Analyze the case study and answer the following questions, please provide details: Devise an alternative, HRM-driven business and ethical case for maintaining the existing long-term relationship with employees, customers and subcontractors.

CASE STUDY 19.1 EMPLOYMENT ETHICS AT BRITISHSTORES PETER ACKERS Introduction duties, and all managerial positions were reserved for men Britishstores is a chain of department stores selling with families. The firm promised lifetime job security for clothes, food and hardware. It employs 10,000 UK work male employees and encouraged children to follow their ers in retail, distribution and office positions, mostly on parents into the trade. For many years, jobs were only permanent, full-time contracts. In addition, around 1,000 rarely advertised externally. manufacturing workers, employed by its main subcon- tractor, are highly dependent on Britishstores' success Growth and employment policy. This case study presents an opportunity to assess the ethics of the business at all passed completely into the hands of his two sons. The The founder died in 1940 and ownership and control stages in its development (was it doing the right thing' boys had been educated at an English public school and towards employees?), and to address a major contempo lived in the Home Counties. But the founder's personal rary dilemma between remaining competitive as a busi- control had declined long before, as the company grew ness and retaining a reputation as an ethical employer. It first into a British chain in the interwar years. The founder allows you to explore various ethical theories and to con- had always strongly opposed trade unions as inimical to sider this business dilemma as a choice between different the family atmosphere of the firm, and in 1923 the firm ethical frames of reference. fought off an organising campaign by the shop workers' union which was already well established in the stores of In the beginning the strong Scottish cooperative movement. As a result, Britishstores was founded in 1900 as a small store in a 20 'ringleaders' were dismissed. During the economic medium-sized Scottish town by an austere, very religious depression of the 'hungry' 1930s, Britishstores gained Presbyterian (with his elder brother as a 'sleeping partner). a good reputation for maintaining employment when In the early days, the founder knew all his employees by other businesses were laying people off. This was partly their first name and exercised a strong "fatherly' influence because of good business performance, but it was also over their lives in and out of work. This had both benign widely believed that the owning family accepted lower and harsh aspects. The paternalist company was gener- profits in order to continue both to keep the loyal work- ous at times of family sickness, with the founder often vis- force and invest in the expansion of the firm. iting in person, though sometimes employees wondered The workforce was now counted in thousands rather if he was really checking up on them. And any employees than tens, so it was impossible for senior managers to who were caught with the smell of alcohol on their breath retain personal, face-to-face contact - though local store at work, or even drunk outside work, were summarily managers were encouraged to do so. In response, the dismissed. The founder also promoted a strong sense of company developed a professional personnel department family values, organising (alcohol-free) works picnics and to create a more systematic set of provisions and policies. providing a free hamper every Christmas and at the birth These included a non-union, representative company of any child (up to two in number) and 200 cigarettes to council that operated monthly at store level, and bian- the employee of the month". Christian prayers were com- nually across the whole company. Representatives were pulsory before each morning's work began. He also initi- elected from every work group, and both negotiated with ated and contributed towards various 'self-help' savings management over wages and consulted over any issues and mortgage schemes. Wages were generally slightly affecting the welfare of the workforce. There was also a above the industry norm, according to the discretion of welfare and sports society, which was heavily subsidised the founder, who liked to quote the parable of 'The Work- by the company and provided local Britishstores social ers in the Vineyard' and reward those whom he thought clubs - initially on a strict temperance basis. These organ- deserved and needed most. Women employees who ised competitions for football, cricket, ballroom dancing married were required to leave, in order to fulfil their family and so on. Company developments and these social activities were reported in Voice of Britishstores, a monthly unemployed. Still today Britishstores and Makeit & company newspaper produced by the personnel depart- Co together employ 800 people in the town, equally ment. The firm also pioneered a number of other welfare divided between them. benefits, including a contributory pension scheme for all Britishstores' personnel policy has remained fairly employees, and a seniority and promotion system called stable since the main structures were set in place in the "Growing our own', which meant that nearly all middle and 1930s. In line with 1960s and 1970s labour law and best senior managers were recruited from the shop floor. Fol practice, however, the company council system has been lowing one year's service, all employees joined the com- supplemented by a more formal (but still non-union) griev- pany profit-sharing scheme, which, in most years, added ance and disciplinary procedure. Employees have shown a further 10 per cent to their income. no further interest in union membership, partly because Public limited company wages and conditions are as good as those of most com- parable unionised firms, and partly because they know In 1965, Britishstores became a public limited company Britishstores senior management are strongly anti-union (PLC), and within a few years family shareholdings had and fear they might lose existing benefits if they push the been dwarfed by those of pension funds and other out- issue. A new company interest in equal opportunities for side investors. No senior managers now belonged to women was partly inspired by the national policy mood, the original family, and many were being recruited from but also by labour shortages and recruitment difficulties outside the business, rather than rising through its lower in the post-war retail labour market. As a result, there has ranks as they had in the past. A new graduate recruitment been a small influx of women graduates into managerial programme had short-circuited the old seniority systems, and supervisory roles, and the old distinction between though most middle managers had still risen from below. 'men's' and 'women's' jobs has been replaced by a for- The business had also had to adapt to outside social mally non-discriminatory, A-G grading system. Equally, trends, such as legislation for sexual and racial equality, criticism that internal recruitment reproduced an 'all white and relaxed social mores - leading, among other things, workforce, even in cities with large ethnic minorities, has to the serving of alcohol in Britishstores clubs. British- led the company to advertise all vacancies in job centres stores was still perceived by workers, customers and and local newspapers, followed by a formal interview. the general public as a family-run paternalist business Once again, outside policy influences have dovetailed with a strong ethical commitment to fair play. This was with business concerns that its workforce should reflect reflected in the trust and loyalty of long-service employ- the stores' potential customer base. Notwithstanding ees (and very low labour turnover), and of customers these developments, personnel policy still cultivates a who repeatedly told surveys that they would not buy their long-term relationship with both the directly employed clothes anywhere else. Britishstores continued to play a workforce and the manufacturing subcontractor. In the high-profile public charitable role, both in the town of its latter case, Britishstores has insisted on exercising sub- origin, where the head office remains, and in the wider stantial 'quality control over the subcontractor's pro- community. In the latter case, the company sponsored a duction process, while offering Makeit & Co. employees City Technology College in inner-city Glasgow during the access to its social clubs and welfare provisions (though 1980s and actively supported Business in the Commu- wages and conditions are handled separately). The nity". It also funded a professorship in Business Ethics at a company's long-standing commitment to high-quality leading British business school. British-made products has been a major attraction for its Britishstores now has a global supply chain, with traditional customer base. 40 per cent of its output sourced abroad. However, the Until recently, Britishstores has interpreted the new company had developed another long-term business wave of HRM thinking as largely an extension of its exist- relationship since its first major expansion in 1920, with ing personnel practices. For instance, it has added team a large high-quality clothing manufacturing firm based briefings, quality circles and a modest element of perfor- in the town where the founder was born and British- manco-related pay to its existing communications, con- stores originated. Although Makeit & Co. is an inde- sultation and reward structures. In some respects, like pendent firm, 70 per cent of its output is contracted profit sharing, the firm was already a pioneer. Today, how- to Britishstores - whose letters also prefix the name of ever, major changes in the retail market are forcing the the local football team. The Britishstores founder had company to reassess all elements of its activities. After presented to the town a park and art gallery, as well years as a market leader, with steadily rising profits, Brit- as a row of cottages for long-service company pen- ishstores is now in some commercial difficulty. In particu- sioners, while his wife played a prominent charitable lar, it faces competition from a new generation of fashion role in the interwar town, including organising youth shops, which threaten its core clothing market. These clubs and holidays for children of the local poor and firms source their products entirely from low-cost Third World suppliers and are happy to switch these where with Makeit & Co. to enable Britishstores to buy on the and when the market justifies. They also employ a raw, open market and benefit fully from low labour costs in if enthusiastic UK workforce of students and young peo- Southeast Asia. In the marketing director's view, the tradi- ple, almost entirely on zero-hour contracts. Their wagestional paternalist approach is now completely archaic and are close to the national minimum, often about 25 per untenable in the fast-moving retail market. cent less than Britishstores, and they spend far less on To further complicate matters, a whistleblower within training and welfare. Britishstores has already responded either senior management or the marketing depart- to this threat by shedding 10 per cent of its workforcement has leaked these plans to the media. Rumours are through natural wastage, early retirement and voluntary circulating that Britishstores has been negotiating with a redundancy, while terminating one major contract with military dictatorship for access to its labour force. Con- Makeit & Co. cerns about the abandonment of existing employees The ethical and business dilemma and the exploitation of Third World 'cheap labour' have been tabled by the founder's family for the company A new managing director has been appointed to tum AGM. There have been demonstrations by employees in around' Britishstores. He has asked all the main functional the original company town, addressed by outside trade directors to present a root-and-branch analysis of how the union leaders, who called for union recognition for Brit- business can regain its market position and restore stock ishstores employees and an effective European works market confidence. These papers will be presented to council. A petition has been presented to the Scottish and discussed at a 'Retail 2050: Future Directions' sem- Assembly by local MPs and church leaders, describing inar, the outcome of which will determine the new busi- Britishstores as 'the unacceptable face of capitalism ness strategy to be presented to the next company AGM. and urging a consumer boycott of stores nationwide. The recently appointed head of marketing has already Historically, the personnel function, now renamed stolen a march on the others by circulating radical plans HRM, has been seen as the custodian of the company's for a new, marketing-led, customer-focused, flexible ethical employment policies. As we have seen, these cen- firm that breaks almost completely with the traditional tre on a long-term relationship with a stable workforce. shape of the business, including its much-vaunted ethi concerned at the bad publicity the business is attracting, cal employment policies. She proposes a new 'culture the managing director has asked you, as personnel direc- of entrepreneurship' which will withdraw the comfort tor, to frame an explicitly ethical employment policy which zone' and time-serving' of current employment practices. overcomes the difficulties you are facing and draws on Using a cricket metaphor, she argues that the point is 'not some of the business' existing strengths. There are signs to occupy the crease but to score runs? This will include that the adverse publicity is affecting customers and establishing specialist boutiques and other facilities undermining their trust and loyalty towards the company. (including restaurants) within the stores, run on a franchise No options are barred, but the managing director has basis, using external subcontractors wherever possible, asked you to consider specifically the following questions. transferring all remaining direct employees to part-time Note: While Britishstores is a fictional ideal-type contracts, except for a core of enterprise managers and company, it incorporates many real-life elements from supervisors' who, in future, will be paid largely accord a number of leading British manufacturing and retail ing to performance. In addition, she moots the closure of organisations. These all began as paternalist family the Scottish company headquarters and complete with- firms with their own ethical ideas about how employ- drawal from the town to smaller, more convenient facilities ment should be managed and adapted, and developed in an English new town; and the ending of the contract these as they grew into large, modern businesses