· Shoe Corporation of Illinois (SCI) produces a line of lower-priced women’s shoes. · Average profit per pair of shoes has decreased from 10 years ago. · The company has 2 factories within 60 miles of Chicago and a headquarters; offering 100 to 120 different products to customers each year. · The external environment is unstable, requiring rapid responses to style demands. · SCI’s organization chart is based on Functional Grouping. · Large shoe houses hold the market for “stable” shoe market because of economies of scale, SCI offers trendy styles and their org structure allows for them to be flexible for this. · The volatile product environment of SCI causes friction within the company. An e-commerce department, directed by Olsen, was recently created to help reduce friction but this has not had the desired effect as most employees are resisting change and do not want to use the new technologies. Olsen believes these technologies would increase communication and product awareness and reduce design/production/delivery times. · SCI continues to use outdated procedures for deciding new styles and unclear/confusing production procedures.
· According to Allison, the average time from design to the pilot run is too long but could be reduced and there is too much conflict in the styling phase. · According to Lawson, Flynn is knowledgeable and has gained much experience over the years. Last year, he was promised a raise that he has yet to receive. · Flynn says he is becoming dissatisfied with his job as it lacks creativity, he would like more freedom to design styles but Lawson told him the current process is proven. · Flynn and Freeman feel Allison is overtaxed and his work is suffering. They also feel the procedures should be changes and without consulting others two projects with their new procedures, one successful and one not. · There is conflict between the styling department and one of the factories due to a lack of understanding of each other’s roles and responsibilities. · There is a goal conflict in the various departments and this is causing certain employees to circumvent procedures in order to achieve their goals.
Statement of the Problem
The problem in which Shoe Corporation of Illinois is currently facing is the need for quicker speed of responsiveness to customer expectations and changing trends which is the result of the lack of communication, collabroation and coordination present at SCI, lack of horizontal linkages implemented in the organization’s structure, the absence of a leadership which supports a culture that accepts the use of technology, emergence of conflict between separate departments and the insufficient incorporation of technology into the company’s processes. (Kat: added)
Analysis/Causes of the Problem
The problem in which Shoe Corporation of Illinois is currently facing is the need for quicker speed of responsiveness to customer expectations and changing trends which is the result of the lack of communication, coordination and collaboration present at SCI, lack of horizontal linkages implemented in the organization’s structure, the absence of a leadership which supports a culture that accepts the use of technology, emergence of conflict between separate departments and the insufficient incorporation of technology into the company’s processes.
Charles F. Allison believes that the only way for a small independent company to be competitive is to change styles frequently, be flexible and design shoes that appeal to customers. Since SCI is in the fashion industry its operations fall under the ‘Simple-Unstable’ quadrant of the ‘Framework for Assessing Environmental Uncertainty.’ This indicates that the company operates in an environment with high-moderate uncertainty where there are constant shifting customer expectations and preferences. In this sector managers need to respond quickly to the environmental changes in a fast manner [Viv: grammatical error], constantly produce up-to-date and new products that are tailored to customer needs and [to] adapt to changes in its environment (140).
In addition, the average time from when Lawson decides on a design until they notify Centerville to produce a pilot run takes from two weeks to a month which still after all of this time has not gone through Allison for approval to introduce to the market. Trends change daily and by the time SCI shoes enter stores they are no longer in season; this may be one of the leading reasons why average profits of 30 cents to 50 cents are dropping down to 25 cents to 30 cents per pair, because they are “putting out shoes that are already behind the times.”
According to the Organizational Life Cycles, Shoe Company Illinois is currently in between the ‘Collectivity Stage’ and ‘Formalization Stage.’ [the] Problem in[in?] which SCI currently encounters throughout [in its] the collectivity stage include: workers feeling constrained by upper level manager, departmental managers do not want to give up control, and SCI must discover a method to coordinate the divisions. During the formalization stage communication is less frequent, there is difficulty and confusion with planning and strategy, the company is bureaucratic, and specialization is high with extensive division of labour (Daft and Armstrong, 2009, 303-305). [this is especially true]
Especially when there are currently eighteen departments within SCI which prolongs the process time from when an idea is developed to when the shoe enters the market,[.this makes it difficult for the employees] it becomes difficult for employees to coordinate their activities in a [efficient approach]timely fashion thus creating barriers of communication. All of theses issues only hinder communication, coordination and collaboration which exacerbate the issue of lack of speed of responsiveness. And since the current functional organization design of SCI is no longer efficient and as they pass from the collectivity stage to the Formalization stage of their organizational life Cycle the company will need to make drastic changes in order to succeed.
Another issue that inhibits the speed of responsiveness is the lack of horizontal linkages implemented within the SCI organizational structure which reduces the amount of communication and coordination that can facilitate across divisions. There are currently too many divisions within an extremely bureaucratic organizational structure and Shoe Corporation Illinois is presently experiencing ‘symptoms of structural deficiency’. Primarily, every employee must report back to C.F. Allison which causes decision making at the upper level to be delayed and lacking in quality. This is demonstrated through Allison’s decision making in regards to approving shoe styles; as president Allison is constantly busy as a result “the company has lost a lot of money on bad judgement in styles-perhaps six or seven times in the last eighteen months.”
In addition Allison is occasionally “unavailable to do his styling approvals for several days, or even two weeks.” Allison is overloaded with decision making and has made poor quality judgements due to that fact that there are no horizontal linkages or decentralized decision making. Secondly SCI is not responding to innovation and customer needs in a timely fashion because divisions are not mutually coordinating and communicating their goals and efforts horizontally. And lastly, there is conflict rising between employees from separate departments because there are non-sufficient horizontal linkages that will incorporate the departmental goals within the organizational goals (119-120). This is apparent with the conflict between Lawson (styling department) and Robbins (manufacturing department).
SCI possesses a bureaucratic culture where there is hierarchy overload that is rooted to the organization functional structure and there are numerous steps for each process which slows down the decision making (98). With the absence of horizontal linkages in the organization’s structure, decision making is sent to the upper level managers. The employees cannot make quick, decisive decisions on their own or within teams and they are usually delayed in waiting for Allison’s approval. This issue is a detriment to the organization’s ability to rapidly respond to continuously shifting customer needs and fashion trends as well as discourages teamwork, innovation and collaboration since all decisions are left to Allison. For instance, Flynn (designer) is dissatisfied with his job due to fact that SCI does not encourage or support innovation, experimentation and decentralized decision. Flynn has even proven that his original designs have greatly succeeded in comparison to some of shoes copied from existing styles through the experimentation of ‘project X and project Y.’
Another issue that contributes to the lack of speed of responsiveness is the fact that C.F. Allison, through his leadership, is not maintaining a culture that supports the implementation and use of technology. The biggest issue is that SCI has expensive IT technologies that can drastically improve production and coordination but there is a nonexistent [there is a culture, just not the right one]culture that promotes, communicates or encourages the facilitation of these equipments. C.F. Allison has done little to encourage employees to incorporate technologies[such as the intranet] into their everyday work tasks such as the intranet. Katherine Olsen also commented on how Allison has taken no action in solving problems about employees use and acceptance of technology and only provided a few days’ training to upper and middle managers.
A cause for the lack of coordination among departments and the resistance to technology is the fact that Allison is not providing leadership, commitment or [is]being a role model towards the adaptation of the regular use of technology. According to ‘Value Based Leadership,’ [leaders must influence]it is when leaders influence[the organization’s culture] culture throughout the organization through everyday behaviours (355). But Allison is not promoting or communicating to all of the employees the importance of IT or how to operate the technologies and the benefits of them. As well, culture is what directs the daily tasks of employees to meet goals and helps the company respond quicker to customer needs and external changes but there is a lack of support for a ‘strong adaptive culture’ from C.F. Allison towards technology supported by upper management (355).
[furthermore]Shoe Corporation Illinois is furthermore facing increasing conflict between employees. SCI is a small organization but it is highly centralized. It operates under in a [under a or in a]mechanistic system where tasks are rigidly defined and broken up into specialized and separate components (147). This division of tasks is creating an immense differentiation between departments where each section is solely concerned with its own area of expertise and departmental goals are not aligned with the total organizations’ goals (145). The lack of integration between departments, accentuated by the non use of technology to facilitate this process, is creating goal conflict within the company. For example, the manufacturing department is not collaborating with styling department. A consequence of this differentiation of departments is the segregation of subcultures within the SCI.
In addition, the social capital in the organization is very low because the relationships between employees are not of understanding or of trust (334). Simultaneously, there is a strong Bureaucratic culture established in the organization that is making change hard to implement. “Strong cultures… [are] a danger for many successful organizations in that culture becomes set and the company fails to adapt as the environment changes” (345). In the case of SCI the ‘person-to-person’ approach and the mechanistic system has become part of their culture that is impeding the flexibility that it needs to be further adaptive to external changes.
The last factor that is affecting the time response of the company is the lack of technology implementation to all the processes. The knowledge management currently implemented in the organization is the tacit person-to-person approach (282). Employees in SCI are accustomed to interacting with one another face to face and do not rely on technology for exchange of information, thus resisting the implementation of technology such as the intranet. Unfortunately, this current knowledge management approach is time consuming and not very efficient which adds to the slow speed of responsiveness.
Solution 1 – Investment In Technology
There are many internal coordination issues that are evident with Shoe Corporation of Illinois. Efforts to relieve some of the processing, information sharing, team collaboration, and job enrichment have been attempted to be resolved through the introduction of an intranet; however its implementation and acceptance approach requires much attention in order to exceed the operational goals of the organization.
President Allison and Director Olsen are focused in the right direction with re-structuring core technology and information technology and control. The process from the initial research and development to final product sale is very complex and should be mapped onto a system that would adequately capture tasks and provide reports that would be evaluated for performance enhancements. The current complex workflow and task interdependence could be harmonized with the introduction of an enterprise resource planning system (ERP) where information related to order processing of salespeople, product design between Richards, Flynn, Lawson; plant coordination; manufacturing between Robbins and Lawson, Freeman’s future trends would be centralized.
The integration of these systems would allow managers from various departments which currently lack communication, such as the styling manager and plant superintendent, order clerk and plant superintendent and inevitably, Allison with other managers[to communicate better] while approving and amending information directly on the system. This feature of live updates saves time, money and effort for announcements that affect the complete production process and will reduce duplication, instability of operations, and friction amongst employees.
An obvious challenge faced by Olsen is [the]to transition away from a system that has existed for over 30 years. The employees are currently content with the way the organization is operating even if it provides more constraints and disagreements than [maybe erase adopting?]adopting an ERP. The approach that would engage their interest would be [the]full training of the system, job [redesign]design [with enhanced responsibilities for Foremen]and enhancement with responsibilities for Foremen, the ease of retaining information and providing feedback for management and opportunities for growth and development within the organization for all employees. Each of these employee incentives would render better job satisfaction for both Lawson and Flynn and would ease some of the coordination and cooperation issues managers and employees are facing.
As Allison would approve various processes through ERP, managers would be encouraged to utilize this tool also to enhance their process monitoring throughout the organization by the horizontal linkages that would be created. The speed of responsiveness would also increase with both internal and external environments since accurate and timely information would be available for decision making. Furthermore, once the inter-organizational relationships have been improved, managers in specific sections can focus their efforts on strengthening external relationships with clients, suppliers, partners using the same ERP system. Allison is convinced that information technology and control will have a positive impact on his organization. The president and Olsen must now focus on seeking the acceptance of this new operating system with managers and enforce this change to its subordinates.[shouldnt we incude some cons to this solution. Just to explain why it wasnt the elected one?]
Solution 2 – Enhancement of Organizational Culture
The current culture at SCI is one of bureaucratic nature, where all the decisions are made centrally by C.F Allison, President. This type of culture is not ideal for a company that operates in an industry that requires quick changes and constant innovation. Therefore, SCI must adopt a new organizational culture that is supportive of innovation and technology. Since SCI operates in an industry that requires constant changes in shoe styles, the clan culture is ideal for SCI to adopt. A clan culture’s primary focus is the needs of its employee’s; since it is believed that if employees are well taken care of and they are provided with the proper tools that they will perform at a higher level (342). In the case of SCI the necessary tools that the employees require to be able to perform at their maximum capacity is the use of technology. SCI possesses a sophisticated computer system which has yet to be utilized. Technology is based on providing employees with a much quicker way of conducting business.
In the case of SCI, if the intranet is made use of, employees’ workload will be completely much faster since approval processes can be made without ever leaving a desk or building. All organizational culture changes must come from top and work its way down. Therefore, at SCI, the ultimate responsibility of implementing the new organizational culture rests on the shoulders of President, C.F. Allison seeing as he will be responsible for disseminating this new culture throughout the organization. Allison will have to use values-based leadership to persuade his employees that using technology, such as the intranet, is the most efficient and effective way to build a successful organization. Given that all SCI employees will have to adopt the new technology in their everyday work life. Therefore, it is necessary that all employees be trained not simply upper and middle management, as was the case previously.
The implementation of a new culture that supports innovation and the use of technology will enable SCI to build a strong organizational culture which is important, since a strong organizational culture has a positive effect on organizational performance (344). Currently, the culture at SCI does not support innovation and risk taking because of the bureaucratic nature of the organization. A clan culture will enable Allison to provide the necessary tools to his employees so that they understand that; the overall success of the organization is more important than individual success, also that treating people equally and building trust are extremely important values and finally that employees should not be afraid to take risks (346-47). Although having a strong organizational culture is a good thing, it can also cause long term problems. When an organization has been successful for a number of years there can be a tendency to become complacent with their industry standing and the danger is that the company might fail to adapt to environmental changes (345).
Moreover, an organizational change can be a very daunting task that can take several years to be fully implemented if it is successful at all. The number one reason people resist change is because of the fear of the unknown. The majority of people do not like change and the same can be said for employees at SCI. When the new sophisticated computer system was installed the majority of the employees at SCI refused to use the intranet. Although employee resistance is inevitable, Allison must remain committed to the culture change. As long as Allison leads by example and is supportive of his employees’ insecurities about adopting a new culture, then SCI should be able to successfully implement the new culture that supports technology and innovation.
Solution 3 – Organizational Restructuring
One of the key issues faced by the Shoe Corporation of Illinois is the lack of ability to quickly adapt to environmental changes. Due to the continually changing nature of the shoe industry it is essential for companies to maintain current styles in order to maximize on seasonal sales. This can be defined as a relatively [it was said in the beginning that it was high-moderate unstable]unstable environment which can be responded to through the implementation of a horizontal structure.
A horizontal structure is based on the organization of employees around core business processes in order to open up the lines of communication between functional areas, harbour innovation and responsiveness in an unstable business environment, and clarify overall organizational goals and direction. Although a changeover to a horizontal structure would require a drastic shift in organization, collaboration styles and culture, the benefits contributed by this streamlined approach effectively address the current problems faced by SCI.
In order to begin the transition towards a horizontal structure, it is first necessary to redesign vertical workflows to horizontal workflows through business process engineering. This process outlines the core processes within organization and aims to connect each functional phase of the production to self-directed teams. By linking each functional team through an order of process, it coordinates efforts for overall objectives, empowers employees to make decisions and respond flexibly to impending challenges.
One of the most beneficial advantages to the implementation of a horizontal structure is the increased responsiveness. Because every functional team will be working together on each shoe line, the process will be streamlined for maximum effectiveness and all teams will be coordinated allowing for quick and effective changes to be made. Due to the unstable nature of the shoe market that SCI faces, the ability to respond flexibly to changes would generate a strong competitive advantage as it would allow them to change styles more frequently and thus create designs that attract customers.
Another fundamental issue with the Shoe Corporation of Illinois is the inability to communicate objectives across functional areas. Different groups with narrow priorities tend to conflict, when in actuality the groups should be working together in order to obtain the overall organizational goals. The new structure will allow for groups of employees in each specialized area to focus on creating a successful end product to satisfy organizational efforts. The unified objectives will also promote greater attention towards customer needs and delivery of value.
Of all the previously mentioned potential solutions each has its respective advantages and disadvantages. In the case of Shoe Corporation of Illinois, it is recommended that a combination of organizational restructuring and enhancement of organizational culture would provide an optimal solution.
The objectives of SCI are broken down into two core business processes, design and production. The design process is further divided into two processes in order to allow for original product designs and replicate products. Top management will oversee the entire operation of each process, and will include C.F. Allison as the president, M.M. Fraser as the controller, and K.T. Olsen as the director of e-commerce. Due to the empowering nature of a horizontal structure, teams of employees will have the knowledge and authority to make decisions. This will in effect relieve the pressure from Allison and allow him to focus on overall objectives rather than small decisions. Previously the structure of the company did not support the on-site creation of original designs and chose in favour to produce replicates of popular models. With the design function divided into two processes, it will give SCI the competitive advantage to produce[manufacture] both. For the New Product Development process, the team leader will be J. Flynn as he has demonstrated an ability and interest in creating innovative products.
He will be given free rein to create original designs after running them by Allison for approval. It is the responsibility of Flynn to oversee the phases of the entire new product development process. Once the design has been created and approved the Data Analysis Team, including Freeman and Ferguson, will then gather data and conduct research to forecast and plan for potential sales and upcoming trends. The purpose of the Data Analysis Team is to evaluate the probable success of the design and whether any adjustments are necessary. The design will then proceed to the Pattern Making Team, including Richards, who will then create a prototype. Once the prototype is complete it will then be sent to the Centreville plant have a sample batch created by the Manufacturing Team. The sample batch will then be shipped to members of the Sales Team, including L.K. Shipton and the salespeople, in order to present the sample products to the customers. The replicate product process will be overseen by M. T. Lawson who will correspond with current industry contacts in order to select designs to be recreated. It will be necessary for Lawson to run his selected designs by Allison in order to keep top management involvement.
Once approved, the design will then be forwarded to the Data Analysis Team, Pattern Making Team, Manufacturing Team and Sales Team, where they will follow the same process as previously mentioned for New Product Development. The last core business process is the Procurement and Logistics Process. Dependant of the success of the sample batches produced in the previous two processes the Sales Team will then forward any orders onto the team leader of the Mass Production Process which is overseen by the superintendent of the Meadowvale plant. The customer demand will determine how much material will be ordered by the Purchasing Team. Once the materials have arrived, the Production Preparation Team will oversee the material flow and set up for production. The Production Team will then manufacture the shoes and the Distribution Team will ship them out to the customer. [with Allison’s approval?] The above is detailed in Appendix – Diagram 2.
To simply implement a new structure is not a sufficient solution. With the suggested drastic changes it will be necessary to create a culture that can support the structures’ objectives.