Sainsbury - Organisational Diagnosis and Problem Analysis - Essay Example

Sainsbury (branch level) - Organisational diagnonis and problem analysis Table of contents Executive Summary 3 Introduction 4 2. Description of research method 4 2.1 Documentary Evidence 4 2.2 Limitations of the research method chosen 5 3. Current situation of the organisation 5 3.1 PESTLE analysis 5 3.2 Organization system map 7 3.3 McKinsey 7S Model 7 3.4 Mintzberg’s model 9 3.5 Organisational culture 10 4. Increase of effectiveness of the organisation 11 4.1 Identification of external triggers for change 11 4.1.1 Economic Recession 12 4.1.1.1 Multiple cause diagram 13 5. Change strategy for addressing the problem 14 6. Recommendations 15 6.1 Presentation of suggested intervention method 15 6.2 Action plan 16 References Executive Summary The development of the supermarket industry in Britain has been gradual but continuous. The firms of the specific industry have all significant potentials – as also weaknesses. Sainsbury’s is one of the key competitors of the particular sector. The firm has not severely affected by the recession, at least up to now. However, it seems that the inability of its leaders to respond to the needs of the market, as increased under the pressure of the global financial crisis, has caused turbulences in the internal organizational performance. Moreover, instability has been also developed in regard to the firm’s financial performance, a phenomenon made clearer from June 2010 onwards. The changes suggested in regard to the firm’s leadership should be more effectively promoted trying to avoid delays in the restructuring of the organization aiming to minimize the risk of potential damages. It seems that through an effective plan of action the firm will be able to stabilize its performance in the British market and seek for further growth. 1. Introduction Under the influence of globalisation, firms in all industries have to continuously update their practices in order to secure their position either locally or internationally. In certain sectors, competition is extremely high, especially when firms of similar characteristics are involved. The UK supermarket industry is an indicative example. When trying to develop their organizational plans, the firms that operate in the particular industry have to face a series of challenges and barriers. Current paper focuses on the review of Sainsbury’s organizational structure and practices. Efforts are made so that the firm’s organizational problems are diagnosed; among them, one is chosen and is further analysed and evaluated. Also, recommendations are made so that the specific problem to be eliminated or, if the above target is not feasible, just to be effectively controlled. In this context, a series of change intervention methods are presented and appropriately justified, aiming to support the improvement of the organizational performance, as expected to result from the limitation or the elimination of the firm’s key organizational problem. 2. Description of research method 2.1 Documentary Evidence The research over the organizational structure and performance of Sainsbury’s is based on appropriate documentary evidence, which includes material of the following kind: books published in the academic literature, articles published by organizations focusing on financial evaluation (e.g. Bloomberg), articles of newspapers and non-governmental organizations and reports published by the organization under evaluation. The material described above is appropriately categorized – in terms of its relevance with the issues under discussion and is used in order to support the arguments developed in the paper. Most important, through these documents, the potential failures of the organization are identified (along with its strengths) in the context of the needs of this study. 2.2 Limitations of the research method chosen The documents employed in this study, as describe above, refer to different time periods, so that the performance of the organization under different market conditions to be identified. However, the specific research method has also certain limitations: a) not all organizational issues and challenges are identifiable by researchers, economists and journalists, i.e. by people in the external organizational environment. The above issue has been addressed in this study in the following way: reference is made to the interviews of the firm’s CEO and of other members of the board, so that details from the internal organizational environment to be included in this study, b) the documents on which the research for this paper is based need to be reviewed carefully; personal views included in these documents should be taken into consideration only if helping to understand the issues under examination. In any case, the potential existence of subjectivity in regard to the text of these documents should be also taken into consideration. 3. Current situation of the organisation In order for the organizational structure to be fully explored, a series of appropriate theoretical models have been used. Through these models all aspects of the internal organizational environment are identified and appropriately analysed. 3.1 PESTLE analysis The PESTLE analysis refers to the organization’s external environment and is related to the following sectors: a) political; the political environment of Britain is stable; no particular turbulences have been reported in regard to the country’s governance; on the contrary, any potential failure in the political decisions taken in regard to internal social and economic activities is covered by the use of integrated diplomacy on the country’s external affairs, b) economic; the economy of Britain currently faces severe pressures by the recession, as also in most countries worldwide; however, Britain has its own currency, a fact that allows flexibility in economic decisions. Moreover, Britain is an important node in the context of international trade, a fact that helps towards the standardization of the country’s position in the international market, c) social environment: social environment in Britain is free from turbulences and conflicts; human rights are respected and multi-culturalism is promoted; therefore, no threat from turbulences in the British social environment exists from organizations operating in the local market, d) technological environment: Britain is a country with advanced technology; businesses in all industrial sectors can have access to advanced technological features securing the adequate support of their operations; from this point of view, no technological failure or gap would be justified for firms operating across Britain, at least at the level that provision has been taken so that necessary IT systems are in place, e) legal environment; business activities in Britain are regulated through a series of laws, which guarantee the effective resolution of any conflicts in the internal and the external organizational environment (for example, the Companies Act of 2006, as revised in 2009, the Competition Act 1998 and the Enterprise Act 2002, Department for Business, Innovation and Skills, 2011), f) environmental factors; in Britain sustainability is highly promoted in regard to all aspects of daily life; organizations that try to incorporate sustainable practices can be supported by relevant programs of governmental or non-governmental organizations (Department for Environment, Food and Rural Affairs, 2011). 3.2 Organization system map Sainsbury’s – Organization system map The organization’s system map is presented above. Reference is made to the relationship between the organization and its external environment and not to the internal organizational structure and relationships. The above map is important in order to understand the external factors, which influence the organizational performance; among these factors, the one that negatively influences the organizational performance will be identified and analysed, at the level that this factor is related to a specific organizational problem, as explained below. 3.3 McKinsey 7S Model McKinsey 7S Model is based on the view that ‘there are seven factors that can most influence the organizational development: strategy, skills, shared values, structure, systems, staff and style’ (Karlof 1993, p.163). The specific model is likely to be used when the development or the restructuring of an organization is required (Karlof 1993). The above factors can be further analysed as follows: a) strategy reflects the methods required for achieving organizational goals, b) skills are the capabilities of those involved in the particular process, c) shared values, meaning the aims of the organization, d) the structure refers to the organizational structure, e) systems is a terms used for denoting the procedures through which the organization’s resources are engaged in the achievement of organizational goals, f) staff, i.e. the human resources of the organization and g) style, meaning the leadership style applied on a particular organization (Wickham 2000, p.380). Through the above model, the organization’s key structural and operational characteristics can be identified so that the organizational change to be appropriately prepared (Burtonshaw-Gunn 2009, p.233). In the McKinsey 7S Model presented above, the key characteristics of the organizational structure/ strategies are presented. The above details will be used in order to identify the elements of the organizational structure/ strategy that needs to be changed. Among these elements, the one, which is most critical for the organizational performance, will be highlighted and analysed. 3.4 Mintzberg’s model In the context of the Mintzberg’s model, managerial roles are likely to be categorized in three major groups: interpersonal, informational and decisional (Hernandez-Marrero 2006, 19). The above model can be used for identifying ‘the level and the quality of coordination among the various organizational mechanisms’ (Van Assen et al. 2008, p.161). In the firm under examination, which is structured in accordance with the principles of bureaucracy, a democratic leadership style is used; in other words, difference seems to exist between the leadership style and the organizational structure. It is perhaps this difference that has led to internal organizational turbulences, as explained in the following sections. The organizational structure in the firm under examination can be characterized as a machine bureaucracy, which is characterized by simple procedures and large operational units (Ghertman et al. 1997). The organizational structure can be represented using the Mintzberg’s model through the graph below). In the above graph, a common form of the Mintzberg’s model is presented, followed by explanations on the hierarchy of positions and rules across the particular organization. 3.5 Organisational culture The culture of Sainsbury’s incorporates the following characteristics: effort for delivering the best possible products without negatively affecting the environment. At the same time, emphasis is given on the relationship between the organization and the community. Employees are also considered an indispensable part of the organization, having key role in the realization of the organizational projects (Sainsbury’s 2011, Our goal). It seems that the firm values significantly its customers, trying to secure the quality and the low price, as possible, of their products. At the same time, the non-food sector of the firm is continuously growing incorporating services, which are valuable, such as the clothing department and the Sainsbury’s Bank (Sainsbury’s 2011 Corporate Objectives). The current market share of the firm in UK market has been estimated to 16% indicating the success of organizational aims but also the need for further growth. In terms of its employees, the firm’s culture is unique, highly emphasizing on diversity and equality: the brand ‘You Can’ has been established for giving the chance to people of different background and capabilities to participate in the firm’s daily operations (Sainsbury’s 2011 Careers). The above brand is based on the following values/ principles: ‘equality, diversity and inclusion’ (Sainsbury’s 2011 Careers). Rewarding is also promoted in the specific organization. Apart from the high salaries and benefits, the bonuses of the firm are also used for rewarding employees for their contribution. In 2010, about ‘127,000 employees of Sainsbury’s were shared a bonus of over £80 million’ (Sainsbury’s 2011, Engagement and Recognition). An annual conference is also held for further support cooperation and collaboration in the workplace (Sainsbury’s 2011, Engagement and Recognition). In accordance with the above, organizational culture in Sainsbury’s can be characterized as a combination of two different elements: flexibility for responding to the needs of customers and understanding for offering to its employees the necessary support. 4. Increase of effectiveness of the organisation In accordance with the issues discussed above, organizational structure should be changed aiming to increase the firm’s effectiveness within its market. Reference should be made primarily to the causes of the change, meaning the external events due which organizational restructuring has to proceed. The emergent need for change in Sainsbury’s is related to an important organizational problem, which seems to affect the relationship between the organization and its customers. Primarily, the organizational problem, which needs to be addressed as early as possible, will be presented. Then, a hard system model would be used for dealing with this problem. The choice of the specific methodology of change is also justified below. 4.1 Identification of external triggers for change 4.1.1 Economic Recession Sainsbury’s has managed to face the global crisis effectively. In fact, the effects of the crisis of 2007-2010 on the organization’s performance have proved to be limited. An indicative example of this trend has been the performance of the firm in December 2009; for the 7 days that followed the 25 December 2009, the firm reached record levels in terms of performance, while its competitors lagged behind (Thomas, 2010, Wearden 2010). In fact, the firm’s performance for the last quarter of 2009 has been significant, leading the firm to a further growth within the particular industry. In 2010, the above trend continued – with temporary performance problems in the summer of 2010 (NewStates Man 2010, Wilson 2010). In December 2010, a similar growth of the firm’s profits has been reported (Poulter 2011). In 2011, the firm’s performance has been declined, a fact that also caused the decrease of the firm’s share price (International Business Times 2011). The decline in the firm’s profitability worried analysts and economists who think that a continuation in the decline of the firm’s share price could cause severe turbulences in the British supermarkets industry (Shannon 2011). In any case, the level of reduction of the firm’s profitability has been considered as a critical sign of the need for changes (Easier Finance 2011). Apart from the recession, in the context of which market conditions can become extremely hostile, the firm has to face its internal problems. One of the most important challenges of the firm is the successful implementation of its innovative schemes, especially of the scheme involved in the establishment of self-checkout points in the firm’s stores across the country. Initially, the introduction of this technology was considered as a potential solution for the limitation of time in checkout. In practice, the relevant projects have failed to meet the targets set by their initiators. In accordance with a relevant report, about 48% of people across Britain consider the specific technology as ‘nightmare’ (BBC News, 2009). The notice for ‘an unexpected item in the carrier bag even when one has paid for it’ (BBC News, 2009) is a common phenomenon in supermarkets, which have introduced this technology. In Sainsbury’s also, which has established such machines in 220 of its stores (BBC News 2009) the negative aspects of this technology were difficult to be controlled. In fact, in Sainsbury’s the weaknesses of the specific technology had been revealed early, since 2003, when the first attempts for introducing this technology in the firm’s store were made (Computer Weekly 2003). In the context of the recent recession, the firm’s manager considered the promotion of innovative schemes, such as this technology, as an effective solution for stabilizing the firm’s performance. Their estimations have been verified, at least up to now. However, since the firm faces severe financial pressures, it would be necessary for changes to be initiated. A plan of change is suggested below, using a hard systems model. Primarily, a multiple cause diagram is provided in order to show how economic recession affects the firm’s operations, even not directly, and leads, gradually, to the limitation of the firm’s growth making the need for change emergent. 4.1.1.1 Multiple cause diagram 5. Change strategy for addressing the problem Because of the nature of the problem, a hard systems approach would be most appropriate for controlling its effects. Through this approach, relevant changes could be suggested aiming to increase the firm’s effectiveness in the particular sector. In the multiple cause diagram presented above it is made clear that the failures of the firm’s self-checkout points can be considered as related to the recession – in the context described above. The changes required for the resolution of this problem could be identified through a hard system’s model, as presented above. In accordance with Boczko (2007) the hard systems theory is used in those cases where the following two criteria are met: a) an ontological dimension of the problem and b) the conditions need to change from chaotic to normal and stable (Burrell et al. 1979, in Boczko 2007, p.47). From another point of view, a hard systems approach should be used when the resources engaged in the change process are specific (Ragsdell et al. 2002). Another perspective of the hard systems approach is that in the context of this approach, a clear objective is set and then efforts are made to achieve this objective (Jackson 2003, p.51). Indeed, the problem, which has been chosen – among other organizational problems – is that related to the performance of the firm’s self-checkout points. In this case, the problem is pure technical. The specific IT system fails to meet its technical requirements causing severe delays in the firm’s checkout areas. Therefore, the change required would be involved in technology – at least at first level; then, a different approach may be required, i.e. a soft – systems approach, which would require extensive measures, for instance, the replacement of the firm’s CEO, an idea which was first promoted in the organization last summer, after a period of severe decrease in the firm’s profitability (Hall 2010). The decision of the firm to ask Brittin, a former senior manager in Google, to join Sainsbury’s board (Lovett 2011) can be considered as an indication of a more decisive practice by the firm’s board to control the limitation of organizational profits. 6. Recommendations 6.1 Presentation of suggested intervention method An intervention method should be used for promoting change in the particular organization, referring to the improvement of the self-checkout points so that the time needed for the completion of the relevant process to be reduced and for failures to be eliminated. The most appropriate intervention method would be personal, i.e. the managers of the organization should be of two different forms: a) as for suppliers, meetings should be arranged; emphasis should be given on the quality of the technology provided; a series of issues, like compensation in case of further failures, should be discussed with the suppliers, aiming to face the problem effectively, b) as for customers, explanations should be provided to each one of the them regarding the use of the machine; the appointment of employees who would be responsible for this task could help to reduce problems and delays at the firm’s self – checkout points. Through the above strategy, both aspects of the problem would be addressed – no matter whether only one of them or both have mostly contributed to the above problem. An action plan of the required activities is analytically presented below; this plan could help to address all potential issues related to the specific problem, aiming to prevent primarily its further expansion; then its limitation could be gradually achieved. 6.2 Action plan The action plan in regard to the elimination of problems related to the performance of the firm’s self-service checkouts should be developed in the following phases: In stores of the firm: Meeting with employees in stores in order to discuss on the aspects and the consequences of the problem Discussion with employees of their willingness to participate in support teams who will assist customers in the self-service checkouts Development of these teams and arrangement of their work hours and their training needs The members of each team will report on a weekly basis to the manager of their store regarding their experiences in the particular position and the problems that they had to face In regard to the suppliers of the relevant technology: Meetings should be developed with suppliers for identifying potential solutions for the improvement of the relevant systems Technicians of the suppliers would be asked to check thoroughly all existing self-service checkouts in the firm’s stores Arrangement for the provision of technical support for these systems on a daily basis, primarily through a phone-line, should be arranged with suppliers Arrangement should be made for replacement of these systems, with no extra cost for the firm, if the failures continue References BBC 9 December 2009. 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