

It’s fitting that International Women’s Day should open with news that Kathryn Bigelow has just become the first female to win the best film director Oscar.

Yet today’s World Economic Forum’s Corporate Gender Gap report 2010 makes her achievement look more like the exception than the rule. The report, which surveys the heads of HR at 600 organisations in 20 countries, claims global leaders are failing to engage talented women at work. Hmmm. Still?

A baseline question simply asks what proportion of the overall workforce is female, and even at this most basic level, companies worldwide haven’t made as much progress as you might expect.

The findings show up developed economies badly, too: while companies from the US, Canada and Spain had the highest percentages of female employees at all levels of the workforce, Japan and Austria joined emerging market India at the bottom of the scale.

Likewise, the findings reinforced concerns that “glass walls” still exist in departments and industries, showing a predominance of women in service-related businesses — financial, professionaland media– and at middle management, rather than board-level positions. While the majority of HR heads claimed there were “generally no gaps” between men’s and women’s salaries, only 13 percent tracked and rectified any discrepancies anyway.

But it’s not pay, regulation or parental leave that are the biggest barriers for progress anyway. What’s most stultifying, it turns out, is a country’s culture — surprising in light of the fact that Austria and Japan score so low on the percentage of women employed.

A masculine or “patriarchal” corporate culture is another obstacle, while a lack of role models and and flexible working options are also complaints.

All of this has “huge economic implications for developed economies”, according to the report, which quotes research saying that greater equality could boost US GDP by “as much as nine percent” and eurozone GDP by 13 percent.

The report also again reminds readers of research that links leadership diversity to financial performance and greater innovation. But it doesn’t really get to the bottom of the problem.

Saadia Zahidi, head of the Forum’s Women Leaders and Gender Parity Programme, claims this year’s results are “an alarm bell” for equality at work. But are the findings so very different to those reported by BNETUK last year?

Over at gender consultancy 20-First, CEO Avivah Wittenberg-Cox is more worried about the future prospects for men.

She predicts that “over-feminisation of the education sphere”, married to the “continued over-masculinisation of the business world” will only make for more wasted talent all around.

Her advice to women is to stop seeing themselves as a “maligned minority” and “accept the responsibilities of our newfound power”. Not sure exactly what that means, but it offers a more positive message than another report into the failings of the workplace talent system.

Who do you turn to for help? Well, it looks as if one person you’ll go to great lengths NOT to seek help from is your manager.

A survey of 2,000 adults by the Chartered Management Institute and the British Library found that 85 percent would rather find their own answers than ask their manager for help.

Why? Some (23 percent) just don’t trust their managers’ judgement, others don’t want to appear incompetent or be judged incapable of sorting out their own problems. But the big excuse is also in some ways the most telling — 48 percent just don’t want to bother their manager.

Despite the fact that it’s a manager’s job to support and guide team members, the fact is that most are perceived as unapproachable or incapable — probably a sign of the times. If your workplace is one of the many worldwide where headcount has been cut, there’s every chance your manager really is busier than before.

Yet wherever people are looking for help, only a small proportion are reading it in books. The CMI survey — which is promoting its Management Book of the Year competition — found only five percent turn to business books in their manager’s stead.

But when they do, the subjects speak volumes — most seek advice on better balancing work and home life; on how to get a pay rise or promotion; or on how to manage people… not, perhaps, something you’d tell your manager you’re reading up on.

It’s not such a bad thing to foster a culture of independence, where people seek out solutions from colleagues — but it should be in the knowledge that your boss can help if you’re struggling, and is there to guide your initial path. Steering clear of your manager because they are busy is one thing; but it’s another to avoid your boss because you deem them incompetent. (Wouldn’t even the most insensitive manager notice if no-one ever sought their advice?)

So where do people go for help if not to their boss? Do the CMI findings reflect your experience at work?

(Photo: Andres Valenzuela, CC.2.0)

Pharmaceutical business AstraZeneca’s announcement that it will close its R&D operation at Charnwood in Leicestershire by 2011 not only takes some 1,200 highly-skilled jobs out of the local economy. It raises a bigger question as to where the UK skilled jobs are in future.

AstraZeneca uses the research facility, based near Loughborough, for drug development work, which will now be moved to the company’s Cheshire base, Alderley Park. It also looks set to close similar, smaller bases in Cambridge and near Bristol as part of a longer-term restructuring plan which has seen 8,000 jobs go worldwide this year with a further 3,500 to come.

AZ’s not the first to cut its drug development costs worldwide — Pfizer’s cut R&D jobs and GlaxoSmithKline’s cost-cutting target is likely to mean job losses among UK R&D professionals. The rationalisation trend — cutting jobs and ‘peripheral’ costs to get a business back to its core, money-making activities — is reminiscent of the aggressive re-engineering that took place post-1990s recession.

What’s worrisome about this is that individual companies emerged from the 1990s re-engineering spate to find they’d pared back too far — and that some skills (specialist engineering, for example) were pretty thin on the ground. Arguably, this also hastened the UK’s shift to a ’service economy’ — and influenced what students focused on at university.

Science and Innovation minister Lord Drayson has argued that AstraZeneca’s decision to put its main activities under one roof — Alderley Park — is a sign that the UK remains a top choice for big pharma investment. And local government representatives are working with the company to find a way of softening the blow for Leicestershire.

But it’s a reminder of how significant inward investor decisions can be for the UK’s economy as a whole. Without big pharma to offer internships and graduate jobs, will British science grads look elsewhere for work? One company’s decision won’t tip the scales, of course, but the trend away from drug discovery is dispiriting.

There is one silver lining for brave entrepreneurs in the sector. Big pharma’s loss could be the smaller start-up’s gain. Given the amount of time and trialling behind drug development, though, any entrepreneurs in this sector will need serious backers, both from the private and public sectors.

Addition: After writing this, I noticed a response to a report by none other than the Science for Careers Expert Group. This group’s aim is to “better communicate the value of  science skills in the workplace and therefore the opportunities that are available to those who study science… “, to build partnerships with business and to generally get more of the workforce into science-based industries. Assuming someone is hiring.

Two companies in the news illustrate how arbitrary the government’s decisions are over what is too important to fail and how lucky banks are to have been viewed as such.

Lloyds Banking group has just announced it lost £24bn on bad debts in 2009, heaping much of the blame on subsidiary Halifax Bank of Scotland’s commercial property lending arm for much of this.

CEO Eric Daniels had already announced he would forgo an annual bonus of £2.3m — a prudent move in the circumstances. Surely he must be breathing a sigh of relief that similar moves from Barclays, HSBC and RBS meant he didn’t have to do so in isolation.

Lloyds doesn’t have as big an investment arm as Barclays and so will probably be able to escape a huge bonus budget and the accompanying ire from customers. Even so, the UK taxpayer is still being asked to stomach a £200m bonus bill for Lloyds staff.

On the same day Portsmouth Football Club has announced it is going into administration over a debt of a mere £60m. Far from anyone swooping in to save the company, it is being penalised with a nine-point deduction which will almost certainly see the team relegated from the Premiership to the lower tier Championship League. This is through no fault of the company’s star performers, the players who have actually suffered delays in pay as a result of the club’s financial strife.

Considering the talent for which these player are paid for is evident on the pitch, it’s ironic that they are being penalised while star bankers, whose talent is debatable are given huge payoffs.

You might argue that there is a great deal of difference between a huge national bank and a – it must be said – football club of middle standing, in terms of significance. But, the citizens of Portsmouth, for whom the club is a big cultural icon, might disagree. For them it is just as much of a blow.

Lloyds, like other banks were bailed out not only to save them, but also to save the reputation of the UK banking system as a whole. By the same token isn’t the reputation of the UK Premier League, which is a sizeable export to the rest of the world, also damaged if one of its clubs is allowed to sink into financial ruin?

Compared to Lloyds which still relies on the cushion of taxpayer support to survive, Portsmouth will have its opportunities to make the money needed to get back on its feet taken away, by being moved into a less lucrative league. It’s already had to sell off star players to recoup losses.

Perhaps Lloyds should take a similar line with its star performers, instead of rewarding them.

The long winter of pay and bonus stagnation is set to lift according to two reports from the CIPD and CMI, but the trade-off may be increased redundancies to pay for it.

The CIPD annual Reward Survey found 53 per cent of the 800 respondents expected salary spend to increase in 2010, while 15 per cent said it would shrink and 21 per cent said it would stay level.

The response towards bonus packages was positive, but there was an increased focus on aligning reward with business strategy and making it internally fair.

CIPD reward adviser Charles Cotton told BNET UK that this did not necessarily mean the pre-crunch bonus culture was coming back and employees could not expect big payouts regardless of their impact on the business.

Key performers would do well, which leaves the question of whether employees who are not stars, but nonetheless are critical in keeping the company afloat, will be left out. Cotton advised it was essential these employees’ efforts were recognised in their basic pay. (more…)

UK chocolate-maker Thorntons’s results, announced today, are a welcome fillip for smaller quoted companies, often neglected in favour of their bigger brethren and pressured by short-termism in the City.

With profits up just over 24 percent to £9.1m, chief executive Mike Davies expects improved performance in the second half of the year, usually slower, and is hoping to spread demand throughout the year so the business is less reliant on high sales over Christmas.

What did the business do so right? It’s adapted quickly to the recession and made shorter-term financial decisions that have paid off. Clearing January 2009 without any overhang may’ve cost the business initially, but it’s paid off longer term. It decided not to discount product costs, but instead looked for internal cost-savings (lower rents, a more flexible supply chain, a change to its pension provision.)

It has made investments in improving efficiency, spending some £4m in electronic point-of-sale (EPOS): a big outlay, but one that’s led to better service for customers and data capture and a 5.5 percent improvement in demand for its chocolates.

It has improved its commercial deals: sales tumbled by a quarter after its franchise partner, Birthdays, folded last May, and it had to close 94 stores as a result. Woolworths’ earlier closure, just before the vital Christmas 2008 period, knocked sales. Even so, commercial sales to retailers rose 6.5 percent to January 9, 2010.

It’s also avoided becoming too mired in the short-term: “Recession won’t be with us forever,” according to Davies, so it pays to keep a weather eye on consumer trends (in its case, a trend to ‘healthier’ dark chocolate) and continue to launch new product lines to make it less dependent on one season.

Employment has suffered, but “we really wanted to avoid making redundancies,” according to Davies, so it engaged the workforce in coming up with money-saving opportunities and tabled flexible working options.  “Much more than money is saved,” said Davies. But you have to be “open and honest and treat people like adults.”

In a conversation with BNET UK last year, Davies said: “I’m neither a pessimist nor an optimist. We can influence our own destiny. Being in recession teaches you to always be on your toes.”

It is not only banks that are too big to fail. The treatment of corruption allegations against BAE Systems shows some manufacturing companies must be protected from their own excesses too. 

As Britain’s biggest industrial company, BAE is too important to be severely punished. It employs more than 100,000 staff, earns foreign income from exports and supplies the hardware to defend the nation. And given the international counterparties to its questionable payments, prosecuting the UK company could risk upsetting important allies abroad.

So following the Serious Fraud Office’s decision to scrap its inquiry into Saudi Arabian arms contracts because of national security interests, the SFO and US Department of Justice have now extracted the maximum fines from the aerospace company that do not cause wider damage. Hurting BAE would endanger not only its own payroll but also the 400,000 workers at its suppliers.

The American prosecutors have thus imposed a $400m fine for providing inaccurate information while the UK fines it £30m on an accounting irregularity. The cost is bearable for a company valued at £12bn and with sales almost double that, but BAE emerges innocent of any serious charges and free to continue supplying governments. 

The settlement is the equivalent of the US and UK governments injecting funds into the banks that caused the financial crisis, rescuing rather than punishing them. Britain can no more function without a major defence supplier — never mind employer and exporter — than without a banking system. 

As at the banks, BAE’s board has been cleaned out, a new code of ethics written, and tougher regulation imposed, but it will be allowed to flourish because, like the lenders, it is too big to fail.

That was the test applied to British manufacturing industry many years ago and used to justify the wave of nationalisation after the Second World War. In the 1970s, Rolls-Royce and British Leyland were rescued by the state because the aircraft and car companies were considered too big to fail — and the US government adopted the principal last year to save Chrysler and General Motors.

But having been held to ransom by the banks, governments are urgently examining how to stop companies again becoming too important to lose. Barrack Obama wants deposit-taking banks to shed their risk-taking activities such as private-equity and hedge funds. The UK’s parliamentary inquiry into exactly that danger will report soon.

If “too big” becomes unacceptable, politicians must rethink their views on big business. Anti-trust and competition rules have been used to prevent consumer exploitation rather than break monopolies because their size endangers supply or could cause consequential failures.

But unless the risk can be taken out of commerce, or unless governments turn against big business, the state must be willing to accept companies can fail or prepared to step in when they make mistakes.

Whether car companies, defence companies or banks, it is the economy that the state is protecting, not the erring corporations.

The Observer

Branson predicts an oil crisis by 2015 Virgin boss Sir Richard Branson has warned UK ministers to act now or face a ‘peak oil’ crisis in as little as five years. “Don’t let the oil crunch catch us out in the way that the credit crunch did,” says Branson as he and other business leaders including Scottish and Southern Energy Group’s Ian Marchant call for government to take urgent action to avoid severe oil droughts.

Jobs and courses culled as UK universities face cut-backs More than 15,000 jobs could go across the UK’s universities as institutions look to adapt to “devastating” cuts in funding. Post-grads may step in to teach instead of professors, bursaries and scholarships could be cut, courses or whole campus closed as institutions look for cost savings of around five percent a year.

Tiffany the target of of Bushmen protestors Diamond purveyor Tiffany & Co’s donation of money to the Botswana government to create water boreholes in its national park has raised a stink among protestors. Tiffany’s money is being used to “oppress” local Bushmen whose access to water has been blocked, they say, by the government.

The Sunday Times

Bonus storm as losses hit £7bn at Royal Bank of Scotland

The Treasury is about to approve a bonus pool of £1.3bn at RBS even though the bank is expected to announce huge losses in 2009. RBS leaders claim they have no choice but to follow other banks, such as Goldman Sachs, or risk losing star employees to rivals. The Scottish bank lost 1,000 top performers last year.

Big contractors squeeze out the little man

The National Federation of Builders claimed a quarter of small and medium-sized building companies have been forced to lay off staff after missing out on government contracts. The federation said big property companies are able to offer cheaper rates and mount better bids.

Independent on Sunday

Big oil funds anti-climate change research

Anti-climate change thinktanks including the UK’s International Policy Network have been given grants by oil giant ExxonMobil. Organisations such as the IPN, as well as the US-based Atlas Foundation, have staged global gatherings of climate-change sceptics, while last year’s “Global Warming: Was it Ever Really a Crisis?” meeting in New York was co-sponsored by Atlas and the Heartland Institute, another recipient of ExxonMobil money.

HSBC denies US senate accusations of corruption

HSBC bank has strongly defended itself against criticisms over its anti-money laundering processes. A US senate report slammed the bank’s conduct over dealings with an African woman who it failed to detect was related to a Gabonese public official. The bank insists its processes are within the spirit of US regulation.

FSA switches auditors

The Financial Services Authority has been forced to ditch its private sector auditor, Grant Thornton, for the National Audit Office. The change will save the FSA £100,000 a year. The Public Accounts Committee recommended the change as a result of criticism of the FSA’s performance before and after the credit crunch.

News of the World

Geordies spend more on Yorkshire puddings than families in Yorkshire A survey by mysupermarket.com has found UK consumers are not loyal to their regional foods. More Yorkshire puddings are bought by shoppers in the Tyne and Wear than in Yorkshire, while Welsh consumers are more fond of Cornish pasties than shoppers in the West Country. On average, East Anglians spend nearly £5 more a year on Cheddar cheese than consumers in its region of origin.

Glaxo Smith Kline set to slash 4,000 jobs The British pharmaceuticals giant is expected to axe workers in an attempt to refocus on emerging markets. The bulk of job cuts will be in Europe and the US. The move follows rival Astra Zeneca’s layoffs last week.

Adam Crozier to get £15m - but only if he can save ITV The outgoing boss of Royal Mail has a super-payout written into his new salary, providing he can turn the fortunes of the flagging broadcaster around. His basic salary is £800,000 but he will receive his bonus in shares only if ITV’s performance is improved in three years. Even then, the payout will be deferred for a further two years.

Half of new jobs are created by the state Nearly three-fifths of the jobs created in the first 10 years of the Labour government were directly or indirectly paid for by the public purse. More than 80 per cent of new jobs for women nationally were created by the state and no new jobs in the West Midlands were created in the private sector during that time, says research. Finance — the UK’s highest growth private sector market — has had a negligible effect on job creation for the country.

City of London loses 10% of senior staff in two years Redundancies, insolvencies and early retirement have claimed 17,000 senior roles in the financial services sector. The job losses are equivalent to the population of Weybridge in Surrey, a commuter-belt town.

Independent on Sunday

Cambridge Boring Bank or Boring Bank of Cambridge? An entrepreneur banker has set up a lending bank in East Anglia by raising £50m. Founder Nigel Brown has recruited former Coutts head Peregrine Banbury as its first chief executive and bank manager. Former HSBC head of IT David Gill has also been taken on. The bank will lend money to businesses specialising in technology.

Former BAE agent charged with bribery An Austrian count and former employee of defence giant BAE has appeared before magistrates on a charge of trying to bribe officials in Central and Eastern Europe. The Serious Fraud Office has charged the individual with conspiracy to corrupt. A spokesman for BAE said the company could not comment on the case.

Sunday Telegraph

Pepsico’s Health Drive Indra Nooyi, Pepsico’s chief executive, is making a £19bn move into healthier food. Nooyi wants the company to treble revenue from ranges such as Quaker Oats and Tropicana, which is where she sees the market moving.

Cadbury Job Fears “Overstated” Kraft boss Irene Rosenfeld claims worries of UK job losses as a result of the company’s Cadbury acquisition are “greatly overstated”. She also dismissed criticism (from major shareholder Warren Buffett) that Kraft had overpaid for the UK business. At the World Economic Forum at Davos, she also said that Kraft was looking at doing more work with development agencies in emerging markets to promote sustainable agriculture and affordable nutrition.

HSBC’s China Bid HSBC is shopping for Chinese acquisitions and are looking to acquire 51 per cent of one of the big three banks there — ICBC, Bank of China or China Construction Bank. At the moment, the Chinese government limits foreign ownership of banks to 20 per cent.

The Observer

Shareholders Call for ITV Break Up ITV’s New Boss Faces Rebellion  He’s barely in the chair but shareholders are already calling for ITV’s new boss, Adam Crozier, to break up the business. Options they’ve put forward are a sale to a rival such as Fox, a separate listing for ITV Productions or a partial sale or float so ITV’s broadcasting arm could retain control. Chairman and former MP Archie Norman is also trying to form a coalition of channels and content producers to lobby for deregulation of broadcast media.

London an “Insolvency Brothel”? A partner at law firm Cadwalader claims lax UK regulations surrounding insolvency are turning London into an “insolvency brothel”. Foreign companies need only be resident in the UK a few weeks and have a UK address to take advantage of Britain’s winding-up process.