Over the course of many years, Beryl Couture built up a series of manufacturing and retail outlets into a powerful presence in the fashion and homewares industries. Her style, fabrics and innovative flair created unique products and made worldwide expansion a real possibility for Couture Industries.
In addition to women’s fashion, the company manufactures and sells a range of homewares, including mid-range furniture, wallpapers, manchester and kitchenware.
Financially, Couture Industries had been highly successful and there seemed to be few obstacles to further substantial growth. Unfortunately, after a short illness, Beryl Couture had to retire 10 years ago, with no succession strategy in place. Several chief executives came and went, with little success because none could replicate Beryl’s leadership or creative style and flair.
Her daughter, Pamela Burns, an only child and a Melbourne socialite, had little interest in the company. Couture Industries began to lose market share, causing the bottom line to slip dangerously and bringing the company close to bankruptcy.
As the bottom line slipped, employee retention in the factory became an issue. Workers who had been with Couture Industries from the beginning were leaving and taking with them valuable corporate knowledge.
To compensate for the loss of income, the factory foreman was told to issue a statement to the factory workers that no overtime would be paid and there would be no increase in pay for an indefinite period.
The new generation of fashion
Realising that bankruptcy was close, family members persuaded Pamela, who had been given a controlling interest, to bring in Jo Bryden, one of the newer generation of emerging fashion-industry executives, to lead the company.
Jo had spent most of her career in the fashion industry and had recently been chief executive officer of a burgeoning fashion chain that, although still small, had exhibited strong growth and had developed a strong national presence. She was known for her ability to energise her business and staff, and to mould them into high-performance organisations.
After reviewing the history of Couture Industries, Jo decided on several strategies to revitalise the organisation.
She put in place a vigorous recruitment plan to hire talented emerging designers and gave them the task of modernising and repositioning the range of women’s fashion.
She decided to move away from the established Couture Industries concept of flowing, swirling lines towards unstructured, individually designed pieces. The initial outcomes were somewhat disappointing, but slowly, under her leadership and effective management, the creative teams developed and unique styles emerged.
Jo also decided to concentrate more on the furniture and homeware side of the business in which quality, price and other competitive strengths could be developed quickly. Beryl Couture had always looked on this section of the business as a secondary operation, but sales had been growing and Jo intended to take the profit contribution of the non-fashion business from 25% to 70% over the following five years.
Reactions to her changes were mixed. Some of the more established retail managers were implacably opposed to the idea of reorienting their stores, particularly those who felt that their carefully gathered, long-term clientele would be alienated.
Several of the male factory managers were sceptical about working with a woman, especially one without manufacturing experience, and who, they thought, would probably be ignorant of the cultural factors that had to be faced in managing factories outside Australia.
However, the executives who worked at Couture Industries were willing to give Jo’s initiatives a go and enthusiastically adopted her change program as forward thinking. They also agreed that the strategy was a way of salvaging the organisation.
Although Jo substantially changed Couture Industries, she seemed to be having a considerable degree of success in achieving her five-year goal of turning the homewares section of the business around.
Her strategies were beginning to work and there was a growing degree of acceptance of her leadership, in Australia and overseas.
Although there was still unrest among the factory workers, her greatest difficulty through the period of transition was with Pamela.
Pamela did not favor Jo’s strategy of downgrading the fashion business and was beginning to talk of splitting the company into two sections. She had made it clear that she was in charge of the fashion side of the business and the two sections of the business would be run autonomously.
But Jo still needed the financial support of the fashion side of the business over the following five years to accomplish her goal of expanding the homewares section.
Jo had the support of the other managers, however she still had an uphill battle with the factory workers and with Pamela.
How should Jo handle the male factory workers attitude to working for a woman? How should Jo handle Pamela’s suggestion to split the organisation into two entities? How would splitting the organisation into two entities affect Jo’s plan to increase the homewares side of the business and the organisation’s ability to meet the expected standards of its customers?
Proposed solution #1
Leonie Clyne is managing director of two South Australia-based companies that design, manufacture and sell fashion and corporate clothing. For three years her company, Angus Clyne Australia, was ranked in the annual BRW 100 Fastest-Growing Private Companies and has won numerous business awards, including the national Prime Minister’s Small Business of the Year Award in 1999.
The clothing trade has historically been dependent on the skills of female workers, and men usually made up the middle level of management. Furniture factories were usually male oriented.
Fashion and homewares are tough, demanding industries, particularly on the manufacturing side of the business, and females are expected to prove their capabilities.
It is useful to note that Couture Industries was built up by a woman. However, after the owner’s retirement, another female, her daughter, took over the helm and steered the company towards bankruptcy.
Jo Bryden, the new CEO, was not dealing with a problem of straightforward prejudice against women. She was facing the backlash from male workers who saw the company almost fold, following poor management from the owner’s daughter, Pamela Burns.
The workers had experienced years of frustration and anxiety as they watched the once-strong company lose market share. Many of those who worked with the founder and who experienced a positive, successful businesswoman, had left.
I suspect that, on account of the company’s recent problems, the male factory workers felt isolated and detached. Jo needed to restore the workers confidence in the company as a whole. This in turn should elevate the confidence of the male factory workers in her leadership abilities and her competence to manage the company’s turnaround.
I would advise Jo to restore the male workers confidence through a program of meetings with worker representatives to discuss the directions she had planned for the company.
Sharing the recent successes of the company and having the factory workers participate should develop the sense of ownership and team spirit that encourages confidence. Feedback sheets and suggestion forms for all workers should be instituted.
Jo must have positive managers working alongside her, managers that understand how to communicate effectively without seeming to be condescending to male workers. (I recommend the book Gender Games by Candy Tymson as a great tool in doing this.)
Splitting the organisation into two autonomous entities would be risky, costly and little more than a distraction. It would mean greater financial pressure on the separate divisions through higher overheads and staffing costs.
If the company became two entities, it would be difficult to co-ordinate theme planning for seasons and, consequently, to market the company’s products with a similar style.
The brand, Couture Industries, always represented the two entities as a united label and style of product. The differences that would be created between the entities would be recognised by the customer, who expects continuity of product and experiences when shopping for the same label. Loss of customer confidence and loyalty would follow.
Jo believed that she needed the financial support of the fashion division of the business to accomplish her goal of boosting the homewares section. However, Pamela had a strong bias towards the fashion side, which, historically, was also favored by her mother.
Jo needed to be acutely aware of Pamela’s attitude to fashion and of the ego of this socialite, who obviously viewed the business through glamor eyes.
Pamela needed to be dealt with carefully to make her understand how important it was to keep the company unified. In discussions with Pamela, Jo needed to focus on the importance of customer perceptions of the company as a single entity.
Had Pamela envisaged a name change for one or both of the divisions? This would be costly and confusing to customers.
Also, in recent years, consumers had been spending less on clothes and a greater percentage of their income on lifestyle goods such as furniture and homewares. In reality, Jo’s vision of elevating the homewares side of the business was in line with consumer demand and was a sensible move. It would be wise not to burden this strategy with the problems that would almost inevitably arise if the company were divided.
Pamela might not have noticed the synergy that had been developing over recent years between fashion and lifestyle goods. With a united front, the company would more capably offer a greater product range.
Jo needed to stroke Pamela’s ego. Perhaps she could have suggested that Couture Industries was way ahead of its time in having both of its divisions work as one entity. This combination has been successful for many fashion houses, such as Country Road, which introduced homewares lines many years after its fashion collections had proved successful.
Proposed solution #2
Bruce Nicholls, managing director of Chadcorp, served as a trade commissioner and public company director before establishing his own company. Chadcorp operates in two markets: telecommunications retailing and major project development. The former provides the recurrent cashflow and income to underwrite the higher risks and longer lead times associated with the latter.
Our case study provides a lot of subjective background and some clues as to the personal dispositions of Jo, the professional manager; of Pamela, the daughter of the owner; of the male factory workers; and of the retail managers.
Although this information would influence decisions on the future of the business, those decisions would be far better informed with harder, more objective data.
Detailed financial statements would provide valuable insights. From these, we could explore cost structures, revenue trends, capital adequacy and other measures of viability. We could assess the financial capacity of the business to underwrite the likely costs associated with a big restructuring.
The business has outgrown its family structure. Without a committed family successor to pick up the leadership reins, the company needs a more enduring and objective business structure.
The family must engage itself wholeheartedly in the management of the enterprise, entrust its management to professional managers, or divest or dilute the family shareholding to attract new capital and commitment.
There is a case for retaining long-standing employees, particularly those with special skills. An employee share-participation scheme would help there.
The deleterious effect of Beryl’s retirement on the business reminds us that family businesses are vulnerable if they lack a succession plan. Businesses that have been driven by a charismatic leader face special challenges in filling the vacuum left by that leader’s departure.
Pamela has shown interest only in the fashion side of the business. We are left to surmise whether this interest is a genuine business interest or, rather, a romantic one.
This reinforces the need for a more objective business structure, including a broadly based and representative board of directors, one able to ensure more independent management, due diligence and financial control.
The decision to appoint Jo Bryden was probably correct and served as an important circuit breaker, allowing time in which to separate family issues from the management of the business.
The suggestion that the fashion arm of the business should cross-subsidise the homewares business is troubling. It could be fertile ground for management conflict and could obfuscate the relative performances and financial contributions of the two streams.
Any restructuring must provide for separate business planning for the two streams of the business. It should also seek to give management, workers and the retail channels a strong sense of participation in the restructuring process.
The concerns of the male factory workers about serving a female boss, and the negative morale generated by the freeze on wages and overtime, will need to be resolved quickly, as there is an urgent need to stem the loss of skills.
Germany has developed the industrial-relations practice Mitbestimmung (worker participation in management). The essential proposition is that a worker-representative is given a seat (but not a controlling voice) on the company’s board of directors. This can result in real benefits, in reducing worker-management conflict and in raising productivity. When coupled with productivity bonuses and an employee share-participation scheme, the strategy can be a potent means of reviving worker enthusiasm for an enterprise.
Jo needs to analyse carefully whether there may be merit in having two management streams before rejecting Pamela’s suggestion out of hand. She could welcome the suggestion of separate business streams, but only in the context of a fundamental restructuring. Her restructuring strategy would then seek to retain financial unity between the two business steams to underwrite the expansion plans in the homewares business.
This might be achieved by creating an investment holding company, whose board of directors would include equal representation from both business streams. The separate product streams could then be structured into subsidiaries reporting to the principal (holding company) board.
This would open the way for Pamela, as major shareholder, to be given the role of chairwoman as a peace offering. Her interest in the fashion stream could then be indulged under the watchful eyes of independent finance and manufacturing directors, supported on practical issues by Jo.
Economies available through the joint use of facilities and resources in the old structure would be retained, making restructuring a device for management specialisation while retaining transparency, financial unity and central control.
This new structure should provide a platform from which to explore growth, including the development of export markets and other international links.