Lands’ End (Reader’s Digest finale)

I first met Tom Nevins in the fall of 1985. As the person responsible for Reader’s Digest’s International operations my mission was to successfully close the Japanese subsidiary. The Digest had a glorious history in postwar Japan. Encouraged by SCAP and MacArthur to help democratize Japan, the magazine reached a peak circulation of 1,480,000 in 1949.

However, market competition, poor labor relations, appeasement of the union, and voluntary staff reductions in which good people left, and their opposite were able to stay, gradually weakened the company’s ability to compete in the market. By 1985, circulation was down to 460,000 and a workforce of more than 500 had dwindled to less than 90. Unfortunately many of them tended to be the most radical and committed union members.

During a period before Tom or I was involved, there was an attempt to suddenly close the company. This poorly executed strategy resulted in getting the land, building, inventory, and accounts receivable attached by the union. The company had no choice but to back-off. As a condition for removing the attachments, the union had the company pledge not to close the company again without prior consultation and negotiation.

The fact is, however, that over a period of seven years Reader’s Digest Japan had lost 4,200,000,000 Yen and this couldn’t continue. Both the attorneys and “big eight” (at the time) accounting firm commiserated with us, told us we had a problem, but not much could be done.

This is when I met Tom Nevins. His reaction was, “Yes of course what has to be done will be done. Now let’s set about doing it in the best possible way.” On schedule and within about three months the company was essentially closed, and the employment relationship and ongoing support costs ended.

In a difficult case like this, with a group of such hard-core entrenched trade unionists, there were some residual problems. This was planned for. However, these could only be directed against the company that bought our building. Anticipating the problems, the price they paid was accordingly discounted.

Unfortunately because of the diehard commitment of such a union, it was impossible to license, or do anything with the Reader’s Digest brand name in Japan. In this sense the radical posturing of the union over the years tended to put the noose around everyone, including their own members’ necks.

There was bad publicity in Japan aimed against Reader’s Digest. The company never made any attempt to counter the misrepresentations in the media. For example, although Reader’s Digest could be considered a bankrupt entity, the company did not leave Japan without paying the employees their retirement benefit. The full retirement money for every employee, including the most radical union firebrands was sitting in a bank account in Japan. All employees needed to do was sign the resignation and release letter and the money was theirs. All but a handful of the final 88 staff did that by the end of January 1986.

Throughout the process Mr. Nevins gave us guidance, and he helped implement the plan including assisting with the final union negotiations. I am glad that Tom’s request for this testimonial gives my former employer of many years the only chance I know of to set the record straight. Reader’s Digest did the inevitable, and did it in a responsible way, making good on all employee retirement benefit commitments. In that area they were more responsible than what would be reasonably expected.

Because of this experience with TMT, almost eight years later in late 1993, I asked Mr. Nevins for help again. This time I was establishing a green field operation in Japan for Lands’ End, and the decision was to set up a wholly owned subsidiary.

We were going to also be using a number of warehousing and distribution center employees. I wanted to make sure that unlike Reader’s Digest we would have a healthy union free environment maintaining maximum operating flexibility and efficiencies.

For example, I wanted an operation where Saturday work would be possible, and where we would have an unlimited performance range on summer and winter bonus. It was also important that the company be able to take customer orders around the clock on a shift basis.

Tom did a good job getting Lands’ End employment practice established correctly. By September 1994, the first catalogues were in the mail. Tom also helped our managers and staff with a number of unusual personnel issues over the next couple years.

When the subject of Japanese labor relations and employment practices comes up, I turn to Tom Nevins. But then I tend to stick with what works for me.

William J. O’Neill
(former) Vice-President
Reader’s Digest
Lands’ End
(Presently Consultant)
June 2002