For Unsuccessful DTC Applicants: Sightholders Anonymous...

If, for many years, you have been addicted to Diamond Trading Company (DTC) Sights and suddenly face life without them, don’t despair. The DTC is about to launch its “Sightholder Support Programme, a package designed to assist those clients who will no longer be Sightholders from 31st March 2008. This programme has been designed to help de-selected Sightholders by offering high profile consultancy support in managing its reputation and relationships with key stakeholders. This programme is only eligible for Sightholders who have been deselected.”

No, I am not kidding. The quoted excerpt comes directly from a DTC brochure that was put in all the Sight presentation rooms in London at this week’s Sight, announcing that the DTC is financing a support program for soon-to-be ex-Sightholders (or, as the DTC calls them, de-selected Sightholders) to help them adjust to life “beyond De Beers.” It isn’t clear whether this idea is comparable to alcoholics going into a sobriety program, or whether it is more like a training course to help soon-to-be-retired employees adjust to life as pensioners.

The problems faced by both the ex-clients and the DTC are real. In the past, a company was dropped from the Sightholder list because, somehow, it wasn’t good enough. This time, most Sightholders will be taken off the list because the DTC doesn’t have the goods. Says the DTC, “We are keen that all Sightholders are aware that the impact of less availability, increased competition and our complete commitment to beneficiation objectives and requirements of our JV partners will, inevitably, result in us being able to offer a lower level of supply to our clients than under the current contract.”

The DTC offers a three-phase program to help those ex-clients cope. The program will be paid for by the DTC and administered by Avalon Projects in conjunction with PricewaterhouseCoopers (PwC). PwC is, of course, well known. I have no idea what Avalon Projects is, though De Beers says it has “specialist knowledge of the diamond industry.”

(If you Google “Avalon Projects,” you’ll get close to 600 entries referring mostly to a Yale Law School library program, various real estate developments or a comics designer – so Google won’t provide clarity.)

Phase One of the ex-clients recovery program “will be the publication of a Programme Manual containing advice and guidance on a range of issues including dealing with change and stakeholder management, with a particular focus on relationships with bankers and retailers,” says the DTC. “The manual will include examples of how other companies and industries have dealt with change as well as guidance on how to ensure the business (of the ex-client) presents its best possible face to market.”

I am not sure whether the people who brought us SoC1, SoC2, Best Practice Principles, Forevermark and Beneficiation are the most logical people to now offer advice on how to live without these creations. I trust the intentions are great – they always are – but I am not sure whether this initiative won’t have unintended consequences, just as some of the other initiatives.

Phase Two of the support program involves “half day workshops with professional advisers which will be custom designed to meet individual Sightholder requirements. The form and content of these private sessions will be flexible so that each individual business can focus on the areas of most interest or concern to them. PwC will have experienced advisers on hand to assist in specialist areas such as working capital management, corporate recovery, debt refinancing and dealing with bankers.” This comes straight out of the DTC brochure.

What nerve! You are among the financially most robust players in the diamond business; you lose your Sight privileges – so now you need “corporate recovery” and “debt refinancing”? If I were a Sightholder, I would feel insulted.  

It has probably escaped the DTC that some clients who were dropped three years ago are among the best in the business today. It has also escaped the DTC that most of the major financial failures of the last few years were DTC Sightholders, whose resources had been misdirected in order to comply with the SoC1 scoring system. The DTC has conveniently ignored that the most serious violations of Best Practice Principles were committed by some of its clients. So now the very same company is offering “reputation management” to the de-selected?

Incidentally, it isn’t clear whether the professional advisers at the workshops are economists, psychologists, psychiatrists or anthropologists. The brochure doesn’t say.

There is also a Phase Three in the Sightholder Support Programme. This represents an optional direct engagement of PwC by the Sightholder. However, the ex-clients are advised that “those companies wishing to progress to phase 3 should be aware that this will be at their own cost.” To me, Phase Three seems like a recruitment program for new clients for PricewaterhouseCoopers. At Phase Two, the unfortunate ex-client got used to PwC, so he may, indeed, be tempted to sign on and pay for the continuation. This is disgraceful.

The Alternative Support Program

If the DTC truly wanted to help its ex-clients, it should have created a prominent DTC Sightholder Alumni Club, a highly prestigious body where members had earned the privilege of using the title “DTC Sightholder” for the next 10 years or so (depending on the years of the active client relationship and given the limited lifespan of the DTC itself).

If the DTC’s lack of supply is the problem, allow these ex-clients to continue the use of Forevermark and other DTC promotional materials. They have earned these “benefits” by supporting the DTC even in bad years, and by buying goods even when they truly didn’t need them. The DTC shouldn’t forget who absorbed and financed the buffer stock, which it dumped onto the markets in the 1999-2005 periods.

An alternative support program could have turned the ex-clients into DTC ambassadors by their continued use of the DTC/De Beers symbols. Let the Sightholder Alumni Club hold an annual party, hosted by Chairman Nicky Oppenheimer, where members can also invite their clients and demonstrate the continued relationship. One might even consider an occasional auction of some specials or other parcels among the Club members, so that the feeling of “belonging” (and still purchasing) would remain. De Beers could have continued to include the Club members in the annual DTC Sightholder Directory, so that these companies could maintain their reputation as DTC clients.

My DTC sources intimate that the current Support Programme is just a first step; they are looking at a range of options to support ex-clients well beyond those steps which have now been announced. After expressing wonder at whether there is a legal imperative to accommodate these ex-clients, I was assured that this was not the case. There is a genuine desire to help ex-clients.

There would be legal problems, I was told, with some of my suggestions, i.e. to give the de-selected some stones even in the future. The lack of supply flexibility (even a symbolic-supply) has always been one of the greatest obstacles and flaws of the Supplier of Choice system.

With a little bit of creative thinking, the DTC could have come up with powerful ex-client support programs that would have ensured the continued “goodwill” of ex-clients towards the industry’s leading producer.

My advice: drop the Sightholder Support Programme immediately and save the cost of the advice and guidance manual. It might even reduce legal costs by avoiding facing the consequences of the inevitable misguided advices. The publication of the Sightholder Support Programme, in the miserable way it was presented, constitutes by itself a “reputational issue.” I can imagine that in some instances ex-clients need help to rescue their relationships with banks, retailers and customers. But I am not sure that the DTC should be the one to arrange for this service. A golden handshake of the equivalent of 10% or so of the last year’s purchases would be a better way to parachute from the Sightholder list.

If the DTC indeed will come up with some Alumni Club program or an Honorary Sightholder status scheme, that will certainly be welcomed. Let’s wait and see what will come next. In any event, the current recovery assistance seems a goodbye present one could certainly do without. While offered for free – I find it difficult to imagine that unsuccessful applicants will line up to apply.

Have a nice weekend.