Introduction Lewis Jeans has been operating as a manufacturer of jeans for ten years, and is currently one of the UK’s leading manufacturers. 300 employees are divided over 3 geographic areas, with the head office in Croydon.
Due to an array of contributory factors, there has been a downturn in sales and profits over the previous 12 month period.
Sales – 20% reduction
Profit – 40% reduction
Returns due to quality issues – 15%
These figures, coupled with a worrying turnover of staff, and high manufacturing costs have ensured that a fundamental review of the whole structure of the company is necessary to halt further degeneration, and to allow the company to re-establish itself as a market leader.
This report will investigate the following areas:
Organisational and Managerial Structure
Each of these areas will be considered within the Lewis Jeans framework and formal advice will be given covering: Inherent strengths and weaknesses within Lewis Jeans. Recommendations for improvement.
Organisational and Managerial Structures
“An organisation is a system, having an established structure and conscious planning, in which people work and deal with one another in a coordinated and cooperative manner for the accomplishment of recognised tasks”
The above paragraph is a typical definition of what makes an organisation. The type of structure will influence everything about the organisation, including the relationships between individuals, who is empowered within the authority to make decisions, and how information is communicated throughout the organisation. Getting the correct structure in place to suit the objectives of the organisation, and the aspirations of its staff is imperative if the business is to flourish.
Lewis Jeans currently operates with a geographical structure. Three manufacturing facilities are located in the Northern, Central, and Southern areas of the United Kingdom. This geographic grouping of functions can be a viable option for some organisations, Tesco PLC being a prime example. Tesco needs retail outlets in most towns to allow it’s customers to purchase the goods it offers.
The geographical structure can have a number of distinct advantages: Responding quickly to local needs and issues, allowing the organisation to become more sensitive to customer and employee needs. Bureaucratic ‘red tape’ can be reduced if each division is empowered with more decision making authority. There is a greater ability to tailor operations to local differences, such as language, law etc.
However, there can also be significant disadvantages: The duplication of facilities and roles. Additional management positions are required. Lack of unity in objectives and direction of semi-autonomous units.
Lewis Jeans has little necessity for a geographic structure to the organisation and many of the disadvantages discussed manifest themselves within the company. The argument for three plants could reasonably be made if Lewis Jeans were manufacturing multiple products which required different processes, staff specialisations, tooling and machinery, and supplying these products to differing markets with unique needs. A company which essentially manufactures one product range may benefit from one central production plant. It could be argued that additional storage and distribution depots may be advantageous, and could result in a more economical production process, with efficient distribution throughout the UK.
The simplified organisational chart below demonstrates how the organisation could be streamlined. The links flowing from top to bottom demonstrate the hierarchical structure (the direction of authority from top to bottom). The horizontal lines demonstrate the lines of communications which should exist between functional areas. Each ‘area’ forms a specialized team which will encourage team-working.
A Central Management Team consisting of specialists in each field make strategic decisions on company objectives and policy. Daily meetings will allow current and future issues to be decided quickly and efficiently. Lower level managers, who must be developed through training, appraisals etc, will make decisions on the day to day running of their departments. This allows the management team to look at ‘the bigger picture’ and not be consumed by the day to day production, sales and distribution issues.
The simplified organisational chart above demonstrates how a functional structure may work for Lewis Jeans. The business is divided according to the business function performed by each department. Each functional area plays its own specialist role in working towards the objectives of the organisation. Groups of specialists are delegated control over specific work areas, thus avoiding duplication within the company. Potential problems regarding inter-departmental transfers and rivalry can occur but it is for the management team to resolve such issues before they occur.
Product Based Structure
An organisation is divided by the products it sells. Each product division performs all of its business functions, whilst working towards the organisations aims and objectives. With only one main product, or a variation on the theme, this structural framework would not benefit Lewis Jeans.
In a large organisation it may be useful to allow members of the company to be within more than one functional group. The introduction of ‘Product Development Teams’ which may produce more than one product (jeans, denim jackets) may be useful. Marketing and Sales could be linked, with specialists working in both areas.
Matrix structures do have a number of advantages: The organisation can focus on a number of aims at the same time. Flexibility to adapt and respond to changing demands and resources. Exchange of ideas between multi-role staff, instead of the insular approach of isolated departments.
The ‘matrix approach’ can result in an overcomplicated structure, with employees losing sight of the major aims of the organisation, a due to more than one chain of command, power struggles can occur.
The geographical structure of Lewis Jeans cannot be justified at the present time. One central production unit would make good business sense, providing premises could be adapted, or new premises located. Alternatively, North and South production facilities with an additional central distribution depot may allow suitable financial savings, coupled with an increased efficiency. A new single production unit may allow for a reduction in staff by as much as 30 – 40%, dependent on improvement in processes, technology etc. Relocation of staff may be possible if local distribution depots are introduced. Final consideration to locations would need to take into account customer locations, export markets and the need for storage. If products are transferred very quickly then a single distribution unit may suffice.
A further advantage of a single production unit would be the ability to implement 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 is firmly centralised at head office, with Mr. Bart Lewis making all decisions, and cascading those decisions down to his managers at the production units. The flow of communications is very much in a downward direction, with managers purely responsible for carrying out the directions of the Managing Director. The hierarchical principle stemmed from the theories of Bruno Lussato. The ‘Scalar Concept’ viewed an organisation as a group of grades, arranged in a sequence. Superior grades carried authority which could be delegated to the grade immediately below. Lower grades carried no authority at all. Authority descended from the top to the bottom along a well defined scale of posts. In the current system within Lewis Jeans, little authority is delegated at all, with managers little more than supervisors, passing down the orders from above.
Lippitt & White are among many researchers who have identified a range of leadership styles. Tightly controlled (autocratic) The leader alone makes decisions, with staff being informed of these decisions and then carrying out the task. Democratic (Persuasive or Consultative) The leader makes the decisions, and then persuades workers that his decision is the correct one. The leader consults staff before a decision is made. The leader has the final say, but takes staff views into consideration. Laissez-faire (loose) Opinions are not forced on staff, with no formal structure for decision making.
None of the above is the correct approach, but they do have differing effects on those within the organisation. The style adopted at Lewis Jeans is autocratic in nature. This type of management style may have a negative effect on middle managers and workers alike. Managers may feel that they are not trusted or empowered to manage their departments. The organisation is output orientated, and this will certainly affect motivation of all staff. A supportive management style, as argued by Charles Handy is said to foster: Worker satisfaction. Lower staff turnover and grievance rates. Fewer inter-group conflicts.
With extremely high levels of staff turnover, the style of management may have an important role to play in this area. Motivation is also significant and this will be discussed further on in this report.
Spans of Control
The span of control within an organisation is important. General Sir Iain Hamilton once said that, “No one brain can effectively control more than 6 or 7 other brains”. It has been proven through research that the span of control (the number of subordinates that a person is directly responsible for) should be 3-6.
At present Mr. Lewis controls sixteen managers at present, five in each of the factories and a centralised sales manager. Each factory has eleven managers and three supervisors. This is not an efficient allocation of power and authority. One person having day to day responsibility for all areas of an organisation, some of which may not be his area of expertise can create failings in certain functions. As the organisational chart on page 4 demonstrates, with a higher level of trust and authority vested in professional, skilled managers, the ‘span of control’ could be significantly reduced for Mr. Lewis, but widened for lower level management staff. This would allow Mr. Lewis to concentrate on the ‘strategic’ decision-making of the organisation within a central management team, whilst allowing lower level managers to concentrate on the day to day issues of production, distribution, sales, and marketing. Regular managerial meetings would allow for updates on production, sales targets and organisational objectives which may change due to the dynamic nature of the clothing industry. A suitable structure would include weekly or monthly targets communicated to the responsible managers. Daily communication as happens at present will only reinforce managers opinions that they are not allowed to ‘manage’. The flow of communication will be up as well as down the chain of command, giving local managers and subordinates a role in decision making. Those in the local facilities will be able to supply quality feedback on problems of stock, quality, retention issues etc. This will allow the management team to adjust their aims and objectives according to the latest information available. In addition to this, a well-organised system of recording and monitoring will ensure that all communication, orders, sales, returns and forecasts can be used as historic data to support future decisions.
The structure of an organisation is strongly influenced by the culture within it. A definition of culture is “the way we see and do things around here”. History, traditions and structure are influencing factors on a company’s culture. Behaviour of new workers within an organisation is often influenced by the ‘norms’ of behaviour already prevalent. The need to ‘fit in’ and be ‘accepted’ can often put pressure on individuals to conform. Culture can change over time as new people join the organisation, and as external factor change.
Charles Handy observed behaviour in a large number of organisations and described four main types of culture.
The centralisation of power is the main factor of this type of organisation. One person makes all the decisions. Individuals may feel suppressed by those with power. A ‘Power Culture’ is evident within Lewis Jeans.
Typically found in large organisations divided into layers of offices and officials. Power is hierarchical and determined by a person’s position within the company. Strict job descriptions and communications prevail. Very little scope for individual growth or development.
A job or project orientated organisation. The task dictates how a team works, not strict, set down rules and regulations. The freedom and flexibility can make for a rewarding work environment. Due to the lack of formality, the management and control of a task culture can be difficult.
An organisation with a cluster of people, all working at the same level. Hierarchies cannot be formed without mutual consent.
Changing a culture to fit the objectives of the organisation is not straightforward. Some writers believe that the culture is created by the people, and a manager cannot change it on a whim. It is widely agreed that the actions of managers can have a profound influence on the culture within an organisation, far more so than written statements about what should happen.
A move away from the ‘power culture’ within Lewis Jeans could have profound effects on the attitude of workers. Empowering managers to make decisions, to run their departments, and to build confidence and desire within the workforce, to succeed for both themselves and for the organisation. A narrower span of control for the management team will force them to concentrate on the direction of the business and not be directly involved in the intricacies of production, distribution, and marketing. Providing suitable structures, quality managers, systems of work, and staff motivation needs are met, the Managing Director and his team need to be figureheads for the organisation, inspiring confidence, fairness and trust in all.
Lewis Jeans has developed a trend for a rapid turnover of staff. Less than 50% have been within the company for more than a year. This creates problems for the organisation: A lack of specialised and skilled staff. Low Morale amongst current staff. Poor image in the wider community, from where new employees may come. A lack of team vision. Little motivation to excel, and to rise to the challenges facing the company.
Managers can only perform well, and achieve the objectives required if they have an equally motivated team working with them.
To make a realistic analysis of the workers at Lewis Jeans, it is necessary to relate to some research into motivation, and lack of it.
Maslow popularised the theory that people have needs. Maslow developed a ‘Hierarchy of Needs’ and concluded that when the needs of an individual were met at one level a higher level of motivation would develop. The levels from lowest to highest are: Physiological Needs Shelter & Safety Love & Belonging Esteem Self Actualisation
When applied to the workplace it can be seen that work can provide a means of helping people satisfy their needs. Not everyone has the same needs, so this must be taken into account.
Hertzberg carried out research based on interviews to find out what satisfied and dissatisfied workers. He found a number off areas which were a potential cause for dissatisfaction. He called these ‘Hygiene Factors’. Only when the hygiene factors have been adequately met can other factors improve performance. These are called ‘Motivators’.
By considering the structure, management style, leadership and culture at Lewis Jeans, and then considering the factors mentioned above, it becomes clearer as to why the retention of staff is at a low ebb. The giving of financial bonuses and such incentives can provide short term solutions. It is necessary to consider that these production bonuses, coupled with low levels of motivation within the company are the major factor affecting the poor quality of goods. Staff have little loyalty to the organisation, and can see that turning out large quantities of goods, regardless of quality can result in useful additions to wage packets. There is a wider range of needs and motivators for most staff. If they feel used, undervalued, and have little chance of self improvement then motivation to perform will suffer. Whether it involves leaving the company, or working at levels that reduce quality purely to realise financial bonuses. These symptoms are all clearly visible within the company.
However, it is also a basis to design strategies which will alleviate such problems. Motivating the workforce through empowerment, delegation, recognition and a chance to improve themselves will promote a real change in the workforce.
Regular staff appraisals are an essential part of developing a company’s human resources. A yearly meeting with each member of staff allows both sides to highlight areas where performance has been good, and to look at areas of difficulty which may need some attention. It allows the appraisee to highlight development needs they may have; this could include training courses or aspirations for promotion. The appraiser needs to ensure that a fair and non-confrontational approach is adopted, and to make it clear that the meeting is for the benefit of both parties. Ideally, the appraiser and appraisee should have suitable paperwork to record their views at least 2-3 weeks before the appraisal meeting. When the discussion takes place, a ‘meeting of minds’ should occur, with both sides agreed on a way forward for the next year. An appropriate system of referral to another manager should be in place in case agreement cannot be reached. The process needs to be transparent and honest. Staff can become resentful of appraisal systems if they are not treated to all the facts surrounding the system.
Recommendations for Change
Lewis Jeans as been running under the same organisational and managerial structure for some ten years. In recent times performance has dropped and most of the problems have been created by the organisation itself. This can be changed. Changes in structure can be made fairly quickly. Cultural change can take considerably longer. Strong leadership will play a vital role in changing this culture. The recommendations below should be implemented as soon as practicable to ensure that change takes place. With a change such as this there will have to be a transitional period, but the impetus for change must be immediate.
Initiate changes to a functional structure for the company. Considerable planning will be required to implement changes in property use and re-deployment of staff. This may not be possible in certain cases and decisions will have to be made. Redundancies may be unavoidable, but should be a last resort. There is no reason why the organisation cannot introduce multiple structures to afford the best options to functional departments. Within the Finance Department there is a need for formal structures due to the procedural systems which need to be adopted. This would almost certainly set down fairly prescriptive definitions of what staff should do. Within a production or distribution department there will be considerably more scope for staff to demonstrate individual flair and team-working qualities. There is more option for an informal structure to these departments. This does not imply that an autocratic management style is suitable for any department, but demonstrates that different organisational and management structures can co-exist within one organisation.
Management and Leadership style must change. A Central Management Team will decide on aims and objectives. This should consider input from all levels of the organisation. A Staff Council allowing workers to contribute to the success of Lewis Jeans will undoubtedly motivate workers. Meetings with all levels of management will ensure that managers feel trusted and empowered to deal with their own departments, the areas in which their expertise lies.
Changes in management style will certainly affect the ‘culture’ within Lewis Jeans. The ‘power culture’ which currently exists is detrimental to the future success of the business. People will determine the success or failure of this organisation. A move towards a ‘task culture’ where staff work in teams, where there is little need for authoritarian management, where people feel that they can succeed and develop, should be the aspiration of the company. There can still be a discipline within the culture, but it should be more orientated towards ‘self discipline’ rather that autocracy.
Motivation of staff needs to be a focal point. All the recommendations above will contribute to this. Financial incentive, if delivered correctly can to a certain extent motivate workers. There are many other factors involved. A share of profits rather than production bonuses will focus staff on company success rather than short term individual gain. The need to ensure quality of goods thus increasing the good reputation of Lewis Jeans will lead to success and higher profits. These successes, which the workforce will have played a direct role in, will lead to financial reward and personal pride.
Communication between all sections must improve. Within this report we have discussed various strategies to enhance inter-personnel communication. There is also a need to communicate organisational plans to the correct areas. The Central Management Team meetings will agree strategy. This should be a consultative process. It is essential to draw on all areas of expertise within the organisation. Consultations with key staff and trades union officials / staff council members will assist co-operation. Weekly team meetings will allow concerns to be passed up the chain of command if necessary. Senior managers need to communicate directly with team leaders where possible. The telephone should be in place as a backup system. The use of electronic communication / video conferencing can be utilised for remote locations.
For growth to occur for Lewis Jeans, a wholesale evaluation of the marketing strategy needs to take place. The previous ten years have allowed Lewis Jeans to fall behind the current market leaders, with regard to diversification of the product base. The days where one style of jeans suited all are gone. There needs to be a thorough evaluation of current and future trends, and a marketing strategy adopted to reflect this. There may be a need for project team to be developed (this could draw on expertise from throughout the company) to create a radical marketing plan. This will need to consider product development, publicity, distribution methods (mail order catalogues, internet based sales, retail outlets). New products need to satisfy the needs of the existing clientele, but to drive the products into the 21st Century.
The image of the product is important. Potential users need to feel that these products can make a fashion statement. A large scale public relations exercise should be used to change opinions among the targeted public. This can consist of press releases, product publicity, advertising to show this exciting brand. If packaging is necessary it can be used to make the product noticeable, to convey the brand image, and to make it appeal to customers. Marketing therefore, needs to be at the forefront of the strategy.
This report places some exacting demands on Lewis Jeans. There are no simple solutions to its current problems. However, the organisation can turn its fortunes around if it accepts this report as the first building block towards future success. There will be no room for egos in the revitalised Lewis Jeans. Everyone MUST pull together to make this happen. People are the strength within this organisation, and with a unified, dynamic, progressive team, success is certain.