A Thorntons Case Study: Managerial Problems and …€¢WW II brought a dramatic stop to the...

BUSINESS FORUM Mid Devon

A Thorntons Case Study:Managerial Problems and

Solutions

Peter Thornton © 2014

• In current values in 1988, Thorntons made a profit

before tax of £17.7million on sales of £122.9million(14.40%)

• In 2014, Thorntons made a profit before tax of

£5.97million on a sales of £222.4 million(2.7%)


Press Statement 23rd Dec 2014

However, it now expects earnings to be well below those achieved last year after many supermarkets took in stock later than anticipated.


The Story Begins

Thorntons was founded in 1911

jointly by:• My grandfather, Joseph William Thornton

• My father William Norman Thornton.

•They opened a high quality confectionery shop in a good secondary position in Sheffield.

•My father was its first manager at the age of 14.


THE FIRST SHOP - 1911


COLES CORNER 1911


SHEFFIELD STEEL – FORGING A PROPELLOR SHAFT


Cutlery – The Little Mesters Shop


1911 – WILLIAM NORMAN THORNTON – The First Manager



• By the time my father was 18 he was virtually fully responsible for the business.

• Grandfather died when my Dad was about 22 years old when he was joined by his brother Stanley Thornton then aged 18.

Joseph Stanley Thornton & William Norman Thornton1926



• They made a wonderful team,

• Norman was very creative, intuitive and a good businessman but very morose, anxious, depressed and dominant.

• Stanley became an excellent confectionery technician. He was extremely happy-go-lucky, outgoing and confident.

• 1911 up to the 1930s was a traumatic period; World War, General Strike, Devaluation and the Great Crash.

• By dint of very hard work, intuition, perceptiveness and inventiveness they succeeded.

• They created what I have called the Thornton Family Business Formula giving it a huge Differential Advantage on the basis of which it was run until it went public.


• WW II brought a dramatic stop to the expansion and a reduction in the numbers of shops, the business survived.

• My elder brother Tony joined the business in 1949 and I joined in 1953.

• At this time Norman, worried about Death Duties split the company shares into voting and non-voting, kept the majority of the voting shares with himself and Stanley and the rest for the children in trusts.



Norman Thornton , early 50’s

Relationship problems

• There were many traumatic relationship problems

• but by the early 60s these were mostly resolved and effectively Tony and I were running the business

• Exacerbated again by the introduction of another family member


Walter Willen arrives 1954 for a year and stays for 40 years


Human Relations Management

• Two Aspects

1.Boardroom

2.Workforce



• Uneven distribution of voting shares

• Directors had been appointed according to age and availability.

• Inter-director conflict extremely high, the stress levels extremely high

• Those directors making the major decisions were not theoretically enabled to do by status or role.

Practical Boardroom Problems

Background Workforce Human Relations Advantages and Disadvantages

– 1960’s 1970’s 1980’s

• High workforce satisfaction – but

• Lack of management structure.

• Lack of terms and conditions.

• Differing management behaviour

• Poor rewards

• Business policies not agreed


Remedies applied to correct situation

• Use of Drucker’s principles

• Establishment and stabilisation of management style.

• Setting up of Factory Council

• Recognition of Thorntons Business Formula

• Writing of Market Positioning Statement


Peter Drucker - Objectives

1. Survival

2. Maximise return on investment.

• Human Relations

• Finance

• Sales and Marketing

• Research & Development

• Society and the Environment

• Moral Behaviour and the LawPeter Thornton © 2014

• Management Style –

not ruthlessness:

–long-term experience of the company.

–know instinctively what to do, highly intuitive.

–maturity of behaviour.

–building excellent relationships


• Management Style – Page 2

–Humility to recognize that he/she is not always right

–Respect everyone

–Listen to everyone’s views but make your own decision as near to consensus as possible

–Never accept a compromise to which you cannot be party.


Business Formula

• Every company has its own formula which gives it its differential advantage.

• It must not be changed without very careful consideration.


Thorntons Formula in Brief Summary

• Business – Freshness, Quality, Value, pricing+10% on market, don’t sell to other retailers, excellent employee relationships, servant leadership, minimise capital spending, squeeze production capacity, minimize non-productive overheads

• Retail – indulgence first, not prime location, small confectionery shops, in-store theatre, mouth-watering displays, superb window display, at least 10% net profit per shop.


Window Display


Actions taken did not solve the fundamental boardroom problem:

Because of conflicting mixture of personality types & no secure concensus


• I realised in early 80s that I would soon be forced to leave the business.

• The company would not have the resources to support me if I had to leave. I needed to ensure that the company went public.

• In 1985 my father died passing his voting shares to us. He had always been completely opposed to going public.


• If a relationship cannot work then it needs to be terminated.

• BUT WE WERE LOCKED IN

• A decision taken by the Thorntons Board in 1987 that the personal relationships were impossible.

• As an escape route the company would have to go public in 1988.



• Endless meetings took place with Merchant Banks.

• Internally we had discussions about who would do what as a public company. One director wanted to be in complete control but this was not agreed.

• In July 1987 I took Stanley and my mother to New Zealand to a family wedding. On my return I found that I was required to resign.

• Unfortunate results of the Public Issue:

–Business formula abandoned.

–Culture changed from participative and respectful to command and control.

–Detachment of ownership from management - outside shareholders

–Pressure on management to grow and to pay a high dividend.


• Within the Public Company environment many bad and expensive mistakes were made.

• The managers become increasingly detached from ownership = self-serving

• The belief in the command and control type management within the City and Government seems to lead to the appointment of this sort of professional manager in public companies.


The destructive 'Public Company' system:

• supported by powerless small shareholders,

• ineffectual institutional investors,

• the naivete of the shareholders who are so easily persuaded by excellent PR,

• managers who are determined to hold on to their well-paid jobs,

• The institutionalised belief in command and control type management.


Some Good Books with some relevance

• Mood Mapping - Dr Liz Miller

• Positivity - Barbara Fredrickson

• Employees First, Customers Second. -Vineet Nayar

• The Psychopath Test - Jon Ronson

• Snakes in Suits - Paul Babiak and Robert D. Hare


More Good Books

• Outliers – Malcolm Gladwell

• O Louis – Hugo Borst

• Blink - The Power of Thinking without Thinking - Malcolm Gladwell

• Upside Down Management - Jon Timpson

The End


Archer Road Factory – 1935 - 1937


Thorntons current site


Thorntons fundamental mistakes

• The core of Thorntons problem was within the family relationships. BECAUSE:

• No definition of selection method of the next generation for leadership roles.

• No non-family independent director

• No female director

• We suffered from personality incompatibility in the boardroom


• In 1995 a change from family management to a 'professional' chief executive; this resulted in a dramatic change away from the family business formula.

• Large-Scale Development and short-term results became the overwhelming drivers. The rigid rule limiting the maximum number of shops to 280 was abandoned and a new plan to have over 400 shops initiated.


Selecting relatives for partnership• Minimize numbers of related people – say 3

• Select mature personalities.

• Choose those with matching skills.

• Weed out dominant behavioural types.

• Encourage ‘Mood Mapping’

• Include a non-family partner to manage relationships.

• Encourage positivity.

• Have a very intuitive, mature, calm and non-dominant leader


One Fundamental Rule

• In restructuring a failing business it is impossible to change the implication of the original brand name into something quite different


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