This post first appeared in The Conversation.
Sports Direct has had a turbulent time of late. Investigations into the working conditions at the retailer’s warehouses led to criticisms from unions, MPs and its own law firm about its labour and governance practices.
Even an attempted PR move to change the company’s image – a Sports Direct “open day” for journalists and members of the public to look around its warehouses – ended in controversy after boss Mike Ashley pulled a wad of £50 notes out of his pocket during a security check.
In a bid to restore confidence in his company, Ashley appeared on prime time news in a rare television interview and agreed to an independent review of its working practices and corporate governance. Will this be enough for Sports Direct to put criticism behind it and move on?
Sports Direct is neither the first nor the last company to face a reputation crisis. To weather these storms, research would suggest three important actions, some of which the company have already put into action.
1. Proactively address critics
Proactively addressing the criticisms the company has had around its labour and governance practices is an important first step in rebuilding confidence. This shows that the company is serious about how it treats its employees and how it is organised.
There have been major shifts in how other organisations in the UK engage with and treat their labour and in how seriously they take the issue of corporate governance. Empowering employees in the workplace through involving them in strategic decisions and ensuring a diversity of skills and backgrounds on company boards are two recent trends.
The challenge for Sports Direct will be to show its staff, shareholders and the public that it takes both issues seriously – not as a knee-jerk reaction to external pressure, but because they are an important part of the company’s values. This takes time to achieve and should be more than a tick box exercise.
For Sports Direct, agreeing to an independent review, instead of using its own law firm, is a step in the right direction.
2. Top-down, bottom-up
Inevitably, when a company does seek to change its reputation, there is both resistance and scepticism from certain quarters within it. This is why such change must be both top-down and led in this case by Mike Ashley and Sports Direct’s chairman, Keith Hellawell. But it must also be bottom-up, with champions leading the change across the entire company.
Too often, attempts at change lead to major disconnections between leaders, managers and the rest of the workforce. This was a problem at food producer Beak and Johnston, which historically had a hierarchical approach to managing workers in the context of a tough working environment of meat processing. Over time, however, this multi-million dollar company has empowered workers to be accountable for line performances and provide input into company strategy, which has transformed the company’s culture and financial performance.
A disconnect between leaders and workers not only creates tension internally among the workforce, it also raises questions externally among analysts, unions, journalists and others around the authenticity of the change process.
3. True values
Most organisations make grandiose claims about their values. However, when a company faces major questions about its reputation then those values come under greater scrutiny. What is particularly interesting about Sports Direct is that there is very little information on the company’s website about its values. Much more is said about its strategy, business model and operations.
Clearly, writing a set of values does not imply sound labour and governance practices, but their absence might suggest too great an emphasis on economic performance. Sports Direct should consider embedding a strong set of values which are meaningful to its members. To be clear, this should not be a window dressing exercise for its website, but an opportunity to much more closely engage with its core internal and external stakeholders such as employees, customers, investors, unions and regulators.
It won’t be easy, but Ashley’s presence this morning on BBC Breakfast is an important first step, as demonstrated by the boost in the company’s share price that followed it. But it must be about more than just PR soundbites. Other important steps include more directly engaging with key employees and shareholders who are concerned not only about the short-term turnaround, but also the company’s long-term reputation and survival.
Working on the above with a strong and committed board, senior management team and group of employee representatives will help to rebuild the company’s reputation from within. And this, over time, will be recognised externally.