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August 1, 2016

Can Mike Ashley save Sports Direct and his own reputation?

‘Extremely disturbing’ working practices, workers ‘not being paid the minimum wage’ and various ‘serious health and safety breaches’.

‘Extremely disturbing’ working practices, workers ‘not being paid the minimum wage’ and various ‘serious health and safety breaches’. Sports Direct and its owner Mike Ashley have had their reputations dragged into the gutter in the past few months, with the ‘appalling’ working conditions of the company compared to a ‘Victorian workhouse’.

Can business tycoon Mike Ashley now save the self-built business and his own reputation after the barrage of abuse from parliament and the British media?

Close ties

Mike Ashley’s biggest problem has arguably been himself. The close tie between himself and his brand has been much of its recent undoing, which has led to a 65% fall in share prices and struggling performance on the high street.

ReputationHaving built the brand almost single-handedly from the first store, named Mike Ashley Sports (in 1982), through to the near 500 Sports Direct stores across the UK today, his personal endeavour and success has allowed the brand to flourish.

Even in the early days, his companies operated on low margins with competitively low prices. These business practices have slowly killed off rivals such as Gilesports, All Sports and JJB. Ashley has managed to monopolise the market by stocking sports gear high and selling it cheap, buying closing stores from the likes of Republic, JJB and Bank, while his workers earned less than the minimum wage 1.

Ashley’s public image has declined since his purchase of Newcastle United Football Club in 2007, which first placed him in the public eye. The last two years have been somewhat turbulent for the 51-year-old and his relationship with the British media has suffered as a result. Examples of this include the controversy over the club’s sponsorship deal with payday lender Wonga 2, as well as the ongoing problems at Sports Direct 3 which have both intertwined into a popular belief of his incompetence.

Reputation recovery

The key to a good reputation is transparency, management and accountability. Sports Direct has failed In all three areas over the past couple of years. Last December the company claimed to have paid out £10 million 4 to staff to ensure wages were above the minimum legal limit. But that was immediately dubbed a ‘PR Stunt’ by trade union Unite which claimed the figure was closer to £5.5m.

MPs have released a report on employee practices at Sports Direct5 which identifies the weaknesses in the company’s practices and gives some recommendations. For example, the ‘six strikes and you’re out’ policy has been criticised, while they have also called for Sports Direct to increase the involvement of local authorities in health and safety matters. The review of its relationship with the workers’ agencies and relaxing the lateness rules are also two key practices which Sports Direct has been found to have got badly wrong. Ashley will be taking an internal review, which will need to be shared with the public – just like the current situation has been played out through the media.

Ashley admitted in court that his company had arguably outgrown his leadership. The company will now surely need new management to make the business fit for the 21st Century rather than the quoted ‘Victorian’ era, in order to be successful in the long term for both Ashley and the company’s reputation.

Footnotes

1. https://www.theguardian.com/business/2016/jun/07/sports-direct-agrees-back-pay-deal-with-hmrc-minimum-wage

2.http://www.independent.co.uk/sport/football/premier-league/newcastles-muslims-faced-with-shirt-dilemma-over-wonga-8204411.html

3.https://www.theguardian.com/business/2016/jul/24/odds-are-still-against-sports-direct-workers

4.tps://www.theguardian.com/business/2015/dec/31/mike-ashley-10m-pay-all-sports-direct-staff-above-minimum-wage

5.http://www.parliament.uk/business/committees/committees-a-z/commons-select/business-innovation-and-skills/news-parliament-2015/working-practices-at-sports-direct-report-published-16-17/

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