6 Business Lessons from Mike Ashley and Sports Direct’s Warehouse Working conditions
Essentially a guide on how not to run a business, the Sports Direct revelations can serve as an important message for business owners
Sports Direct founder Mike Ashley has been in the news of late for all the wrong reasons. The media-shy businessman was recently hauled in front of the business, innovations and skills (BIS) Select Committee following revelations in the press about unfit working conditions at his retail sports firm’s Shirebrook distribution centre.
A divisive figure in the world of business, the billionaire faced allegations from MPs about exploitative zero hours contracts, harsh penalties for tardiness and paying less than the minimum wage.
But what are the real issues behind the headlines? And what can aspirational small business owners learn about HR and legality from Ashley’s running of Sports Direct?
Here are six essential business lessons from the Sports Direct controversies…
1. Maintain adequate control of your business
Founded by Ashley in 1982 as a start-up retail chain, Sports Direct now runs 670 outlets across the country and owns brands such as Slazenger, Dunlop and Lonsdale.
An enviable success, but, by Ashley’s own admission, the operation is now so large that it has “outgrown” him and he no longer knows what’s going on.
If nothing else, this highlights the need for top-down reorganisation of its management team to regain a measure of control and increase accountability.
Stellar growth doesn’t mean you can just sit back and take a back seat – a hands on approach throughout the life cycle of a business is essential.
2. Minimum wage should always be adhered to
Amongst the most unpalatable allegations from the Select Committee’s hearing was that Sports Direct was not paying staff for the 15 minutes it takes to carry out compulsory searches at the end of every shifts, resulting in an average hourly rate that equated to less than minimum wage.
Now under investigation by HMRC, Sports Direct are likely to have to pay staff back the wages owed to them as well as a penalty of 100% of the total amount of every underpaid worker up to a maximum of £20,000.
The company has also promised to commit an extra £10m to increase workers’ wages
Employers should always make sure to take into account extra time for anything that employees do for company that takes up their personal time.
National minimum or living wage must be paid as an average across all the employee’s working hours.
3. Create a comfortable and stable working environment
While it makes sense for a large business where staff are handling goods on a daily basis to protect its security, compulsory searches need to be undertaken in a fair and sensitive manner.
The Sports Direct hearing seemed to suggest that the company’s processes went beyond accepted protocol in a normal retail environment; resulting in a culture of fear.
Any searches or security procedures should be clearly communicated to all staff and applied consistently across the workforce. A staff handbook detailing the regulations and guidelines staff should follow can help everybody to feel safe and secure.
4. Establish clear disciplinary and dismissal procedures
‘Six strikes and you’re out’ was the policy adopted by Sports Direct at its Shirebrook distribution centre, according to the hearing. Misdemeanors could be as innocuous as chatting too much, spending too much time in the toilet, or even taking a day off sick.
Staff disciplinary procedures and dismissals are a part of any business, but its vital they are appropriate and conducted fairly across the board – otherwise staff are well within their rights to make an unfair dismissal claim.
Again, setting up expectations helps ensure a productive workforce, but it’s important to communicate disciplinary procedures clearly and avoid intimidating and unfair policies.
Employees should have the chance to explain their behaviour or appeal a decision. Sports Direct have been asked to review their controversial six strikes policy.
5. Consider zero hour contracts carefully
Zero hours contracts have received a lot of negative attention in politics and the press over the lest few years and were a big talking point in the run up to the 2015 general election.
Sports Direct has been said to use too many zero hours’ contracts. While these contracts are not illegal, it is illegal to require someone on such a contract to work for just one employer and they must be used fairly.
Zero hours contracts can benefit both employee and employer – giving workers a more flexible working life and meaning a business has no obligation to offer work if it is seasonable or unavailable. However, they should not be used to avoid giving workers their full employment rights.
While such contracts don’t give employees access to redundancy, maternity and paternity pay, they are still afforded the rights to national Minimum Wage or National Living Wage, paid annual leave, rest breaks and protections from discrimination.
Abuse of these contracts can dishearten the workforce, resulting in lower productivity and damaging the credibility of a business.
6. Build a positive company culture
Terms such as ‘Gulag’ and ‘labour camp’ have been leveled at Sports Direct’s Derbyshire warehouse, with people describing a pervasive ‘culture of fear’.
Reports claim that an employee who was nine months pregnant ended up giving birth in the loo at the warehouse because she was afraid of losing her job if she took time off.
Although workers may have turned up on time, it’s certainly not the ideal environment for a healthy, happy workforce – and this is surely what every business should aspire to. Happy workers are more productive workers and create a better experience for all.
Motivating your workforce isn’t just about money and punishment – there are far more creative ways to rewards and engage your staff to get the best out of them which involve neither.
So, what does this all mean for business owners?
Building a business as successful as Mike Ashley’s is a long and difficult process, fraught with regulation and tough decisions. It would appear that somewhere along the way, Sports Direct put profit and procedure ahead of the welfare of its staff.
Had a more rigorous review of policy been undertaken, then the operation of the Derbyshire warehouse would not have been called into question by the media and politicians.
For any business owner, it’s important to set reasonable rules, expectations and procedures as early as possible and keep an eye on them as your company evolves.
For help with the issues raised in this blog, or for professional HR guidance, contact CitrusHR.