UK HR leaders key to avoid mismanaged one-size-fits-all restructuring

18 July 2017 Consultancy.uk

As business models are disrupted by technology and socio-demographic shifts, professional service firms specialising in HR management must bridge the gap between employees and executives for UK clients to avoid being left behind. According to the annual Global Talent Trends Study, the vast majority of organisations worldwide report they are planning to redesign their structure in the next two years, however executives who seek analytics to boost employee engagement in changing companies are largely let down by HR specialists.

According to a recent survey, the future prosperity of British business rests in the hands of employees, with HR leaders and c-suites divided as to whether they should overhaul companies to adapt amid an increasingly disruptive global market. Mercer’s recent Global Talent Trends report derives insights from over 7,000 world-wide perspectives, comparing the views of senior business executives, HR leaders, and employees from organisations around the world. The 2017 report assesses significant gaps in alignment, identifies several critical disconnects concerning change, and makes recommendations to capture growth.

Recent years have seen business model disruption leading to a boom in demand for restructuring services, with analysts believing an “age of disruption” will cause up to 80% of Fortune 1000 corporations to be replaced, as new smaller competitors better more suited to the times, may mean that an incumbent company becomes stressed, and, given enough change within its ecosystem, may fall into a full blown crisis. Subsequently, HR leaders are required perhaps more than ever before by global companies to help aid shifts within established firms.

Unique views from around the world

Most notably, despite 93% of organisations’ plans to transform themselves in the next two years, HR leaders do not have organisation or job redesign on their list of priorities for 2017. In the UK, businesses are noted as being particularly divided, as while many businesses eye performance ratings as a way to increase efficiency, researchers cite British respondents as being the most content with the status quo of workplace compensation in the world, along with Japan and China, leaving employees at odds on whether their businesses should change by adopting controversial performance ratings.

While companies stated this was a better way to set base rates for salaries in order to maximise the returns they can make on the labour of their employees, the method could also lead to greater employee attrition as staff double-down to insulate themselves from falling base pay. However, with over 88% of the global survey stating they had already implemented this sort of measure, it may well be that UK HR departments begin a full roll-out of this kind of contract in order to maintain their edge, particularly as competitive labour markets in Asia including India see employees contrarily hungry for feedback and performance ratings from employers.

According to Mercer’s analysts, while increasing efficiency remains the number one aim of design changes in the majority of countries studied including the UK, and performance ratings would indeed be aimed toward such a target. However, alongside workers from Australia, Canada and Hong Kong, the top suggestion for improvement from UK employees surveyed was for leaders to set clearer priorities. This contrasts with a vague drive for constantly improved efficiency, suggesting the onus is on higher management to make plans clear for workers, to enable them to better meet demand.

What would make a positive impact to their work situation?While for employers in Germany, France and others, work ratings might improve performance, as 47% of employees there suggested fair and competitive compensation would improve their performance, global firms operating in multiple countries should beware implementing a one-size-fits-all solution when it comes to overhauling a UK-based operation.

Mercer’s paper cites top executives and HR managers of organisations often taking a disconnected “world is flat” view of the universe in this manner, suggesting that decision-making regarding a company’s change might do well to listen to thoughts further down the company chain. As the people who deal with the day-to-day running of the company, employees are best placed to pick out the day-to-day areas of weakness of the business.

Talent Mismatch

Behind this chasm in executive and employee goals, Mercer argue that a mismatch in talent analytics from HR leaders must be improved if companies are to effectively engage their workforce in pivotal decision making. One example pointed to by the report is that executives say understanding the key drivers of workplace engagement would be the key insight to adding value to their business, however just 35% of HR leaders were actually able to provide this information.

The gap in executives’ demand for data types, and the types actually provided by HR globally led to large disparities. HR professionals were capable of providing exponentially more data on why employees join a company than executives actually required, while the reverse was true of team performance, and who was likely to leave a company for which reason.

Mismatch in talent analytics

The outlook for the UK in this case is promising however. While the global figures suggest this gap as a major concern, UK HR professionals, along with those based in Canada and France, cited a capability for data analytics and predictive modelling as one of the top three in demand skills for the coming 12 months. This suggests British HR consultants are anticipating having to decrease this gap in outlooks between employees and executives quickly to help clients best add value to their companies.

 “In an age where digitisation, robotics, and AI are wreaking havoc with traditional business models, it is easy for executives to focus on superior technology as the solution to ensuring the competitiveness of their organisations and to overlook the human element,” said Ilya Bonic, President of Mercer’s Career business. “Growth rests on engaging and empowering today’s workforce in ways that we are just beginning to uncover. It takes employees armed with the right skills and opportunities to develop innovative solutions to advance the business and themselves.”

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Debenhams administrator handed legal threat from Sports Direct

24 April 2019 Consultancy.uk

Earlier in April 2019, the long-suffering high street entity of Debenhams finally collapsed into a pre-pack administration, wiping out equity for shareholders including Sports Direct. Now, Mike Ashley, the controversial owner of Sports Direct, has threatened legal action to remove FTI Consulting from its role as Debenhams’ administrators, following the obliteration of his stock in the company.

As the retail sector in the UK continues to endure a torrid period, British retail stalwart Debenhams endured a spectacular fall from grace. The high street ever-present was founded in the early 19th century, with a single store in London, before expanding to 178 locations across the UK, Ireland and Denmark. However, following a string of profit warnings and several rounds of lay-offs, the company engaged advisors from Big Four firm KPMG to consider its options in the Autumn of 2018.

At the time, Debenhams Chairman Sir Ian Cheshire insisted that the chain was not heading for insolvency, or that it was actively embarking on a company voluntary agreement (CVA). Nevertheless, Debenhams fell into administration in Spring 2019. The news saw Chad Griffin, Simon Kirkhope and Andrew Johnson of FTI Consulting appointed as joint administrators, immediately selling the retailer to a newly incorporated company controlled by secured lenders.

Debenhams administrator handed legal threat from Sports Direct

The pre-pack administration deal meant Debenhams was able to access significant additional funding, preserving 165 of its stores, though plans to close around 50 under-performing stores in the next three to five years remain in place. At the same time, the deal maintained its commercial relationships with suppliers, employees and pension holders. However, it also effectively led all of Debenhams’ previous shareholders – including the retail magnate Mike Ashley – to lose their equity.

Ashley’s Sports Direct firm had increased its stake in the department store chain in 2018, but stopped just short of the 30% stake which would require it to put in a formal offer to fully acquire the business. The transaction fuelled speculation that Ashley was waiting for the opportune time to acquire Debenhams, particularly in the wake of his swoop for House of Fraser. Ashley’s deal there enabled Sports Direct to buy the firm out of administration in a pre-pack deal, allowing the new ownership to controversially wash its hands of the company’s pension scheme in the process.

While some believed this was Ashley’s intent for Debenhams, FTI’s decision to sell the store to its creditors has instead resulted in a sizeable loss for Ashley. The hit of around £150 million from his loss in Debenhams comes after an analysis by The Sunday Telegraph suggested the tycoon had accrued “a sprawling web of stakes” in rival companies, and that he may be nursing losses of more than £500 million.

Bad press

Ashley – who recently lost a complaint ruling by British press regulator Ipso allowing the Times to note that he shared many characteristics with North Korean dictator Kim Jong-un – has been outspoken in his contempt for FTI since the news broke of Debenhams’ sale. The Sports Direct CEO has called for the resignation of FTI from its role as administrator, after his stake in the department store chain was wiped out. The Guardian stated that a letter to FTI saw Sports Direct’s lawyers even threaten legal action to remove the advisory firm as administrators because of a conflict of interests.

According to the reports, the document claimed, “[Sports Direct] will do everything available to it to unwind the damage caused to the company and other stakeholders (including large and small shareholders) by the events of today including but not limited to challenging the appointment [of FTI as administrators] and all consequences of it.”

The letter allegedly claims that FTI had been involved with Debenhams since the second week of February, and had engaged with the group’s lenders. The legal team reportedly suggested that this would consistute a conflict of interest, because FTI sold the retailer’s operating companies to the same lenders via a pre-pack administration.

This comes weeks after Sports Direct was itself accused of becoming overly cosy with a professional services firm, which has seen its auditor Grant Thornton placed under scrutiny for its continued role with the firm. In 2018, it was reported that Grant Thornton was set to stand aside from the role due to competition rules. It had held the role since before Sports Direct floated on the London Stock Exchange in 2007, while Phil Westerman, the Partner at Grant Thornton responsible for signing off Sports Direct's accounts, had himself undertaken the work for five years. 

Neither situation is understood to have changed, leading to the questioning of the independence of Grant Thornton’s auditing work with Sports Direct. Such is the level of bad press surrounding the retailer, that the Big Four of the accounting and advisory world – wary of incurring a new scandal of their own – are said to have ruled out taking the contract over.