Management of the Container Store - Assignment Example

? The Container Store of the of the The Container Store Introduction The quest for excellence is a never ending exercise- the best organizations and people are always on the lookout for principles and practices that will have them not only excel and outperform the competition, but also serve to carve out for them an enviable niche that cannot easily be replicated by others in the industry. Best practices have existed ever since Peters and Waterman published their groundbreaking research in 1982 entitled ‘In Search of Excellence: Lessons from America’s Best Run Companies.’ In it, they defined many commonly observed traits of well known organizations in the practice of management in its different aspects. Here was nirvana for organizational success- the magic formula one could replicate and make its own and hopefully rise to the top amid the competition. Thus the idea of high commitment HR theory and practice was born. We all know that quality is never an accident- it is almost always the result of painstaking and committed effort (Aquayo, 1991). We see this effort in Japan’s adoption of Edward Deming’s Total Quality Management principles, Motorola’s Six Sigma Manufacturing, Philip Crosby’s The Eternally Successful Organization and even Peter Senge’s The Learning Organization. Like any living creature with a body and soul, an organization too has strengths and weaknesses. The organization and its management must also continually learn from and adapt to changes in its internal and external environment, without which it would be hard to survive and prosper. This is what strategic management is all about. From a reading of the case, it is clear that the Container Store has been quite successful in creating and maintaining its niche market in the Storage and Organization retail segment of the home furnishing and house ware retail industry. From humble beginnings in 1978, the company managed to carve out and maintain an enviable position for itself as market leader in an expanding niche market. The Container Store management however realises that competition is fierce and to meet this challenge they have embarked on a high commitment HR strategy that treats the employee as a centre point for sales, work productivity and an attitude of service with a smile. As Vice President Sharon Tindell has observed, the company needs highly trained and committed people to sell its specialised products. Its niche is to sell the hard stuff. However, keeping staff motivated and satisfied is not without its challenges and as we shall see, the HR manager of the enterprise would be hard pressed to create a performance appraisal system that is adequate for its employees, yet equitable and justifiable so that it is appreciated by all. Mission and Guiding Principles of the Container Store As we can see, the foundations of success of the Container Store are very much ensconced in its mission and guiding principles. The mission of the Container Store is the words of its chairman Boone, ‘to better the lives of consumers by giving them more time and space.’ To this end, it has connected employee and customer satisfaction, for it believes that there is no better way to satisfy a customer than by putting him in contact with a highly satisfied, well trained and fully committed employee. The company is convinced that eminently satisfied employees display a service and work attitude that is enviable and that results in better sales, more customer satisfaction and a WOW experience every time. Furthermore, the hours of dedicated and specialised training that is invested in employees whether full time or part time also make one want to produce more sales and satisfaction for the company. In fact the company has consistently been rated as one of the best, if not the best, in customer service and employee satisfaction for a number of years running in the industry. The company has a stringent employee selection and recruitment process that consists of a telephonic interview, a group interview and followed by two or three lengthy one to one interviews that could last a number of hours. Clearly the company takes its hiring and training processes very seriously- it has been known to keep positions vacant for as long as two months if a suitable employee has not been found. On the other hand, the company has been known to rely on employee referrals- most of the hired staff are family, friends and neighbours of already existing employees. This helps them adapt to the culture of the organization quite rapidly and with a minimum of fuss. I guess the employee satisfaction of working at one of Fortune 500’s best rated companies is the best advertisement for recruitment and many would be envious to be given a chance to live up to it. Among the six guiding or foundation principles of the company are (1) fill the customer’s basket to the brim; (2) don’t stop with providing the obvious; (3) get from average to good to great; (4) intuition is preceded by training; (5) create an air of excitement for the buying customer and (6) win by providing the best service, the best selection and the best pricing at all Container Stores. A little reflection will show that all of these principles are based on getting the customer to buy, giving him or her ideas or uses for products that he may have heard or not heard about, striving to improve sales productivity, and leaving the customer with a sense of satisfaction about his or her shopping experience. Rather hard sell, I would think, and could lead to a dissatisfied customer. For instance, I can figure out if I am being hard sold something and hate being pushed into these situations. I would rather that a salesperson asked me what I wanted, recommended something or gave directions to the display area and let me choose for myself. If I was not sure about something, I would ask, but I hate being sold. However this may be part of high commitment selling and the Container Store prides itself on the fact that most of its employees know and practise these principles daily. Analysis of External Environment Let us now move on to an analysis of the external environment in which the Container Store operates. It is clear that not so long ago, even this new storage and organization segment that the Container Store created in 1978 was full of opportunities. This led to a number of new and established firms entering this segment. However since 2005, there have been some ups and downs affecting competitors. For instance in 2005 Organized Living failed in its bid to go national due to financing difficulties and had to sell off 22 stores and declare bankruptcy. Similarly the owner of Hold Everything, Williams-Sonoma plans to close down all 11 of its specialty storage and organization outlets in the near future. Its CEO is of the opinion that this segment is losing its value as a specialty segment, and would prefer that his company reduce the extra investment and incorporate the line into the greater household furnishing retail segment as they had before. So although Store Corporation is still the market leader, its competitors may be seeing something that this enterprise does not. Sometimes we are blinded to the reality of changing circumstances when we have invested a lot of time, effort and resources into stocking of goods, recruiting and training employees, as these are the cornerstones of Store Corporation’s success. Still, it appears that all hope is not lost as the retail industry is America’s second largest employment provider, giving employment to as much as 11.6 percent of the population. Moreover, the turnover rate in this sector is as high as 90 percent. However given that most of this is because of low investment in employee recruitment and training efforts, one can strive to create a better and more conducive environment for employee productivity and that is what the Store Corporation has done. The total market value for this sector grew from 1.44 billion dollars in 1994 to over 8 billion dollars in 2004. In 2004, the top 100 companies in the retail sector experienced a phenomenal growth rate of up to 9.2 percent. The storage and organization sector in the home furnishings category had already experienced a growth from 5.3 percent in 2000 to 10.5 percent in 2002. The retail industry has also been plagued by lawsuits by female staff complaining of discriminatory practices at Wal-Mart and the Home Depot, two of the nation’s biggest retail store ownerships. Analysis of Internal Environment The Container Store has been able to achieve a phenomenal growth rate of 20 percent for the last 20 years which is an enviable feat. The company had been created on a sure footing with a clear strategy to dominate the storage and organization segment of the home furnishing sector of the retail market, and its focus on this area has not only made it the leader in this niche market, but also contributed handsomely to sales and profits. Container Store has been rated number one as the best company to work for in 2 years running, in 2000 and 2001, which is an industry first. While it has lost this position to others, it still ranks in the top 10 and was placed at number 6 in 2006. The company prides itself on investing 18 percent of its revenues towards employee training and morale. It has a stringent hiring and selection, orientation and training process. The recruitment head trusts that proud and hardworking employees will also make good referrals to the organization. Successful employee referrals are paid $200 for helping fill the human resource needs of Container Store. How the Container Store Fits the High Commitment HR Model It is abundantly clear as one reads the Container Store case that much of the success of this enterprise is owed to the administrative and hiring abilities of its top management and the quality and talent of its workforce. An insistence on quality hiring and training has enabled the organization to hold on to its human resources. Turnover is as low as 10 percent in a sector characterised by seven hours of training on the average and expenditure per employee between 3 and 4 percent of revenues. The company also has a number of perks and benefits for employees regardless of level. These include a 401K savings plan, health and dental benefits, a 40 percent discount on merchandise, salary better than the industry average, individual and team based incentive programs, customized employee specific training programs, and encouragement towards open communication. All these elements are signs of a good and strong commitment to employee needs. In return it is expected that the employees should also work with high commitment and high performance towards the achievement of the organization’s goals. We often talk or hear of high commitment, high performance organizations but it is rare to see them in practice. This is because creating such an organization requires a long term and well thought out strategy. According to Professor Michael Beer of the Harvard Business School, the leaders of such organizations see beyond the current bottom line and next quarter’s earnings. They emphasize a commitment to the ultimate goal of creating an organization that has the best value for their employees as well as the customers (Beer, 2009:15). Once they have this covered, everything else falls into place. They build or recreate an organization that allows people to share and communicate in the goals and perform at their best level of efficiency. Feedback is supremely important, and the role of HR key in shaping these changes. HR acts as a catalyst in this case and helps coordinate efforts between top management directives and employee performance and work attitudes. The best organizations make mistakes and learn from them, they are not afraid to try and fail but should also know what motivates people to perform at their best. This involves an understanding of employee motivation and how to get commitment from them. Knowledge, courage and the ability to learn are important factors as well. If we look at the situation in Store Corporation, we see that there is a strong commitment to both the employees and the customers. Therefore it is a high commitment high performance culture. Employee satisfaction is supposed to translate into better employee work efficiency and performance in sales and customer satisfaction, giving the customers a good reason to come back again and again. The strong efforts at employee selection, hiring, orientation and training are all the hallmarks of a high commitment effort. The culture is friendly and supportive rather than one full of cutthroat competition. Employees are encouraged to learn and progress at their own pace, and even select their own roles in the organization. When an employee is so empowered, efficiency and commitment are natural consequences. Problems for a Manager Linking HRM to Performance For those who think living the life of an HR manager at a place like the Store Corporation is easy, think again. How do you improve on something that is almost perfect? The starting point is of course to look at each and every aspect of the HR job and decide whether it is Ok or in need of improvement (Lagace, 2010). This is easier said than done. One needs to have a keen eye for detail in implementing and analysing system and process improvements. If it ain’t broke, don’t fix it is a good rule to follow. Allowing for employee and staff suggestions and rewarding and implementing good ideas should be appreciated. Another way is to look at best practices in other organizations and see if you can employ it in your own. It is best to disturb the status quo only if the benefits are clearly visible. Job enlargement, job rotation and job enrichment may result in boosting the employee’s motivation if he or she sees how his or her job can contribute further to the success of the enterprise. Although the Store Corporation does have an employee appraisal system, it appears that it is not being used properly. Rather than rely on the written appraisal, managers and supervisors are relying on a gut feeling that takes into account the employee’s work attitude, commitment and sense of responsibility. Using what they call an HR Scorecard, HR can show how meeting the enterprise objectives can further an employee’s own career. In fact coordinating the entire efforts of the enterprise and getting the objectives achieved is part of the HR value proposition as a catalyst for change- it makes the organization and its people sought out, wanted and eagerly followed (McGregor, 1985). Recommendations Taking into account the present scenario, for an HR manager having problems linking HRM strategy with pay and performance, the following actions are recommended: 1. All employees and management across the board should be re-educated as to the usefulness of the performance appraisal process and the value of management by objectives (Crosby, 1992). The performance appraisal is a valuable document not only at the beginning of an employee’s career but serves as a historical record of his or her performance, successes and failures. It is a good way to set written objectives with given timelines and performance expectations. Both employee and supervisor should agree on these goals- otherwise HR will intervene. 2. Employee attitude, commitment and communication are important measures as they carry out their jobs, however this is hardly quantifiable in numerical terms. It should be used as an additional measure of performance. After all, there is no point of showing enthusiasm if the sales targets are not being achieved (Carey, 2006). 3. The organization should continue with its present hiring and training procedures. However getting all or most employees from one source i.e. referrals can make it difficult in case of industrial action. Remaining employees are likely to feel for their loved ones in case some are striking or there is some type of industrial action (Senge,1990). 4. Recent claims of discrimination by female staff at Wal-Mart and Home Depot has caused those organizations considerable sums of money. With female staff at 62 percent of the total, Container Store might well be exposed to this eventuality. 5. The company should strike a balance between hiring from outside and through employee referrals. It is likely that employees with relatives in higher management or supervisory capacity will take it easy owing to their clout in the enterprise (Ulrich & Brockbank, 2005). 6. The company should continue to focus on its strengths in selection, hiring and final placement of employees. Training should be given on regular basis or when the employee needs it. Employees should also be allowed to choose their areas of interest regarding job placement, provided they have the required background, interest, skill and training for the job (Massey,2010). 7. Employees should also be encouraged to act as helpers, mentors and guides to new staff so that the orientation process is completed without fear and staff join in and become a productive member of the team and the workforce without unnecessary delays (Wilson, 2010). Conclusion High commitment high performance is a strategy many companies strive to achieve but few can emulate. It requires support from the top, a clear vision and objectives, with each and every department and person willing to pull his or her weight and contribute to the departmental goals and overall success of the enterprise. The Store Corporation as the market leader in the storage and organization niche segment is still going full out to achieve its objectives and this is enviable where the lesser committed competitors have chosen to cut back. It is clear that the cornerstones of its success lie in excellent recruitment, training and employee and customer satisfaction endeavours. Following these principles, it is highly possible that Container Store may continue to be successful in the present scenario for some time to come. References Aquayo, R. (1991). Dr. Deming: the man who taught the Japanese About Quality, 1st ed. Fireside Books. Beer, M. (2009). High Commitment High Performance: How to Build a Resilient Organization for Sustained Advantage, 1st ed. Jossey-Bass. Crosby, P. B. (1992). The Eternally Successful Organization. Mentor Books. Knowledge @W.P. Carey (2006). High Performance, Strong Performance: Companies Can Have Both. May 24, 2006. Lagace, M. (2010). Resolution 2010: High Commitment, High Performance Management. Massey, T. (2010). Ten Commitments for Building High Performance Teams. Robert Read Publishers. McGregor, D. (1985). The Human Side of Enterprise. McGraw Hill/Irwin. Wilson, B.G.(2010). Love at Work: Why Passion Drives Performance in the Feelings Economy. BPS Books. Peters, T,; Waterman, R. & Peters, T. (1988). In Search of Excellence: Lessons from America’s Best Run Companies. Senge, P.M. (1990). The Fifth Discipline: The Art and Practice of the Learning Organization. Crown Business Books. Ulrich, D. & Brockbank, W.(2005). The HR Value Proposition. Harvard Business Press. Read More