THE BLINKERED BOARD AND THE SHRINKING BUSINESS

Mark Price, former MD of Waitrose, shares his workplace fables – true stories from the business front line that can teach us lessons about career success

The board of All Things owned four successful businesses: Home Things, Food Things, Fabric Things and Furniture Things. All Things prided itself on how well it looked after its staff: a good share scheme, a generous pension, and many other benefits, equally spread among all the staff.

But things started to get more challenging and Furniture Things began to struggle. It spent more on promotions, which cut margins, and, despite inventive ways to reduce costs, it didn’t make a profit after the generous staff benefits had been applied. The board grew more and more concerned.

“Everyone else in the organisation is bailing it out, and seeing share awards go down as a result. We need to close or sell,” concluded the chairman of the board.

So Furniture Things was sold and the new owner, without large overheads and offering less generous benefits, was able to make it profitable once more.

It wasn’t long before Fabric Things started to struggle, too. Having seen what had happened to Furniture Things, the management and staff worked hard to sell more and so cut costs.

But it proved hard, particularly as the head office costs – previously split between four businesses – were now shared by the remaining three.

Eventually, Fabric Things was unable to make enough profit to cover its share of the generous benefits, and had to be subsidised by the rest of the organisation.

The chairman said: “Sadly, we can’t see a viable future for Fabric Things as part of the group.”

A buyer was found with expertise in the industry. New markets were located, head office costs were lower and the staff agreed that, in order to keep their jobs, they would take less generous benefits. As a result, Fabric Things became profitable once more.

The two remaining businesses in the All Things group took on an even larger share of their head office costs – and when one did better than the other, there was increasing discontent about the fairness of the equal benefits.

Moral of the tale: Beware of equal rewards when there is an unequal return.

Mark Price is author of Workplace Fables: 147 True Life

Stories (£10.99, Stour Publishing). To order your copy for £8.99 plus p&p, call 0844 871 1514 or visit books. telegraph.co.uk

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‘Everyone else is bailing it out. We need to close or sell’