M&S' Steve Rowe has thrown the dice in a risky game

05/09/2016
It is hard to argue against Marks & Spencer chief executive Steve Rowe’s claim that the retailer is “complex and inefficient” when he can point to the fact that it has no fewer than seven “head” offices. Not since Hercules slew the Hydra has a hero stepped forward to tackle such a beast.

You have to suspect that few of Rowe’s colleagues view him in those terms at the moment, however. He has spent his first few months in charge testing the goodwill he attracted when he took over from Marc Bolland in April.
The retailer’s staff loved that their new chief executive was a former Croydon Saturday boy and not a creature of the City. It is abundantly clear now that if they thought that all that was needed to fix M&S was the leadership and love of one who truly understood its unique place in British life, they were mistaken.
The cuts Rowe announced at head office yesterday mean he has now done something to upset significant numbers of people at every level of the business. It’s an achievement in its own right, of sorts.
First he ousted half the members of M&S’s overstuffed, 20-strong management committee, replacing it with a leaner operating committee designed to take decisions more quickly.
Then Rowe targeted his former fellow toilers on the shop floor. Basic pay would be increased well above the National Living Wage, but premium rates for Sunday and bank holiday working would be scrapped. Pension contributions would be reduced and, most symbolically, M&S would join a long list of big British businesses in closing its final salary scheme to new entrants.
A petition against the move was signed by almost all of M&S’s 71,000 staff, and Rowe improved his “final” offer, but the dispute is still rumbling on.
Undeterred, Rowe has now swung his axe at M&S head office. Some 260 permanent jobs are to go, along with 200 contractors. There are 65 unoccupied roles that will never be filled. All subject to consultation, of course.
The second front in Rowe’s latest attack on costs is in some ways riskier. Those he makes redundant will leave the business, but M&S is also planning to shift 400 staff in technology and logistics out of central London. Some will be happy to avoid the commute to Paddington, no doubt, but there will be many who do not particularly fancy working life on business parks in the capital’s hinterlands.
This seems brave when the two areas of the back office Rowe is targeting – technology and logistics – are currently the most fiercely competitive in retail. People who know how to build fast and reliable e-commerce services, or operate hi-tech networks of lorries and warehouses, are in very high demand.
Talented young web developers who tend to prefer the London life might be tougher for M&S to attract in future, especially without that retro pension. Having rightly understood that outsourcing to Amazon something as core to modern retailing as technology was not a good idea, M&S should be careful it does not make the geeks feel unwanted again.
Anyway, the forecast savings from all the cuts and the relocations, £30m, or just 1pc of UK costs, are pretty paltry. The City, where job cuts are usually welcomed enthusiastically, was unimpressed. M&S shares slipped more than 1pc.
So why has Rowe bothered? Why pile further strain on his relationship with M&S rank and file? Why cut investment in technology and logistics staff when the importance of online sales can only increase?
You have to therefore assume Rowe is sincere when he says that M&S head office in its current form is too slow and too conservative. The retailer says that the cuts are focused on “removing duplication, driving accountability and establishing clear, consistent processes; which in turn will strip out unnecessary costs”. At this point the unnecessary costs are the least important part of that shopping list.
Perhaps not for long though. M&S shareholders and staff should be in no doubt now that the retailer is facing a real fight. These cuts look like training to enter the ring rather than the bout itself. Rowe wants the body of the business in shape after Bolland allowed it to get flabby.
The challenge is urgent. There are signs all over the place that generalist clothing stores have had their day.
The collapse of BHS is in all sorts of ways a special case. At the same time though, it is a useful cautionary tale of what can happen when you have too many shops and not enough customers.
M&S is in another financial league entirely, but cannot afford to ignore the lessons of its fallen rival. The “bolder, pacier” decisions Rowe wants are likely to involve closing some weak stores. That is how real cost savings will be made, albeit after some one-off charges are written down.
Those who constantly needle M&S for making the wrong kind of clothes, or not enough of the right kind of clothes, are right, up to a point.
But much of their sentiment is based on nostalgia. M&S’s biggest problems, the things that fundamentally threaten it, come from outside the business.
It is facing major structural changes. High streets are dying, shopping habits are changing, competition is increasing and digital technology is sweeping through the real economy.
Faced with upheaval, the best thing M&S can do is become capable of responding. With steps towards a leaner and meaner operation Rowe has shown he understands that. Yet the decisive question remains: how will M&S respond?

Fonte:http://www.telegraph.co.uk/business/2016/09/05/rowe-has-thrown-the-dice-in-a-risky-game/

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