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Mike Ashley: Employment strategy

Mike Ashley: Employment strategy
Blog, Strategy Steps

Mike Ashley: Employment strategy

Mike Ashley is a renowned UK billionaire businessman, who owns majority shares in Sports Direct and Newcastle United Football Club amongst others – including Sports World, Lillywhites and Gilesports. He recently bought the House of Fraser assets, leaving the liabilities to the liquidator. Creditors weren’t pleased that they had to take a hit.

Mike Ashley’s employment practices and policies are well-documented, but does he deploy good employment strategy for his business and bad for his thousands of employees?

Clearly Ashley knows how to make money, but media speculation repeatedly talks about his decisions that don’t look good for the working lives of his staff. Equally important, is the question of him acting marginally in and out of the law.

Ashley has made his money buying brands and now employs more than 20,000 people the UK alone. He owns stores in a number of other countries. He has bought shares Donnay, Dunlop Slazenger, Karrimor, Kangol, Lonsdale, Umbro, Blacks Leisure Group (which owns Millets & Mambo) JJB Sports and JD Sports. The group was valued at £2.5 billion in 2006.

In 2007, Ashley bought 100% of Newcastle United for an estimated £134 million. His popularity with fans has been a rollercoaster ride and repeatedly has put the club up for sale with no success. He hired and fired a number of Newcastle managers which annoyed and frustrated fans. Fans also protested when St. James Park Stadium was offered as security for a £10 million personal loan for Ashley. He has said on television that he regretted buying the club.

Ashley subsequently bought a minority share in Glasgow Rangers FC. He is renowned for being shy to dip into his coffers to buy players. He prefers to sweat his current assets to the limit.

The Guardian talks about Sports Direct having a staff turnover rate in 2016 of 22%. At the time, the national average was 8%. Since the productivity of each store is affected as much by its location as by the quality of the management, staff turnover clearly matters. Investors and suppliers know this. The share price on the stock exchange, the careers of all staff, whether they stay or go, are affected too.

Mike Ashley

Productivity, is affected by resources, especially skills and teamwork. Sports Direct’s trading performance dipped in 2015 and share price was smacked by a whopping free fall of 60%. The Guardian further reported that “A scathing parliamentary inquiry found that Ashley had been running Sports Direct in a manner closer to that of a Victorian workhouse than that of a modern, reputable high street retailer, building his success on a business model that treated workers “without dignity or respect”.

Ashley openly admitted to paying less than minimum wage at Sports Direct and that the company was too big for him to manage. His main Sports Direct warehouse had more than 100 ambulance call outs for medical emergencies over a three year period. Allegations of swathes of staff employed on zero hour contracts, who had to endure part strip searches.

It is also alleged that staff at Sports Direct that contested an offer of a minimum of 336 hours a year were often not offered any work. Ashley refuses to employ certain staff directly, since this he said, would increase his responsibility and complicate his disciplinary procedures. Fines of 15 minutes wages for being a minute late were also cited. The Telegraph reported that Mike Ashley repeatedly turned a blind eye to misdemeanors and mismanagement in Sports Direct.

Ultimately, outsourcing this recruitment is designed to drive down costs. Spending less on staff, is a trend that subsequently proved attractive to many other companies in this market sector and others. This trend appears not to be applied to senior management. The Guardian called the Sports Direct mismanagement a “brutalisation of labour.” The wage gap between Ashley’s workers and management has become vast.

The ‘Meet the Owners’ series ran a show on Mike Ashley. They depict him as a hard drinking, hardly educated man who started a business out of funds derived from mortgaging his parents family home.

Ashley is the biggest employer of zero hours contracts. Some would argue that these contracts promote poverty, onerous working conditions and no employment benefits. The contracts made employees fearful of their jobs and often elected to take unnecessary risks in the workplace. Ashley’s notorious employment practices were discussed at the highest levels of government for sanction. At Newcastle United, Ashley partnered with sponsors Wonga, a microlender with an equally poor reputation, this time with the way they treated their customers.

With all the information published and spoken about Mike Ashley: The Employer, are their lessons to be learnt from him for abuses made in plain sight? Here are some questions to consider:

  1. From some of the worst labour practices that Mike Ashley has admitted to, how many others are still prevalent in the workplace today?
  2. Have Government regulations been put in place to stop the worst of these poor employment practices? If so, which have been dealt with successfully?
  3. Do employees, minority shareholders and football fans make it easier for Ashley to make these bad employment decisions? Who has been able to curb his excesses, including that of rewarding only those closest to himself?
  4. Why has Ashley been able to manage his staff so poorly for so long? Who could or should have sanctioned him earlier?
  5. Who are Ashley’s most important business allies?
  6. Which of Mash Ltd’s (Holding Co) worst strategic issues today, emerge from the Employment Strategy deployed a few years ago?
  7. How has Mash Ltd and Mike Ashley personally, benefited from paying staff below minimum wage? How have they not benefited?
  8. What advice would you give to the Mas Ltd Board of Directors regards improving their Employment Strategy? What would you advise, why, where and when?
  9. If it is true that Ashley could be accused of nepotism, how has it helped and how has it harmed his businesses?
  10. Which of the employment practices that Ashley has deployed do you support and which do you not agree with?
  11. Do you think that the media have treated Ashley fairly and do you think they understand his business models?

The purpose of our subsequent discussions could help to understand what the public or stakeholders did or didn’t do to enable Ashley to benefit from our apathy. More importantly, we could identify the triggers and the circumstances that harmed so many employees for so long. Their stories may well not yet be told. We could get the conversation started to raise awareness and to ensure that it cannot and will not happen again.

Your comments and insights are appreciated below.

Citations: Employment Allegations ; Staff Turnover ; Brutality ; Work Practices Report ; Accountability ; A Blind Eye ; Highs and Lows ; Meet the Owner ; BBC Breakfast ; Newcastle investment ; The Newcastle Debate ; Newcastle United Finances ; Incorrigible ; Share Scheme ; Management ; Wiki ; Revolt ; House of Fraser ; Hiring in the family

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