Introduction Lewis Jeans has been working as a manufacturer of jeans for ten years and is currently one of the UK’s leading manufacturers. 300 employees are located in 3 geographical areas with headquarters in Croydon.
Due to a number of contributing factors, there has been a decline in sales and profits in the previous 12-month period.
Sales – 20% reduction
Profit – 40% reduction
Returns due to quality problems – 15%
These figures, combined with a worrying turnover of staff and high production costs, have ensured that a basic review of the entire company’s structure is needed to stop further degeneration and to allow the company to recover as a market leader.
This report will explore the following areas:
Organizational and management structure
Each of these areas will be considered within the Lewis Jeans framework, and formal advice will be provided covering: Inherent strengths and weaknesses within Lewis Jeans. Recommendations for improvement.
Organizational and managerial structures
“An organization is a system that has an established structure and deliberate planning where people work and handle each other in a coordinated and collaborative way for the accomplishment of recognized tasks”
The above paragraph is a typical definition of what makes an organization. The type of structure will affect everything around the organization, including the relationship between individuals empowered within the authority to make decisions and how information is disseminated throughout the organization. Getting the right structure in place that fits the goals of the organization and the ambitions of its employees is imperative if the business is to flourish.
Lewis Jeans is currently working on a geographical structure. Three manufacturing facilities are located in the northern, central and southern areas of the United Kingdom. This geographical grouping of functions can be a viable option for some organizations, with Tesco PLC setting a good example. Tesco needs retail outlets in most cities to allow its customers to buy the goods it offers.
The geographical structure can have a number of different benefits: Responding quickly to local needs and problems, making the organization more sensitive to customer and employee needs. Bureaucratic ‘bureaucracy’ can be reduced if each department is empowered with more decision-making authority. There is a greater opportunity to tailor operations to local differences, such as language, law, etc.
However, there can also be significant drawbacks: overlapping of facilities and roles. Additional leadership positions are required. Lack of unity in the goals and direction of semi-autonomous entities.
Lewis Jeans is in dire need of a geographic structure for the organization, and many of the disadvantages discussed manifest in the business. The argument for three factories could reasonably be made if Lewis Jeans manufactures multiple products that required different processes, staff specialization, machine tools and machines and delivered these products to different markets with unique needs. A company that essentially makes a product range can benefit from a central production facility. It could be argued that additional warehousing and distribution depots can be advantageous and could result in a more economical production process with efficient distribution in the UK.
The simplified organization chart below shows how the organization can streamline. Top-to-bottom links demonstrate the hierarchical structure (top-to-bottom authority direction). The horizontal lines demonstrate the communication lines to be found between functional areas. Each ‘area’ forms a specialized team that encourages teamwork.
A central management team made up of specialists in each field makes strategic decisions about the company’s goals and policies. Daily meetings allow current and future issues to be resolved quickly and efficiently. Lower-level managers who need to be developed through training, assessment, etc., make decisions about the day-to-day operations of their departments. This allows the management team to look at the ‘bigger picture’ and not be consumed by the daily problems of production, sales and distribution.
The simplified organizational chart above shows how a functional structure can work for Lewis Jeans. The business is broken down by the business function performed by each department. Each functional area plays its own specialist role in working towards the goals of the organization. Groups of specialists are delegated control over specific work areas, thus avoiding duplication of work in the company. Potential issues regarding transfers and rivalry between departments may occur, but it is up to the management team to resolve such issues before they arise.
An organization is divided by the products it sells. Each product division performs all of its business functions while working towards the organization’s goals and objectives. With only one main product or variation on the theme, this structural frame would not benefit Lewis Jeans.
In a large organization, it may be helpful to allow members of the company to be within more than one functional group. The introduction of ‘product development teams’ that can produce more than one product (jeans, denim jackets) can be helpful. Marketing and sales could be associated with specialists working in both fields.
Matrix structures have a number of advantages: The organization can focus on a number of goals at the same time. Flexibility to adapt and respond to changing demands and resources. Exchanging ideas between employees with multiple roles instead of the isolated approach of isolated departments.
The ‘Matrix approach’ can result in an overcomplicated structure where employees lose the most important goals of the organization because power struggles can occur due to more than one chain of command.
The geographical structure of Lewis Jean cannot be justified at this time. A central production unit would make good business sense if premises could be adapted or new premises placed. Alternatively, productions in the north and south with an extra central distribution depot may enable appropriate financial savings combined with increased efficiency. A new single production unit enables staff reductions of up to 30 – 40% depending on improvement of processes, technology, etc. Moving staff may be possible if local distribution depots are introduced. Final consideration for placements must take into account customer locations, export markets and the need for storage. If products are transferred very quickly, a single distribution unit may suffice.
A further advantage of a single production unit would be the possibility of implementing a robust quality control system to ensure satisfactory standards. There may be additional factors involved in the quality issue which will be discussed later.
At present, authority and decision making are centrally located at the head office where Mr. Bart Lewis makes all the decisions and leads those decisions down to his managers on the production units. The flow of communication is very much in a downward direction, with managers solely responsible for executing the instructions of the CEO. The hierarchical principle stems from Bruno Lussato’s theories. ‘Scalar Concept’ regarded an organization as a group of characters arranged in one order. Overall qualities bore authority which could be delegated to the character immediately below. Lower grades had no authority at all. Authority came down from the top to the bottom along a well-defined scale of positions. In the current system of Lewis Jeans, little authority has been delegated at all, with leaders little more than supervisors placing orders from above.
Lippitt & White are among many researchers who have identified a number of leadership styles. Tightly controlled (autocratic) The manager only makes decisions where the staff is informed of these decisions and then performs the task. Democratic (persuasive or advisory) The manager makes the decisions and then persuades the workers that his decision is the right one. The manager consults the staff before making a decision. The manager has the last word but takes the staff’s views into account. Laissez-faire (loose) Opinions are not forced into staff without any formal decision-making structure.
None of the above is the correct approach, but they have different effects on them in the organization. The style of Lewis Jeans is autocratic. This type of management style can have a negative effect on both middle managers and workers. Leaders may feel that they are not trusted or empowered to manage their departments. The organization is output oriented and this will certainly affect the motivation of all employees. One supportive leadership style that Charles Handy argued to promote: Worker Satisfaction. Lower staff turnover and complaint rates. Fewer conflicts between groups.
With extremely high levels of staff turnover, the management style can have an important role to play in this area. Motivation is also significant and this will be discussed in more detail in this report.
Scope of control
The extent of control within an organization is important. General Sir Iain Hamilton once said that “no brain can effectively control more than 6 or 7 other brains”. It has been proven through research that the control interval (the number of subordinates for which a person is directly responsible) must be 3-6.
At present, Mr. Lewis currently has sixteen executives, five in each factories and one centralized sales manager. Each factory has eleven managers and three supervisors. This is not an effective distribution of power and authority. A person who has daily responsibility for all areas of an organization, some of which may not be his area of expertise, can create failures in certain functions. As the organizational chart on page 4 shows, with a higher level of trust and authority attached to professional, skilled leaders, the ‘control panel’ could be significantly reduced for Lewis, but expanded to lower-level managers. This would give Mr. Lewis has the opportunity to concentrate on the ‘strategic’ decision making within the organization within a central leadership team, while allowing lower-level managers to concentrate on the daily issues of production, distribution, sales and marketing. Regular management meetings allow for updates on production, sales goals and organizational goals that are subject to change due to the dynamic nature of the clothing industry. An appropriate structure will include weekly or monthly goals communicated to the managers in charge. Daily communication, as it is currently happening, will only strengthen leaders’ opinions that they are not authorized to ‘manage’. The flow of communication will be up as well as down the chain of command, giving local leaders and subordinates a role in the decision-making process. Those in the local facilities will be able to provide quality feedback on inventory issues, quality, storage issues, etc. This allows the management team to adjust their goals and objectives according to the latest available information. In addition, a well-organized system for recording and monitoring will ensure that all communications, orders, sales, returns and forecasts can be used as historical data to support future decisions.
The structure of an organization is strongly influenced by the culture within it. One definition of culture is “the way we see and do things around here”. History, traditions and structure influence factors of a company’s culture. Behavior of new workers in an organization is often influenced by ‘norms’ of behavior that is already prevalent. The need to “fit in” and be “accepted” can often put pressure on individuals to become compliant. Culture can change over time as new people join the organization and as external factor changes.
Charles Handy observed behavior in a large number of organizations and described four main types of culture.
Centralization of power is the main factor in this type of organization. One person makes all decisions. Individuals may feel oppressed by them by force. A “Power Culture” is evident in Lewis Jeans.
role of Culture
Usually in large organizations are divided into layers of offices and officials. Power is hierarchical and is determined by a person’s position in the business. Strict job descriptions and communication are prevalent. Very little room for individual growth or development.
A job or project oriented organization. The task dictates how a team works, not strings, establishes rules and regulations. Freedom and flexibility can create a rewarding work environment. Due to the lack of formality, managing and controlling a task culture can be difficult.
An organization with a cluster of people who all work on the same level. Hierarchies cannot be formed without mutual consent.
It is not straightforward to change a culture to fit the goals of the organization. Some writers believe that the culture is created by the people and a manager cannot change it on a whim. There is a broad consensus that leaders’ actions can have a profound impact on the culture of an organization, far more than written statements about what needs to happen.
A move away from the ‘culture of power’ within Lewis Jeans could have profound effects on workers’ attitudes. To empower leaders to make decisions, to lead their departments, and to build confidence and desire within the workforce, to succeed both for themselves and for the organization. A narrower control panel for the management team will force them to concentrate on the direction of the business and not be directly involved in the difficulties of production, distribution and marketing. Providing appropriate structures, quality leaders, work systems and staff motivation needs are met, the CEO and his team must be the head of the organization, inspire confidence, justice and trust in everyone.
Lewis Jeans has developed a trend for rapid turnover of staff. Less than 50% have been in the business for more than a year. This creates problems for the organization: Lack of specialized and skilled staff. Low morale among current staff. Poor image in the wider community from which new employees can come. Lack of team vision. Little motivation to excel and meet the challenges facing the company.
Leaders can only do well and achieve the required goals if they have an equally motivated team working with them.
To do a realistic analysis of the workers at Lewis Jeans, it is necessary to relate some research into motivation and lack thereof.
Maslow popularized the theory that people have needs. Maslow developed a ‘hierarchy of needs’ and concluded that when the individual’s needs were met at one level, a higher level of motivation would be developed. The levels from the lowest to the highest are: Physiological needs of shelters & safety Love and related self-confidence
When used in the workplace, it can be seen that work can be a means to help people satisfy their needs. Not everyone has the same needs, so this must be taken into account.
Hertzberg conducted research based on interviews to find out what satisfied and dissatisfied workers. I have found a number from areas which were a potential cause of dissatisfaction. I have called these ‘hygiene factors’. Only when the hygiene factors are sufficiently satisfied can other factors improve performance. These are called ‘Motivators’.
By considering the structure, leadership style, leadership and culture of Lewis Jeans and then considering the factors mentioned above, it becomes clearer why staff retention is at a low ebb. Providing financial bonuses and such incentives can provide short-term solutions. It is necessary to consider that these production bonuses, combined with low levels of motivation in the company, are the most important factor affecting the poor quality of the product. The staff have little loyalty to the organization and can see that creating large quantities of goods of any quality can result in useful additions to pay packages. There is a wider range of needs and motivations for most employees. If they feel used, underestimated and have little chance of self-improvement, motivation to perform will suffer. Whether it’s about leaving the company, or working at levels that only reduce the quality to realize financial bonuses. These symptoms are all evident in the company.
However, it is also a basis for designing strategies that will alleviate such problems. Workforce motivation through empowerment, delegation, recognition, and a chance to improve oneself will foster a real change in the workforce.
Assessment of staff
Regular employee assessments are an essential part of developing a company’s human resources. An annual meeting with each employee allows both sides to highlight areas where performance has been good and to look at areas of difficulty that may need some attention. It allows the appraiser to highlight the developmental needs they may have; this may include education courses or aspirations for promotion. The appraiser must ensure that a fair and non-confrontational approach is used and to make it clear that the meeting is for the benefit of both parties. Ideally, the appraiser and appraiser should have appropriate papers to record their views at least 2-3 weeks before the appraisal meeting. When the discussion takes place, a ‘meeting of the minds’ should take place, with both parties agreeing on a way forward for the next year. An appropriate system with reference to another manager should be in place if no agreement can be reached. The process must be transparent and honest. Staff can become angry overestimation systems if they are not addressed on all the facts surrounding the system.
Recommendations for change
Lewis Jeans has run under the same organization and management structure for some ten years. Lately, performance has declined and most of the problems are created by the organization itself. This can be changed. Structure changes can be made relatively quickly. Cultural changes can take significantly longer. Strong leadership will play an important role in changing this culture. The recommendations below should be implemented as soon as possible to ensure that change takes place. With such a change there must be a transition period, but the driving force for change must be immediate.
Initiate changes in a functional structure for the company. Considerable planning is required to implement changes in real estate use and redistribution of staff. This may not be possible in some cases and decisions must be made. Dismissals can be inevitable, but should be a last resort. There is no reason why the organization cannot introduce more structures to provide the best opportunities for functional departments. Within the finance department, there is a need for formal structures because of the procedural systems to be adopted. This would almost certainly set out pretty prescriptive definitions of what staff should do. Within a production or distribution department, there will be significantly more room for staff to demonstrate individual flair and teamworking qualities. There are several options for an informal structure for these departments. This does not imply that an autocratic leadership style is suitable for every department, but shows that different organizational and leadership structures may exist within an organization.
Leadership and leadership style needs to change. A central management team decides goals and objectives. This should consider input from all levels of the organization. A staff council that allows workers to contribute to Lewis Jean’s success will undoubtedly motivate workers. Meetings with all levels of leadership will ensure that leaders feel confident and empowered to manage their own departments, the areas where their expertise lies.
Changes in management style will certainly affect the ‘culture’ within Lewis Jeans. The ‘culture of power’ currently in place is detrimental to the future success of the company. People determine the success or failure of this organization. A step towards a ‘task culture’ where staff work in teams where there is little need for authoritarian leadership, where people feel they can succeed and develop should be the ambition of the company. There may still be a discipline within the culture, but it must be more oriented towards ‘self-discipline’ rather than autocracy.
Motivation of staff must be a focal point. All the above recommendations will contribute to this. Financial incentives, if delivered properly, can to some extent motivate workers. There are many other factors involved. A share of profits rather than production bonuses focuses employees on the success of the company rather than on individual gain in the short term. The need to ensure the quality of the goods and thus increase Lewis Jean’s good reputation will lead to success and higher profits. These successes in which the workforce will have a direct role will lead to financial rewards and personal pride.
Communication between all sections needs to be improved. In this report, we have discussed various strategies for improving communication between employees. There is also a need to communicate organizational plans to the right areas. The Central Management Team meetings will agree on strategy. This should be a consultation process. It is important to draw on all areas of expertise within the organization. Consultations with key employees and union officials / staff members will assist the collaboration. Weekly team meetings, if necessary, allow concerns transferred to the chain of command. Senior leaders need to communicate directly with team leaders where possible. The phone must be in place as a backup system. The use of electronic communication / video conferencing can be used for remote locations.
In order for Lewis Jeans to grow, a wholesale evaluation of the marketing strategy is needed. The previous ten years have allowed Lewis Jeans to fall behind current market leaders in terms of product base diversification. The days when a style of jeans fit everyone is gone. A thorough evaluation of current and future trends and a marketing strategy adopted to reflect this need to be undertaken. Project teams may need to be developed (this may draw on expertise from across the company) to create a radical marketing plan. This should consider product development, advertising, distribution methods (mail order catalogs, internet-based sales, retail stores). New products must meet the needs of the existing clientele, but to drive the products into the 21st century.
The image of the product is important. Prospective users need to feel that these products can make a fashion statement. A major public relations exercise should be used to shift meaning among the targeted public. This may consist of press releases, product advertising, advertising to show this exciting brand. If packaging is needed, it can be used to make the product noticeable, to convey the brand image and to make it appeal to customers. Marketing must therefore be at the forefront of the strategy.
This report makes some tough demands on Lewis Jeans. There are no simple solutions to its current problems. However, the organization can turn the fortunes if it accepts this report as the first building block for future success. There will be no room for egos in the revitalized Lewis Jeans. Everyone MUST pull together to make this happen. People are the strength of this organization, and with a unified, dynamic, progressive team, success is sure.