Sirloin with a side of scandal isn’t a meal people wanted to buy
By underpaying his workers, George Calombaris broke a promise to his employees. And that broken promise led to the collapse of MAdE Entertainment.
When George Calombaris first reported underpaying workers he likely didn’t expect it would lead his organisation into administration.
Promises are like that. You often don’t see the ramifications of breaking them until much later. And when MAdE Establishment broke a promise and underpaid the people who worked for it by $7.83 million dollars, it set in motion a ripple effect that this week saw the restaurant empire in voluntary administration and hundreds of workers out of jobs altogether.
A MasterChef moniker and a regular invitation into people’s lounge rooms won’t save what you’re building if you don’t pay attention to the deeply unsexy details — like making sure you can pay people who work for you what they are owed.
When Calombaris and his company MAdE Establishment hired people they made a simple promise: to pay X in exchange for them doing Y. Those people accepted the promise when they took the job.
It’s unlikely anyone at MAdE Establishment thought about the underpayment as a broken promise. In 2019, when the full extent of the problem surfaced, Calombaris said: “We apologise to all our affected team members, past and present — as it is our people that make our restaurants great, and it is our priority to ensure all of our employees feel respected, rewarded and supported in their roles”.
Which all sounds good. However, when it is weighed against his vocal campaign slamming weekend penalty rates, it sounds somewhat less genuine.
The underpayment is ‘where’ the promise was broken. ‘Why’ is a whole lot more complicated.
I’m not privy to the ins and outs of MAdE Establishment’s strategy and operations so I can’t say definitively if over-expansion stretched cashflow. Or if careless business practices were the culprit.
However, when organisations disregard the elements of a promise, they act as a reverse guarantee. If there was ever a case for a lack of irony when answering ‘what could possibly go wrong’ this is it!
Other elements that get ignored include not having the resources to support the promise in the time boundary to deliver, ignoring internal culture, and willful ignorance of the external environment. To name just a few.
The MAdE Establishment case is one for the books. It is a clear and direct example of promises leading to an eroding brand result and eventual demise. Sure, the banks and other financial institutions took a hit when royal commission findings laid bare their flagrant disregard, but the institutional scale and economic interdependence meant the remedies were more likely to be legislative than market-driven.
Still, no matter the scale, the failure of any organisation can often be traced to wrong and broken promises. Because if something erodes far enough there’s nothing left to trade with.
In this case, once the scandal broke and bad publicity swirled patrons stayed away from the venues, stripping the business of vital social capital. Banks pulled the props out from underneath, leaving a shaky financial capital. And when key investors capped their shareholder capital, it was game over.
There is one further lesson in this mess for anyone who crash-lands into broken promises and bad publicity without a leg to trade on: changing your name is like trying to put a band-aid on a bullet wound. It won’t save you.
In the end, a name is just how people pick you out of a line up — which in this case wasn’t a good thing! Turns out people don’t want a side of scandal with their sirloin.
Making promises is cooked into how business operates. So to avoid the same fate as the Calombaris empire, understand what promises you’re making before you make them.
See you next time.
