The British Home Stores (BHS)

Since its inception in 1928 by US entrepreneurs, British Home Stores (BHS) has grown throughout time. The company specialized on domestic things such as furniture, clothing, electronics, cosmetic products, fragrances, and entertainment. The company’s success was credited to clear stated objectives, proper management, 174 outlets in the United Kingdom, 74 stores on the worldwide arena, and the company’s proper transition. Sir Phillip Green purchased the company as a private entity in business for £200 million in the year 2000. Since then, the organization has had a successful track record in terms of management and earnings. In 2009, BHS Company became part of the Arcadia Group. Sir Philip Green sold the company to Consortium Retail Acquisition Limited in the year 2015 at a price of £1. This marked the genesis of the failure and a myriad challenges in the administration of the company. The future of the company was at stake by then immediately after selling the company. On 2nd December 2016, the company suffered liquidation since all the digital business and franchises were all sold. It is worth noting that the regardless of its achievement in the global market, encounters command the development of business strategies for it to succeed above its competitors. Previously, the business concentrated on escalating and holding extra real estates. Nonetheless, it altered its strategy to assigning its endeavors through franchises. This helped in reducing the overheads used in securing additional estates. The company has been having a number changes in its leadership structure since 2010, with other most leaders leaving the group and others being appointed. For instance, Mike Goring and Jacquie Gray were appointed as managing director and creative director respective. Both of them left the company as new people took their positions.

Introduction

Entrepreneurship skills are vital for the survival of any business. The report is about the development of British Home Stores, especially the poor management and a myriad challenges that the company faced. In regard to this, without proper management entrepreneurship skills one suffers a crisis in a business venture and is bound to run a loss. Therefore, it is inevitable to study the skills and the life of successful entrepreneurs. The report analyses the life and hustles that an entrepreneur employed to rise the ladder of business in both challenging and successful moments. Business is not a bed of roses, one is bound to rise and fall. Effective leadership is perceived as a fundamental factor for maximum team functioning. A manager is a leadership position where one is able to plan, organize, and coordinate both material and human resources. In a nutshell, management is working with people to get results. Every aspect of a society demands proper management and leadership. Most people perceive managerial role to be ‘a boss’. This is the worse ever thought philosophy of a manager. Being called a manager is one thing and executing the desired obligation is yet another thing altogether.

The Business Problem

The business problem addressed by this report is the poor company management especially by having a board of management that was self-centered and had self-gain mind instead of putting the companies needs in front of their needs. Leadership is key in the management and the progress of any organization. The poor leadership traits of Sir Phillip Green, Dominic Chappel, and the board of management. They passed decisions that were not from business perspective especially considering that the company was bought at £200 and sold it at £1, this is not logically as per the business, principles. Thus, it led to the liquidation and insolvency of the company. The company suffered a business problem of bankruptcy in that it was unable to service all the branches in the United Kingdom and the ones on the international market. In addition to that, the workers suffered in that majority of them went long without pay, all the opportunities and the benefits entitled to them by the company were no longer issued to them. Therefore, poor working conditions and remunerations encroached the company. The inability to manage and run all the branches especially to be able to balance all the financial records and the accountability rocked the company to the extent that it was forced to close all the branches. The output in terms of the profitability of the company went down as the stock went down. The branches that had stock remaining were given a short time to operate so that they were all closed following the bankruptcy of BHS. Also, the poor financial predictability of the company officials was the greatest problem that affected the company. Furthermore, the selling of franchises culminated into the liquidation of the company, the company was unable to meet the demands and costs involved in the marketing and the smooth running of its daily activities in all its branches. The inability to sustain the financial crisis and the pressures deemed it necessary to sell it to another person. In addition to that, the Company was at a point of collapse when a loan of millions of pounds that was serviced to Lady Tina Green as the company was being sold from one Green family to another. This was the biggest loss to have been incurred on free repayment by the company instead of progressing forward. The cost that is not forgotten is the laying off of 11,000 workers in their job positions and 20,000 people’s pension which is at risk due to the closure of the company and its operations.

Organization Mismanagement

The leadership of an organization determines its progress and the profitability it registers per unit time. The organization suffered a problem of poor financial, human resource, and the entire company management. British Home Stores had a group of workers whose control and decision making was in the hands of Phillip Green and the few board members who used their positions for self-gain. In this report it’s worth noting the challenges and the traits that led to poor management. This is reviewed as per the management theories outlined in any organization. For example, Philip Green used poor managerial skills in that he did not apply the Human Relations Theory, whereby he considered his and the interest of the company before the interest of the employees. The employees were not treated as per the Human Relation Theory, the rights of the employees were neglected especially the pay and the work conditions were not catered for. For instance, the workers were poorly paid, their incentives were chopped, they pay was always delayed due to the bankruptcy and the insolvency of the company. The pension of more than 20,000 people was compromised due to poor leadership and management of the company. The company officials put their interests ahead of the proper management of the company. This was done through the decisions based on Sir Philip Green, Dominic Chappel, and the few chosen members of the board out of thousands of employees. The type of leadership and management portrayed by Philip Green and his team. He ensured that the employee are not considered in the decision making.

Also, the Director did not perform his role as demanded by his position and the role a crowned to him. The director was surrounded by Theory X employees and he was Theory Y. This was evident from the kind of management he exercised, for instance he could delegate the work to other members of the committee. However, he ended up being dominated and manipulated by the member of the committee on ensuring he does what pleases him. In this regard they ensured poor management by misusing the finances of the company. This is termed as breach of duty especially if the director does not make full decisions as per the powers bestowed on him. The rule of the law was not applied as protocol was not followed. That is the exact behavior of Theory Y managers, they see potential in others but however the risk caused due to delegating duties was immense in BHS. In addition to that, the Mr. Chappell, misused the funds of the company for personal gain, for example he took £2.6 million for personal use yet the pension scheme was collapsing. This money would have been translated to helping the employees who were suffering or pegging it to the pension scheme so that a myriad challenges affecting the company are reduces to zero. The management had no zero tolerance on corruption and swindling of funds. For instance, Sir Phillip Green wrongly mismanaged the company funds to give his wife, this was a clear indication of lack of managerial skills. A manager who does not follow the objectives and the laid rules of an organization and does things to benefit either himself or his family is a poor manager, and these traits were the ones displayed by the governance of the directors and Green.

Phillip Green decided without consulting the employees to look for the buyer of the company. This was arrive to after the company registered losses and deficit in a number of aspects including the pension scheme.

Strategic and Management Solutions

The disaster experienced by BHS was untimely for the company to suffer, however a number of strategies would have helped prevent the disaster. The company management should have considered applying a number of strategies, models of management, and problem solving skills. The skills are vital to mitigate any likelihood of any adverse challenges that may affect the operation of the organization. For BHS, the following strategies would have helped prevent the challenges in the key problems experienced; The Company should have considered checking on the side costs due to the leaders who swindled money for the company using their own interests. These would have helped curb the poor financial management and ensure the funds are managed well, used for the right purpose, and diverted to the proper company activities and not personal or individual benefit. Furthermore, a clear record of the company’s financial record would have helped ascertain and predict the financial position of the company. The early determination of the financial position of the company would have helped ensure that the company finds the long lasting solution to avoid landing to the bankruptcy state or liquidation. The use of the assets of the company wrongly would have been curbed by ensure a company is an independent entity from the family members. The Green family would have monitored the company at a distance and avoided the direct engagement in to the company’s matters. The company would have been managed fully without the interruptions of the family members. Once the directors are given what to do and they are allowed to follow proper management criterion, then the challenges would have not occurred. Also, the proper management strategies and theories would have helped mitigate the challenges that the BHS faced.

On the other hand, the recommendations to the disaster after it happened would entirely dwell on the pension policy acts, government intervention, and the labor policies. Since 11,000 people or workers were affected by the disaster, these is a big number to be left jobless. The government would have intervened and ensured through World Bank the mess would be sorted and the company would be branded under new management and leadership. The government would have taken control of the company and ensured the workers are retained but the company is be under new control and finances from the World Bank. In addition to that, these would have helped check on the pension scheme and ensured the pensioners would not be at a risk nut would be sorted when the company gets into proper financial state regardless of the number of years it takes.

Conclusion

The state of British Home stores (BHS) financial crisis, pension crisis, and poor leadership being the major challenges that hit the company would have been mitigated or controlled to avoid bankruptcy and insolvency. The application of proper managerial principles and theories like the Contingency theory and the Classical Management Theory would have helped ensure that the fate of the company is checked by putting the interests of the company before individual interests.