THE OWNER of Harrods, Mohamed al-Fayed, uses a system of “anonymous sources” in the iconic Knightsbridge department store to keep tabs on his executive directors, according to internal documents.

Employees, nicknamed the “chairman’s ladies” internally, feed Fayed information, which he then uses to write memos imploring his management team to make changes.

Fayed is thought by directors to encourage his informers to report on their movements in and out of the the store and then demands explanations for any activities he views as irregular.

Two months ago Fayed wrote the following memo to a human-resources executive who is thought to have been attending business meetings outside of Harrods: “I have noted that you have been out of the office [for two days] . . . this is a wake-up call for you . . . I expect a u-turn in your performance.”

In a series of interviews with former Harrods directors, The Sunday Times has discovered that Fayed regularly sends top management such memos — in brown envelopes — berating them on their performance.

They often question the staff’s abilities and loyalties, and contain warnings.

Another memo, addressed to the then new chief executive and chief operating officer, stated: “Over the past five years our profits have increased by peanuts, but our payroll has been going bananas.”

It added: “The problem is that every little shit is trying to build an empire for himself . . . I hope you are going to work hard to get me out of this shit.”

Over the past 12 years, Harrods has lost 40 directors, including five chief executives in four years. The most recent was Richard Simonin, who left two-and-a-half weeks ago on the same day as retail director Eric Decouvelaere.

Until now, all departing directors have kept silent, refusing to disclose what it is like to work for Fayed at Harrods.

The Egyptian businessman, who bought the upmarket department store in 1985, is said by former employees to have created a culture “dominated by fear and insecurity” as a result of constantly firing senior directors.

One former director said: “The constant turnover of management causes a culture of fear and insecurity. This, and the inconsistency, drag on performance and innovation.”

The leaked documents and interviews with former managers show Fayed’s obsession with detail. He insists on keeping control of all the main aspects of managing the store.

Harrods declined to comment. Simonin could not be reached for comment.

In recent years Harrods has faced increased competition from a resurgent Selfridges.

The store was also hurt by the collapse in tourism after the September 11 terrorism attacks in 2001.

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