Organizational Design Change.
The Retail Industry Is TransformingTwo things retailers must do now
First, the good news: retail sales picked up in December driven by improved demand at car dealers, Internet retailers, furniture stores and building materials outlets. But sales continued to decline at department stores, restaurants, and electronics/appliances merchants.
Retail is undergoing the biggest transformation in decades. Most department and specialty store operators announced terrible holiday sales and negative comps. As reported by CNBC, RetailNext found that, despite a spike at the end of the holiday season, sales and traffic fell in double digits for many brick and mortar retailers. But this isn’t a seasonal problem.
America is completely over-stored. According to Howard Davidowitz of Davidowitz and Associates we have three times the retail space per person of the United Kingdom, Japan or Canada. CoStar estimates that over one billion square feet of retail will be closed or converted in the coming years. Over $50 Billion in real estate debt on retail stores is coming due in the next eighteen months; this is in the context of a rising interest rate environment and low economic growth (no more than 3% of GDP).
Retail experts expect tens of thousands of stores to close in the coming years. These are some of the store closings announced just this month:
- Sears will close another 104 stores, laying off 4,000 employees. They have closed more than half their stores since 2011. Roughly 80% of remaining 714 leased Kmart Stores and half of the 386 remaining Sears stores will come for lease renewal in the next five years and will likely be shuttered.
- Macy’s is closing 68 stores, laying off 6,800.
- Limited (owned by Sun Capital Partners) is closing all of its 250 stores, and will probably liquidate merchandise online.
- Abercrombie & Fitch will likely close up to 50% of its remaining 745 leased stores over the next 18 months, as leases expire.
- American Eagle is expected to close 185 stores over the coming year, as leases expire.
Thousands of employees will lose their jobs in the ongoing shift from brick and mortar to online retail. Even Walmart, once expansionary, is now closing stores in favor of investments in online retailing. Walmart spent $3.3 Billion to buy Jet.com, a money-losing online retailer that is barely one year old. And why not – online retail represents only 10% of the retail market and is expected to climb to over 50% in the next fifteen years. Amazon just announced they will hire another 100,000 employees in the US over the next 18 months. Retail sales are systematically shifting online and the biggest beneficiary of that trend is Amazon and any retailer that gets ahead of the trend.
Retail companies need a proven, disciplined approach that delivers results.
So what does that mean? First, make hard decisions quickly. Uncertainty is the retail leader’s greatest enemy. It is more important than ever for retail companies to have a plan to steer through this tsunami of a marketplace.
To do this, leaders must be certain. Align the entire management team around a common vision and strategy, and do it with speed. Playing catch-up is not good enough, as many retailers have discovered the hard way.
Once you have a well-conceived plan and your leaders are aligned, create momentum. How do you create momentum across your entire company? There are two essentials.
- First, focus on your early adopters. Get them engaged and working toward the new way of doing business. Yes, you will need the entire company behind your changes, but don’t try to win every heart and mind at first. Ironically, you’ll move faster if you identify and deploy influential people, ate every level, who will adopt your change and get moving.
- Next, make the change feel familiar, controlled and successful to employees. They have to feel safe and confident of success, or you’ll get nowhere. Moreover, research shows we must create momentum within 90 days of launching a change – again, speed is of the essence.
So management needs more than a plan; they must engineer momentum by using the right people and launching the right activities. In a vacuum of direction, employees are uncertain and afraid; lack of certainty will make any initiative fizzle.
Strategize fast, align and get on-message, and create momentum. The whole marketplace is changing forever, but the swift and strong will survive.
Christian is Vice President, Consulting for Emerson Human Capital. Christian has led enterprise-wide transformational retail consulting projects for Gallup and Accenture and worked in global development for Walmart and Metro AG.
Organization Structure for Learning & DevelopmentThere is no one best model for a learning and development function, but there is a best model for your organization.
There is no one best model for a learning and development function, but there is a best model for your organization.
In any company, L&D interacts with other internal entities according to certain rules: who has decision-making authority, what the roles and responsibilities are, and who owns the money for training development and delivery. So what are those entities? It could be functions within a business – say, Supply Chain or Sales. For a global corporation, it might be geographic regions – North America, Europe, Asia/Pacific. In a consulting company, it might be major service offerings, like Audit, Tax, and Advisory. In a very large company, the components might be a matrix that crosses both regions and functions or offerings.
Whatever the components, your L&D organization falls somewhere on a continuum of authority and centralization. I’ll talk about the pros and cons of structures along this continuum.
The Centralized Model
How It Works
L&D planning and decision-making are driven centrally. Let’s say Jack Lerner is the head of the L&D function for a consumer products company. Jack has a training budget and a team to build a curriculum and courses for each of the functions. He and his team of direct reports are responsible for onboarding, compliance, and leadership programs that cross the functions.
Jack works with each business function to understand its training and development needs. He then looks across all the existing curricula to see whether there are materials or courses that could be leveraged. If Jack can’t find anything, he works with instructional designers – who might be part of his team or a separate service – to build courses the function needs.
Jack prioritizes course development according to the strategic needs of the overall business. For example, the Rental function might be new, and therefore have a heavier need for development than the very mature Manufacturing function.
Why Use This Model
Centralized models are efficient. Jack will have a good view of what is already in the curriculum and what the gaps are. This model reduces redundancy; without this model, each function tends to build its own courses though another function might already have it. A centralized model fosters standardization of content and processes. The model makes it easier to ensure that all training programs are aligned with the strategic objectives of the company rather than the sometimes conflicting needs of each area. Jack gets his budget from the company overall and usually has the authority of how to allocate funds.
If the other entities in the organization aren’t communicating well with Jack or if they don’t have a good understanding of learning and development issues or if they try to circumvent the centralized function and develop training on their own, they risk creating training that is disconnected from the goals of the business. If Jack’s team isn’t large enough and/or skilled enough, they can be too slow and too removed from the business to be useful in a fast-paced functional area.
The Decentralized Model
L&D planning and decision-making reside in the business components. Jack might have responsibility for programs that cross functional areas, such as onboarding and compliance. In smaller companies, these programs might be handled by HR with little or no dedicated L&D support. In either case, some cross-functional programs are typically still held centrally in the decentralized model. The rest of the learning professionals are deployed to the functions. Each reports to the function’s leadership and develop programs specifically for that function.
How It Works
Let’s say that Alicia is responsible for the Manufacturing function’s learning program. Each fiscal year, she and the VP of Manufacturing work on the training priorities and budget to train the professionals. Alicia then partners works with her team to develop the Manufacturing training program for the year. She is aware of the central training that is impacting the people in her group, but has very little visibility to the training is being built in any other business unit.
Why Use This Model
Decentralized models can be very effective and targeted for the business. There is less coordination, as Alicia has a clear reporting relationship only to the function she serves. With the Manufacturing team as her focus, she can respond quickly to every request. Her budget is allocated by Manufacturing, annually.
Because Alicia doesn’t know what the other functional leads are doing, she won’t realize that, for example, each of them is building a course on communications. That means wasted development dollars. Each function must also prepare facilitators to deliver the training. And, and in some areas, they might not have enough learners to make a full class. Alicia might not know there’s a new and innovative program Luis is building for his function, so she won’t take advantage of his best thinking. Finally, since Alicia’s L&D team is relatively small (it might just be Alicia, in fact), she is less likely to grow as an L&D professional.
Finally, in the middle of the continuum is the Balanced Model.
The Balanced Model
In this model, L&D planning and decision making are driven through a central function with significant partnership from the business. Jack has responsibility for the company’s cross-functional curriculum. The rest of the learning professionals or HR business partners are deployed to the functions. They are responsible for ensuring function-specific training is built. They own the functional requirements and the outcomes.
How It Works
This is the most matrixed model. All parties must coordinate, collaborate, and communicate for this model to work well. Jack probably owns curriculum that impacts all employees. This might include onboarding and compliance training as well as professional, leadership, and/or consulting skills. Jack also owns the company-wide training schedule, and the learning management system and other development and delivery technology.
The business partners or functional designees are responsible for understanding and representing the needs of the business and the functional and on-the-job skills that need to be built. Together, the crew works to balance priorities and build an effective and efficient curriculum.
Why Use This Model
When implemented well, a balanced model represents the best of both worlds. There is a deep understanding of the business married with standard processes, tools, and governance. This model is both effective and efficient, particularly when it works within a clear governance structure.
On paper, it seems like the Balanced model should be the nirvana of organization structures, but successful implementation is tricky. It requires all parties to communicate and collaborate in good faith – weighing the needs of each part of the business with the company overall. If Luis decides to create custom communications training for his function, even though there is a company-wide communications course, the model loses some of its value.
These three models are common examples of many possible variations. Organization structures are sometimes more fluid in practice than in design. Think about which L&D organization structure you have, whether it’s functioning as designed – to take advantage of the model – and whether it’s aligned with your company’s overall objectives.