Thursday, 27 August 2009

How to destroy a community –and your reputation

Regular readers of this blog will have noticed that I have replaced the Video of the Month with a link to the “Keep Johnnie Walker in Kilmarnock” campaign. Please read the different pages of the site that explain the link between Kilmarnock and Johnnie Walker and how Diageo, the owners of the brand want to close Johnnie Walker’s bottling plant in Kilmarnock with the loss of 700 jobs. Johnnie Walker was a man from Ayrshire who started selling blended whisky in the town over 100 years ago. Kilmarnock and Johnnie Walker are like Detroit and cars.

With my wife being from Kilmarnock, I had been aware of the issue for many weeks but one thing or another kept me busy. There is far too many news to write about and then I get comments from people with very limited horizons who deserve to be put in their place.

Today however I was having my tea at home when Paul Walsh, CEO of Diageo came on TV in a BBC interview during Reporting Scotland at 1830h. His fake concern for the future of the town and the workers in Kilmarnock, his disguised threats, and above all this snooty bullying attitude enraged me. A not very good summary of the piece is available here.

The company, of course, has a section on its website about Corporate Citizenship.


Kilmarnock is a town of just over 45,000 people. Diageo is by far the largest individual employer after the local council. It employs about 700 people in the town plus many in indirect services. The people of the town are very proud of being the birthplace of Johnnie Walker and have worked hard to ensure Diageo is a profitable business. Diageo now want to close the bottling plant and leave 700 people out of a job and move the bottling operation somewhere else.

Today in the BBC, Mr Walsh came across as an arrogant man without a soul. This issue proves than Mr Walsh and his management team have not done their homework and have let themselves open for some very harsh questioning.

None of the stakeholders are free of blame in this story, but Diageo’s directors, being in charge of the company, have the ultimate responsibility.

Diaego’s senior management:

If there is a problem with the productivity of the Kilmarnock plant, relative to other plants or to the peer-group, the company ought to have identified it earlier. If this problem had been identified, then a working party could have been set up to look at alternative options. Admittedly, the location of the plant right in the centre of town must be a limiting factor when considering potential for growth, logistics of transportation, etc. However, the responsibility of the Directors is to ensure that the company remains profitable whilst looking after employees and the local communities in which the operate. In this regard, Diageo has failed four times:

1) It has failed to identify the problem in advance, and find a suitable solution.

2) It has failed to understand the importance to the town of Kilmarnock of the continuation of the plant.

3) It has failed to anticipate the level of public outrage and disbelief and the social irresponsibility to put forward such plans without first seeking alternative solutions.

4) Having failed at all the above, it has failed as well in understanding that relations with the workforce are difficult to improve after such destructive plans have apparently been agreed, and made public.

The local council:

The local authority, East Ayrshire Council, are not blameless in this sorry affair. Everyone with the most basic business knowledge knows that having a bottling plant right in the middle of town in an area of prime land is not sustainable. But the local council was complacent in the extreme and are now contemplating the loss of 700 jobs in the local economy. The second and third order impacts of the closure of Diageo’s operations in Kilmarnock will have repercussions for years to come. Higher unemployment, higher benefits count, loss of related employment in suppliers to the plant, etc. It is scary to consider what Kilmarnock will look like if the plant closes.

Anybody in the Council with half a brain should have anticipated that this would be a problem sooner or later. A working party would have been set up with Diageo. A brownfield site outside the town, with good access to the motorway or even better to the various freight lines around Kilmarnock could have identified and presented to Diageo’s management. That would have secured the future of Johnnie Walker in Kilmarnock for generations to come.

The local council has been Labour for decades and the SNP became the largest party only at the last elections. However, this is no excuse. Anybody in the SNP with business experience should have highlighted this to the previous Labour administration or done something about it since they took power of the council last year.

I strongly suggest that someone in the Council engages with Brusch-Barclay (the train business) to make sure that the physical location of the plant is not a constraint on growth and the long-term future of this business in Kilmarnock. If there has to be investment to relocate the facility so be it, if this guarantees its long term future. If Barclay closes, Kilmarnock will become like Motherwell, historically a heavy-industry centre, but now a place full of neds and alkies who live on benefits one generation after another. At present, Kilmarnock is not as depressing as Motherwell, but if the local council is not careful, it will happen.

Employees and the unions:

Last but not least, the unions.

If a workforce is unionised, the local union representatives have the responsibility to look after the long-term future of the employees and engage constructively with management and politicians to raise any concerns.

I don’t know the statistics for productivity, unauthorised absence, etc for this plant. But if they were poor, [management and ] the union should have identified the problem and react accordingly.

When people are not happy at work, they should leave for another job. As employee recruiting and training is very expensive, it will be in the best interests of employers and the owners of capital to keep such variable costs down.

When it comes to employee relations, the UK is probably at the bottom of Europe, probably in a par with Spain. On the one hand management often treat the workforce with contempt and as necessary nuisance. On the other hand, unions treat employers as if they were slave merchants and encourage employees to nurture grievances instead of resolving them. Whether it was the chicken or the egg first is neither here nor there. The bottom line is that the refractive behavioural dynamics that occur in the British workplace have to stop and someone has to make the first move. Since labour is now a globally interchangeable commodity, I would strongly suggest that it should be the trade union movement who takes the first step.

And if employers keep treating employees like crap, like some of them do, then I would suggest to the unions that they try running a business themselves via co-operatives or whatever legal structure, and pressing for a change in the law so that self-employment and small-medium enterprises are encouraged. At present, politicians are held by ransom by the big corporations who threaten relocate somewhere else unless they are given more tax breaks and incentives. If we had an economy less dependant on big employers and more reliant on SMEs, this bribery would not happen so regularly.

As far as I am concerned, if Diageo closes their bottling plant in Kilmarnock, the town that gave birth to Johnnie Walker over 150 years ago, it will have destroyed any credibility it had with regards to social responsibility, stakeholder management and being a good corporate citizen. When a business that relies on brand image so much sets out plans that tarnish its reputation, it is a sign that things can only go down from here. Despite today’s announcement, if this plan goes ahead, Diaego is definitely a sell.


kalebeul said...

The Detroit analogy is flawed: Johnnie Walker is shite and should not be made anywhere.

Rab said...

This is not about the merits of single malt vs blended whisky… if Johnnie Walker is shite is up the punters to decide and since it has been a top selling whisky outside the UK for decades, there must be something good to it.

The point is that a business that breaks a 150-year link with a community that is the birthplace of the brand is damaging its reputation and acting irresponsibly towards their own shareholders and towards the workforce and communities in which they operate.

I let the Scottish Whisky Association (SWA) out of my post, I will update it accordingly since their cowardly silence is quite a disgrace.