Case: A Question of Value
Read the case and answer the questions at the end.
Barry Merchant is the recently appointed Branch Manager of a clothing store in a suburban high street. Previously he was the Deputy Manager with the group that employs him, but working in another area. He has not received much in the way of management training, although he has attended some area level briefings about financial procedures and product information. His predecessor has become an Area Manager, also elsewhere in the group. The company has expanded very rapidly in the last ten years, particularly because of the drive and commercial acumen of its founder, who still runs the company and is Chief Executive. The owner also has control of significant other trading activities and substantial shareholdings in a few other companies. He has openly admitted that the recent pace of change has been such that he has had difficulty in keeping track of what has been going on. The product range in the stores is casual clothing particularly aimed at teenagers and young adults. These products are sold at highly competitive prices at a national network of stores and via web site. Most production is undertaken in developing countries. The products are initially stored at a national distribution centre.
The company’s success is particularly because of the low costs of production combined with the low distribution costs it has achieved. Economies of scale are also a factor. The company has recently attracted significant negative publicity because of allegations of ‘sweated labour’ by the contractors it uses to make the products in developing countries. There is also significant adverse publicity about some of its working practices in its home market, in the UK. However, this has not stopped increasing numbers of people buying its products. If customers want to return goods they must do this within a month, have retained the goods in the original packaging, show proof of purchase and are only eligible to receive a credit note
Barry has a deputy manager working for him and an array of sales staff on different types of employment contracts. Some are on zero hours contracts, i.e. they are only paid when they are called in to work, often at short notice. Others are on 365 day contracts, which means they are guaranteed so many hours of work in a year but the employer decides when those hours will be with a day or two’s minimum notice. The 365 day contracts may or may not be renewed according to circumstances. The pattern of trade can vary quite considerably, especially on a seasonal basis and because of factors like the weather. The labour flexibility brings considerable cost savings to the employer. Barry’s store is open seven days a week.
The sales staff are paid the national minimum wage. There are no premium rates for overtime or working unsocial hours. However, just a few of the regular sales staff get a 10% wage premium because of the minor supervisory duties and administrative work they also undertake. The main selection criteria for sales staff are smartness of appearance and reasonable language skills. Many of the sales staff have aspirations to move onto another job when they have gained experience. Sometimes they are able to get promoted to the small core of regular staff receiving the 10% premium rate or move elsewhere in the group. Key ways in which members of staff are recruited are by personal recommendation from existing staff and internet advertising. It is inconvenient if staff do not have a bank account. If they are taken on without one the company requires them to put down a deposit on a debit card. They have to pay a £10 a month card management fee as well as 75 p. each time they make a cash withdrawal. Barry’s remuneration includes an annual bonus which is linked to the profits of his store. He thinks he is reasonably paid but notes that in practice he is encouraged to keep operating costs low and this includes maintenance costs. He is aware that the shop frontage in particular is rather shabby and the window frames all need replacing urgently but such expenditure would affect the profits recorded for the shop.
The strict working culture in Barry’s branch reflects the culture in the group as a whole. Employees have to log in electronically when they arrive and leave. Managers are expected to reprimand staff who talk excessively when they should be working and the same applies with regard to excessively long or too many, toilet breaks. Absences and lateness are carefully monitored and if an unsatisfactory profile emerges staff are likely to be warned that this can lead to dismissal, which can and does happen. Branch managers are required to ensure that random searches are made on staff to ensure that they are not taking away misappropriated goods when they leave the store at the end of a shift. The staff facilities at the store are minimal and if staff want to eat any food they are expected to do this off the premises. Meal breaks are unpaid. Sometimes it emerges that the company is in breach of the statutory employment rights of its staff in which case it rectifies the issue as it believes in keeping at least to the letter of the law, if not always the spirit. Breaches in procedural rights or terms of employment can occur because of the ignorance of some managers of staff statutory protections. It is employer policy not to encourage trade union activity and the level of trade union membership amongst its employees is believed to be very low. It is not common practice for staff to be interviewed when they leave, or make themselves unavailable for further work as it is believed the reasons can generally be anticipated. In any case staff can generally be replaced without great difficulty, even if this means using agency staff.
One day Barry is told by his deputy of critical comments about the company made on social media by one of his Sales Staff, Stevan Sergeev. These comments are particularly about the organizational culture. The criticisms include the strictness of supervision and the general climate of fear. Stevan maintains that people sometimes feel they have to come to work even when they are unwell because of the rigorous monitoring of absence. Those on zero hours or 365 day contracts are aggrieved that they feel they have to drop everything when called to work or it is held against them. The style of management is described as highly autocratic, erratic and ‘very ‘top down’. Reference is also made to the lack of on site staff facilities, the low level of pay and high staff turnover. Barry is aware that there is substance in some of these comments. He is also aware though that there have been two recent circulars sent by the Chief Executive of the firm warning staff not to publicly criticise the company and classifying such behaviour as ‘gross misconduct’. In his circulars the Chief Executive explained that the company was trying to deal with any inappropriate employment practices and that there was a grievance procedure for dealing with employee complaints. He also stated that it was like shooting oneself in the foot to publicly complain about one’s employer. Barry, however, is aware that the formal grievance procedure is rarely used and that there are rarely appeals against disciplinary action, including against debatable dismissal decisions. Employees can also be reluctant to accompany colleagues when they face disciplinary proceedings,
Although Barry is sometimes frustrated with the tight centralised control procedures operated by the company and the growing pains it has experienced with its rapid expansion, he is grateful for the opportunity he has been given to rise to managerial level. He can see too that if expansion continues there may be the chance of even further promotion. However, he can see that effective support services have not kept pace with expansion, many of the managerial appointments have not worked out and that senior management often do not seem in touch with what is happening at store level.
Barry convened a formal disciplinary hearing which he chaired. His deputy made the case against Stevan who was accompanied by a colleague. Stevan admitted the offence and said that he would not repeat it if he was allowed to keep his job – though he did add that he had not said anything he had not believed to be true. However, he has accepted that his behaviour was wrong. His distribution list for the offending electronic message had been to 80 people, including to some colleagues. He had been with the company for over two years, is on a 365 day contract and has a good work record.
Answer the following three questions.
Q1 What penalty, if any, would you recommend that Barry give Stevan? Why do you come to this conclusion? (Q1 approx. 500 words)
Q2 Identify any changes you think Barry can and should make in the way his branch is managed. (Q2 approx. 700 words)
Q3 Identify, analyse and comment on the Employee Relations strategy of this organisation relating it to the Business Strategy, with reference to the company culture and values.
Comment on the effectiveness of the current strategies.
Identify any changes to the current Business Strategy and Employee Relations that you feel would be helpful, relating your discussion to relevant theories and models discussed on the Employee Relations module. To what extent would you think an HR consultant might be able to influence the organisation? (Q3 approx. 1300 words)
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