Tuesday, January 12, 2010

Taking the Mickey Out of the LCBO

In the January edition of Ottawa Life Magazine, Michael Pinkus prosecutes the LCBO for a litany of sins and transgressions going back more than a decade.

Although I think that the LCBO does a lot of things right, I’m not here to defend the LCBO. Despite its successes, the LCBO does some very fundamental things wrong in how it treats suppliers, employees, and customers.

In his article, Mr Pinkus does a good job of describing the LCBO’s treatment of wine producers (particularly small Ontario producers), consignment agents, and consumers. The LCBO has a lot of power; it’s the largest buyer of spirits and wine in the world. From the stories that Mr Pinkus tells, and stories that I myself have heard from wine producers and consignment agents, it seems to take its supplier management lessons from Wal-Mart. It’s not win/win, it’s squeeze, squeeze.

What about the LCBO employees? As a consumer, I’ve shopped in many different LCBO stores in Ottawa and here’s what really gets me. Pick any LCBO store: why do the employees, from the white-shirts (Product Consultants) to the blue-shirts, all look so darn unhappy? They’re selling booze, for goodness sakes! They should be in high spirits (ahem). It’s obvious that morale is terrible; the work environment is toxic. How you treat your employees says a lot about leadership in any organization. More importantly, unhappy employees are deadly for good customer relations. I’ve lost count of the number of times I’ve heard people complain about “the bad attitude” of LCBO employees, how they avoid customers if they can and are discourteous if they can’t. I don't blame the employees...the buck stops with senior management.  But there are courteous people working at the LCBO, and when I find them, I almost want to give them hug!

Another puzzle to me is why the LCBO is flatfooted so often on issues regarding its operations. If you’re running a government-controlled monopoly, you know you’re going to get scrutinised and criticised. Yet, they seem surprised and unprepared when someone takes a run at them.

Of all the problems with the LCBO, it seems that, for Mr Pinkus, the straw that breaks the camel’s back is the Ontario liquor monopoly’s payment of more than $6 million in management bonuses in 2008 while the province’s economy was in a deep recession. Performance bonuses for the public sector managers, or government-controlled entities like the LCBO, aren’t new anymore. And $ 6 million in bonuses for a retail operation with $4.3 billion in revenue and a $1.4 billion dividend to the Ontario government? Not sure that’s necessarily a problem, even in a monopoly.

So, what’s the solution? Many, including Mr Pinkus, think that one solution to the LCBO is to smash it. They say, “The role for government in alcohol is regulation. Why is the government still operating retail and wholesale liquor stores?” Fair enough. But that’s a policy decision: the government is considering whether the time has come to get out of the liquor business. But simply privatizing the LCBO won’t fix the problems that Mr Pinkus describes so well. What’s really needed is far more difficult and complex: a complete re-working of the corporate culture of the LCBO (or whatever succeeds it), with leadership that sets a better example by how it treats suppliers, employees, and customers.



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  1. I like your take on the matter Dave, though you seem a little blase about the 6 mil in bonuses. While I am all about rewarding staff for a job well done, you have to remember they are a monopoly selling booze ... it's not like they broke the human genome, they are the ONLY seller of booze in a monopoly system. My cat could do that.

  2. Thanks for the comment, Michael. Kudos again on a good article.

    I'm not blasé about the bonuses, but looking at one part of compensation without looking at total picture doesn't tell enough of the story for me. Bonuses were 1.6 percent of the LCBO's total compensation in 2008. How many people at the LCBO participated in these bonuses? On what basis are these bonuses paid? Who got the biggest bonuses? What were their regular salaries?

    Should the LCBO offer bonuses at all? No offense to your cat, but the LCBO is a complex operation and, these days, offering bonuses is a requirement to attract and retain good management, which as a taxpayer, I want. Could they do better? Your article and my post shows that there's lots of ways that they could -- and should -- do better.

  3. Bonuses should only work in a non-monopoly situation. Otherwise, as Pinkus says, any body can sell booze in Ontario.

    Having said that, the only guys who should get bonuses at the LCBO are the Quality Control Lab guys. They really work for their salaries, analyzing all the good and bad booze coming into Ontario.

  4. While I am concerned that a monopoly creates mediocrity, bloated bureaucracy and a complete lack of ambition there can be instances where realistic, challenging goals can be met and could merit some monetary reward for achieving same.

  5. simply privatizing the LCBO won’t fix the problems

    No, but removing its monopoly would. Overnight!!

    Let anyone sell wines etc. Licence them so the threat of removal of licence ensures they maintain laws on underage sales or whatever.

    Give consumers a choice -- it's called free competition.

    problem sorted.

  6. I think that many of us can complain about the bonus' and the fact that they have a monopoly but it doesnt matter how you slice it there is a great benefit at the bottom line to the ontario people. that cash they make helps pay for programs that we as taxpayers wont have to pay for.

    I think the bigger problem is that there are people working in the LCBO that dont have a clue as to what they are doing. I was in IT for 15 years and can tell you from experience and first hand knowledge that they really dont have a clue. Get some people in there that really care and can run things properly and you would see moral go up, profits go up, and even the relationships between the LCBO and the suppliers.

  7. Its hard to find what an employees compensation is, but I believe they are unionized with a strong compensation package that beats most packages in the private sector. Their package (to my knowledge) includes full health benefits, generous pension, sick days, personal days, ability to carry-over sick days, etc. A friend has almost a year of sick days "banked". Who in the private sector can bank sick days. I'm an educated person and my sick days come off my vacation entitlement.