Almost everyone has heard about the demise of Sears Canada. The loss of such an established and renowned retail company caused quite a stir. While many speculated the company hadn’t done all it could to keep up with a changing retail environment, others pointed to those same changes as a herald of things to come.
Of more interest to employers and HR managers, employees, and the general public alike was the way Sears handled issues such as benefits and pensions for current and former employees.
The Sears Situation
Sears announced it was liquidating and closing all retail locations shortly after a country-wide rebranding effort. The retailer had long been in trouble, and the effort was meant to revitalize the company’s brand and make it more attractive to younger shoppers.
Sears appealed primarily to middle-class consumers who preferred to shop at higher-end retailers than Wal-Mart and other discount stores. As the middle class has been hollowed out in Canada, there were fewer of these shoppers and more shoppers at either end of the spectrum. Both higher-end shoppers and lower-end shoppers avoided Sears, for opposite reasons.
Other factors were at play, including a dowdy brand image among younger consumers, a lack of perceived quality, and pricing. Management practices can also be called into question, particularly when it came to supporting employees who were losing their jobs and benefits.
The Sears Solution
Clearly, Sears Canada found it could no longer operate and decided to wind down its operations. All current Sears employees lost their jobs, in addition to their benefits. Those former employees who had been receiving pensions from Sears Canada had their pensions cut off.
This move outraged employees, their families, and members of the general public. Making matters worse, Sears Canada opted to pay large bonuses to executives and upper management. Many argued those bonuses could have, and should have, been used to support employees as they looked for new work or to help those who were relying on Sears Canada for their income in retirement or while on disability.
What can be learned from the Sears experience? The first takeaway is rather obvious: Paying out bonuses to highly paid employees when the company declares fiscal insolvency will always generate bad press.
While there’s an argument to be made for one-time bonuses versus ongoing fiscal support, it seems clear Sears could have done things differently. Namely, the company could have extended more support to employees or at least continued pension support for some as they looked for a way to secure their financial futures.
A good question is why Sears Canada or any business owner should care. The usual argument for looking after your employees is because you care about them. Another argument is you want to create goodwill among them. Bad press can hurt a company. In the case of Sears, however, the company was already going under. Could this bad press do even more harm?
Sears seemed to think the answer was “no.” While the move fostered criticism and ill-will among former employees, Sears itself didn’t experience further fallout. When a company is shutting down, there’s relatively little that can be done.
“Bad corporate behaviour,” such as Sears exhibited, could make things tougher for other companies in the future. As Sears Canada employees look to see what they can do to get justice, many are calling on government officials to make tougher laws requiring businesses to support their employees in these situations.
A good start for any business today would be to create a plan about how you’d handle employee support during a transition period. Would you offer severance packages or extended benefits or pensions? What if the company was in dire financial straits? Making these sorts of plans now could be useful should new laws be implemented in the future.