Your supplier - your problem

Aug 23 2005 by Print This Article

It shouldn't take a management genius to figure out that sacking 670 of your workers and replacing them with cheaper temporary labour is not exactly a recipe for industrial harmony.

But when Gate Gourmet, British Airway's catering supplier, did just that earlier this month, provoking a wildcat strike that stranded thousands of BA passengers, the "world's favourite airline" seemed taken completely by surprise by the fallout from what is Ė after all Ė one of their key subcontractors.

But the Gate Gourmet saga also raises much deeper concerns about the yawning gap that often exists between the social responsibility and treatment of employees practiced by major organisations like BA and the behaviour of their suppliers.

Simon Barrow, founder and chairman of business consultancy People in Business, which invented the 'Employer Brand' concept, said: "The killer question is was BA aware that the fact that trouble was brewing within one its key suppliers, and if not, why not?"

Reports in the past few days suggest that the carrier was aware of Gate Gourmet's financial difficulties, but how much did they know about the company's stand on employment relations?

"They should have been fully aware of them," says Barrow. "What organisation, with all its eggs in one basket Ė as BA's clearly were - wouldn't be? At the first whisper of discontent you would be the first to know."

In an interview with the BBC British Airways chief executive Rod Eddington claimed the airline was simply caught in the middle, saying: "This is not our dispute."

When BA appointed Gate Gourmet, where were the checks and balances to show that they were keeping close tabs on the business?
But Barrow dismisses that. "Just because it isn't your own Profit & Loss figures at stake, doesn't mean it isn't your concern. If you appoint a supplier who turns out to ropey, and uses business methods that are going to upset people, then of course it is your concern.

"BA used to do its own catering, but outsourced it to cut costs. Clearly that has come at a price. When BA appointed Gate Gourmet, where were the checks and balances to show that they were keeping close tabs on the business?"

For the sacked employees of Gate Gourmet, who were being paid an average of £6.20 per hour, the dispute was only partly about working conditions. It was also about a total lack of respect. The scale of their discontent and the subsequent crisis should have surprised neither BA nor Gate Gourmet's management team.

"From the feedback that did emerge, both management teams had to have been aware of a sizeable knock on effect, with a labourforce based around the Heathrow area, largely from one ethnic community, and in some cases, with several members of one family, all living under the same roof," Barrow said.

This should serve as a warning for any organisation reliant on a key outsourced supplier. But to what extent should they expect them to share their business values and attitudes to people at work?

"It is crucial that these are aligned," says Barrow. "There were ways for Gate Gourmet to save money without ruining the company and creating havoc for their biggest customer. There is also truth, communication and leadership, none of which seem to have been in evidence."

It also pays to know who is pulling the strings. Gate Gourmet's parent company is US venture capitalist firm Texas Pacific, just the type of company that tends to dip in and out of industries quickly and profitably. Gate Gourmet had been running at a loss for several years.

"Venture capitalists can be hard task masters, looking for an exit in four or five years time, and that is something to be watchful of," says Barrow.

"Whatever meaningful efforts were made by the HR team at Gate Gourmet, they clearly didn't make sufficient impact on a desperate management team in a hurry and under pressure from the VC."

One possible way of avoiding the threat of major disruption caused by a key supplier is to be insured against it. Another is to spread the risk by using several suppliers.

But the best solution has to lie in a successful alignment of business culture and values between company and outsourced supplier, even if that does come at a higher price.