DRM5 - P4723 Fashion Merchandising

CHAPTER 2: ORGANIZATIONAL STRUCTURE
This chapter introduces and explains to the students about the organizational structures and organization charts of fashion retailing. This topic also covers on the needs and importance of organizational structures.

Objectives:
Understand the structure and chart of a fashion retailing organization.
1. The needs for organizational structures.
2. Organization charts on fashion retailing.

1. The Need for Organizational Structures
Notes from Wikipedia (http://en.wikipedia.org/wiki/Organizational_structure)

Contents
1 Operational organizations and Informal organizations
2 Success factors
3 History
3.1 Organizational Structure Types
3.1.1 Pre-bureaucratic structures
3.1.2 Bureaucratic structures
3.1.3 Post-Bureaucratic
3.1.4 Functional Structure
3.1.5 Divisional Structure
3.1.6 Matrix Structure
3.2 Organizational Circle: Moving back to flat
3.3 Team
3.4 Network
3.5 Boundaryless structure
3.5.1 Virtual
4 See also
5 References

Operational organizations and Informal organizations
The set organizational structure may not coincide with facts, evolving in operational action. Such divergence decreases performance, when growing. E.g. a wrong organizational structure may hamper cooperation and thus hinder the completion of orders in due time and within limits of resources and budgets. Organizational structures shall be adaptive to process requirements, aiming to optimize the ratio of effort and input to output.
An effective organizational structure shall facilitate working relationships between various entities in the organization and may improve the working efficiency within the organizational units. Organization shall retain a set order and control to enable monitoring the processes. Organization shall support command for coping with a mix of orders and a change of conditions while performing work. Organization shall allow for application of individual skills to enable high flexibility and apply creativity. When a business expands, the chain of command will lengthen and the spans of control will widen. When an organization comes to age, the flexibility will decrease and the creativity will fatigue. Therefore organizational structures shall be altered from time to time to enable recovery. If such alteration is prevented internally, the final escape is to turn down the organization to prepare for a re-launch in an entirely new set up.

Success factors
Common success criteria for organizational structures are:
Decentralized reporting
Flat hierarchy
High transient speed
High transparency
Low residual mass
Permanent monitoring
Rapid response
Shared reliability
Matrix hierarchy

History
Organizational structures developed from the ancient times of hunters and collectors in tribal organizations through highly royal and clerical power structures to industrial structures and today's post-industrial structures.

Organizational Structure Types

• Pre-bureaucratic structures
  Pre-bureaucratic (entrepreneurial) structures lack standardization of tasks. This structure is most common in smaller organizations and is best used to solve simple tasks. The structure is totally centralized. The strategic leader makes all key decisions and most communication is done by one on one conversations. It is particularly useful for new (entrepreneurial) business as it enables the founder to control growth and development.
  They are usually based on traditional domination or charismatic domination in the sense of Max Weber's tripartite classification of authority.
  


• Bureaucratic structures
  Bureaucratic structures have a certain degree of standardization. They are better suited for more complex or larger scale organizations. They usually adopt a tall structure. Then tension between bureaucratic structures and non-bureaucratic is echoed in Burns and Stalker[1] distinction between mechanistic and organic structures.
  


• Post-Bureaucratic
  The term of post bureaucratic is used in two senses in the organizational literature: one generic and one much more specific [2]. In the generic sense the term post bureaucratic is often used to describe a range of ideas developed since the 1980s that specifically contrast themselves with Weber's ideal type Bureaucracy. This may include Total Quality Management, Culture Management and the Matrix Organization amongst others. None of these however has left behind the core tenets of Bureaucracy. Hierarchies still exist, authority is still Weber's rational, legal type, and the organisation is still rule bound. Heckscher, arguing along these lines, describes them as cleaned up bureaucracies [3], rather than a fundamental shift away from bureaucracy. Gideon Kunda, in his classic study of culture management at 'Tech' argued that 'the essence of bureaucratic control - the formalisation, codification and enforcement of rules and regulations - does not change in principle.....it shifts focus from organizational structure to the organization's culture'.
  Another smaller group of theorists have developed the theory of the Post-Bureaucratic Organization. [4], provide a detailed discussion which attempts to describe an organization that is fundamentally not bureaucratic. Charles Heckscher has developed an ideal type Post-Bureaucratic Organization in which decisions are based on dialogue and consensus rather than authority and command, the organization is a network rather than a hierarchy, open at the boundaries (in direct contrast to culture management); there is an emphasis on meta-decision making rules rather than decision making rules. This sort of horizontal decision making by consensus model is often used in Housing cooperatives, other Cooperatives and when running a non-profit or Community organization. It is used in order to encourage participation and help to empower people who normally experience Oppression in groups.
  Still other theorists are developing a resurgence of interest in Complexity Theory and Organizations, and have focused on how simple structures can be used to engender organizational adaptations. For instance, Miner and colleagues (2000) studied how simple structures could be used to generate improvisational outcomes in product development. Their study makes links to simple structures and improviseal learning. Other scholars such as Jan Rivkin and Sigglekow[5], and Nelson Repenning [6] revive an older interest in how structure and strategy relate in dynamic environments.
  


• Functional Structure
  In a functional structure, the division of labor in an organization is grouped by the main activities or functions that need to be performed within the organization -- sales, marketing, human resources, and so on. Each functional group within the organization is vertically integrated from the bottom to the top of the organization. For example, a Vice President of Marketing would lead all the marketing people, grouped into the marketing department.
  Employees within the functional divisions of an organization tend to perform a specialized set of tasks, for instance the engineering department would be staffed only with engineers. This leads to operational efficiencies within that group. However it could also lead to a lack of communication between the functional groups within an organization, making the organization slow and inflexible.
  As a whole, a functional organization is best suited as a producer of standardized goods and services at large volume and low cost. Coordination and specialization of tasks are centralized in a functional structure, which makes producing a limited amount of products or services efficient and predictable. Moreover, efficiencies can further be realized as functional organizations integrate their activities vertically so that products are sold and distributed quickly and at low cost [7]. For instance, a small business could start making the components it requires for production of its products instead of procuring it from an external organization.
  


• Divisional Structure
  Also called a "Product Structure", the divisional structure groups each organizational function into a divisions. Each division within a divisional structure contains all the necessary resources and functions within it. For example, an automobile company with a divisional structure might have one division for SUVs, another division for subcompact cars, and another division for sedans. Each division would have its own sales, engineering and marketing departments.
  


• Matrix Structure
  Matrix structure groups employees by both function and product. This structure can combine the best of both separate structures. A matrix organization frequently uses teams of employees to accomplish work, in order to take advantage of the strengths, as well as make up for the weaknesses, of functional and decentralized forms. An example would be a company that produces two products, "product a" and "product b". Using the matrix structure, this company would organize functions within the company as follows: "product a" sales department, "product a" customer service department, "product a" accounting, "product b" sales department, "product b" customer service department, "product b" accounting department. Matrix structure is the most complex of the different organizational structures.
  


• Weak/Functional Matrix: A project manager with only limited authority is assigned to oversee the cross- functional aspects of the project. The functional managers maintain control over their resources and project areas.
  Balanced/Functional Matrix: A project manager is assigned to oversee the project. Power is shared equally between the project manager and the functional managers. It brings the best aspects of functional and projectized organizations. However, this is the most difficult system to maintain as the sharing power is delicate proposition.
  Strong/Project Matrix: A project manager is primarily responsible for the project. Functional managers provide technical expertise and assign resources as needed.
  Among these matrixes, there is no best format; implementation success always depends on organisation's purpose and function.
  

Organizational Circle: Moving back to flat
The flat structure is common in enterprenerial start-ups, university spin offs or small companies in general. As the company grows, however, it becomes more complex and hierarchical, which leads to an expanded structure, with more levels and departments.
Often, it would result in bureaucracy, the most prevalent structure in the past. It is still, however, relevant in former Soviet Republics and China, as well as in most governmental organizations all over the world. Shell Group used to represent the typical bureaucracy: top-heavy and hierarchical. It featured multiple levels of command and duplicate service companies existing in different regions. All this made Shell apprehensive to market changes [8], leading to its incapacity to grow and develop further. The failure of this structure became the main reason for the company restructuring into a matrix.
Starbucks is one of the numerous large organizations that successfully developed the matrix structure supporting their focused strategy. Its design combines functional and product based divisions, with employees reporting to two heads [9]. Creating a team spirit, the company empowers employees to make their own decisions and train them to develop both hard and soft skills. That makes Starbucks one of the best at customer service.
Some experts also mention the multinational design [10], common in global companies, such as Procter & Gamble, Toyota and Unilever. This structure can be seen as a complex form of the matrix, as it maintains coordination among products, functions and geographic areas.
In general, over the last decade, it has become increasingly clear that through the forces of globalization, competition and more demanding customers, the structure of many companies has become flatter, less hierarchical, more fluid and even virtual. [11]

Team
One of the newest organizational structures developed in the 20th century is team. In small businesses, the team structure can define the entire organization [12]. Teams can be both horizontal and vertical. [13] While an organisation is constituted as a set of people who, together, synergise individual competencies to achieve newer dimensions, the Quality of organizational structure revolves around the competencies of Teams in totality. [14][15] To cite an example, every one of Whole Foods Market' stores, the largest natural-foods grocer in the US developing a focused strategy, is an autonomous profit centre composed of an average of 10 self-managed teams, while team leaders in each store and each region are also a team. Larger bureaucratic organisations can benefit from the flexibility of teams as well. Xerox, Motorola, and DaimlerChrysler are all among the companies that actively use teams to perform tasks.

Network
Another modern structure is network. While business giants risk becoming too clumsy to proact, act and react efficiently [16], the new network organisations contract out any business function, that can be done better or more cheaply. In essence, managers in network structures spend most of their time coordinating and controlling external relations, usually by electronic means. H&M's is outsourcing its clothing to a network of 700 suppliers, more than two-thirds of which are based in low-cost Asian countries. Not owning any factories, H&M can be more flexible than many other retailers in lowering its costs, which aligns with its low-cost strategy[17]. The potential management opportunities offered by recent advances in complex networks theory have been demonstrated [18] including applications to product design and development [19], and innovation problem in markets and industries [20].

Boundaryless structure
The most radical concept in today's organisational design is the concept of 'boundarylessness', which seeks to overcome traditional boundaries between layers of management (vertical), functional areas (horizontal), as well as geographic boundaries. Some claim the boundaryless structure is a combination of team and network structures, with the addition of temporariness [21]. Ikea, the world's largest furniture manufacture, has been successful in implementing the boundaryless structure.The company works closely with suppliers by providing technical assistance, leasing them equipment, and giving advice. It also refined the role of the customer, putting responsibility on them to cart the furniture home and assemble it themselves. As a result, the company can offer lower prices [22], which supports its low-cost focused strategy.

• Virtual
  A special form of boundaryless organisation is virtual. It works in a network of external alliances, using the Internet. This means while the core of the organisation can be small but still the company can operate globally be a market leader in its niche. According to Anderson, because of the unlimited shelf space of the Web, the cost of reaching niche goods is falling dramatically. Although none sell in huge numbers, there are so many niche products that collectively they make a significant profit, and that is what made highly innovative Amazon.com so successful [23].
  As we can see, organizations develop, modify and change their structures so that they align with their strategies. And the main trend for the last decades seems to be coming back to flatter structures. Although this structure seems suitable for small companies only, large organizations can take elements of it in harder times. Being at risk of losing profits or even going bankrupt due to the major financial downturn today, a lot of companies are moving to flatter structures [24]. Not only are they unable to maintain multiple management levels any more, they are also in need of a more flexible structure to cope with new threats.
  The sources [14] and [15] listed for this section are no longer valid.
  

References
^ Burns, T. and G. Stalker. (1961) The Management of Innovation. London: Tavistock.
^ Grey C., Garsten C., 2001, Trust, Control and Post-Bureaucracy, Sage Publishing)
^ Heckscher C. (Editor), Donnellon A. (Editor), 1994, The Post-Bureaucratic Organization: New Perspectives on Organizational Change, Sage Publications
^ Heckscher C. (Editor), Donnellon A. (Editor), 1994, The Post-Bureaucratic Organization: New Perspectives on Organizational Change, Sage Publications
^ Nicolaj Sigglekow and Jan W. Rivkin, October 2003, Speed, Search and the Failure of Simple Contingency, No. 04-019
^ Repenning, N. (2002). A Simulation-Based Approach to Understanding the Dynamics of Innovation Implementation. Organization Science, 13, 2: 109-127.
^ Raymond E. Miles, Charles C. Snow, Causes of Failure in Network Organizations, California Management Review, Summer 1992
^ Grant, R.M. (2008). History of the Royal Dutch/Shell Group. Available at: http://www.blackwellpublishing.com/grant/docs/07Shell.pdf (accessed 20/10/08)
^ (Starbucks.com (2008). Starbucks Coffee International. Available at: http://www.starbucks.com/aboutus/international.asp (accessed 20/10/08))
^ Robbins, S.F., Judge, T.A. (2007). Organizational Behaviour. 12th edition. Pearson Education Inc., p. 551-557.
^ Gratton, L. (2004). The Democratic Enterprise, Financial Times Prentice Hall, pp. xii-xiv.
^ Robbins, S.F., Judge, T.A. (2007). Organizational Behaviour. 12th edition. Pearson Education Inc., p. 551-557.
^ Thareja P(2008), "Total Quality Organization Thru’ People,Each one is Capable",FOUNDRY, Vol. XX, No. 4, July/Aug 2008
^ http://www.foundry-planet.com/detailview-technical-reports.html?&L=09917&tx_ttnews[tt_news]=3516&tx_ttnews[backPid]=85&cHash=6e30c4a05e
^ http://www.thareja.com/2008/11/03/is-each-one-capable/
^ Gummesson, E. (2002). Total Marketing Control. Butterworth-Heinemann, p. 266.
^ Capell, K. H&M Defies Retail Gloom. Available at: http://www.businessweek.com/globalbiz/content/sep2008/gb2008093_150758.htm (accessed 20/10/08).
^ Amaral, L.A.N. and B. Uzzi. (2007) Complex Systems—A New Paradigm for the Integrative Study of Management, Physical, and Technological Systems. Management Science, 53, 7: 1033–1035.
^ Braha, D. and Y. Bar-Yam. (2007) The Statistical Mechanics of Complex Product Development: Empirical and Analytical Results. Management Science, 53, 7: 1127–1145.
^ Kogut, B., P. Urso, and G. Walker. (2007) Emergent Properties of a New Financial Market: American Venture Capital Syndication, 1960–2005. Management Science, 53, 7: 1181-1198.
^ Pang, L. (2002). Flat and Boundaryless Structures. Available at: http://mysite.verizon.net/lpang10473/web/ldc_flat.htm (accessed 07 Aug 09).
^ Pang, L. (2002). Flat and Boundaryless Structures. Available at: http://mysite.verizon.net/lpang10473/web/ldc_flat.htm (accessed 07 Aug 09).
^ Anderson, C. (2007). The Long Tail. Random House Business Books, pp. 23, 53.
^ Ramienski, D. (2008). Looking For a Holistic Approach. Available at: http://www.federalnewsradio.com/?nid=169&sid=1377323 accessed 20/10/08)
Retrieved from "http://en.wikipedia.org/wiki/Organizational_structure"

2. Retail Store Organization
Structuring Your Business
By Shari Waters, About.com

The organizational structure of a retail store will vary by the size and type of the business. Most tasks involved with operating a retail business will be the same. However, small or independent retail stores may combine many sectors together under one division, while larger stores create various divisions for each particular function along with many layers of management.
For example, the small specialty shop may have all of its employees under one category called Store Operations. A large department store may have a complete staff consisting of a manager, assistant manager and sales associates for its Sporting Goods department, Home and Garden, Bed and Bath, and each additional department.
In order to define the store's organization, start by specifying all tasks that need to be performed. Then divide those responsibilities among various individuals or channels. Group and classify each task into a job with a title and description. The final step is to develop an organizational chart.

Retailing Structure
The following is a brief outline of some of the divisions in a retail organization.
1. Owner/CEO or President
2. Store Operations: Management, Cashier, Sales, Receiving, Loss Prevention
3. Marketing: Visual Displays, Public Relations, Promotions
4. Merchandising: Planning, Buying, Inventory Control
5. Human Relations: Personnel, Training
6. Finance: Accounting, Credit
7. Technology: Information Technology

MANAGEMENT: As the store grows and the retail business evolves, the dynamics of the organization's structure will change too. Therefore it is paramount to redesign the store's organizational chart to support the decision-making, collaboration and leadership capabilities that are essential during and after a growth period.

The function of the store manager is to oversee the daily operations of a retail store.
Key Responsibilities: Store managers work towards meeting personal and location sales metrics and customer satisfaction standards by maximizing the customer's experience. He/she manages all phases of store operations to ensure maximum sales and profitability. Retail store managers focus on key business initiatives, store presentation, marketing execution, inventory management, loss prevention, payroll management, risk management, and daily operational cost control.

Summary of Experience: Must be organized with attention to detail and proven follow-up skills. Store managers should posses the ability to manage multiple priorities with demonstrated management skills to include; coaching, training, recruiting and communication.

Education Required: As with most retail positions, a high school diploma or GED is usually the only education requirement. College degree in business, or a closely related field, may substitute for a portion of the required experience. Supervisory experiences in a retail environment a plus.

Compensation: Base salary will vary with store's sales volume and location. Compensation ranges from around $25,000 to $50,000. Store managers are usually offered benefit packages and may receive bonuses based on sales performance.

VISUAL MERCHANDISER: The function of the visual merchandiser is to create an inviting, visually appealing environment for the customer's shopping pleasure.
Key Responsibilities: Visual merchandisers will have knowledge of colors, patterns and floor-sets. Their job is to communicate with store managers to work out the floor layout and display points, as well as how and what items are to be displayed. Window designs, internal displays and other merchandising of promotional events to entice the customer to buy may be required. Visual merchandisers will be responsible for using appropriate lighting for the best presentation possible, arranging signage and coordinating the take down of displays after promotion.

Summary of Experience: Previous retail experience and good physical condition is a must. Visual merchandisers will be highly creative, enthusiastic and have a natural finesse for color, balance and composition. A strong understanding of current market trends and innovative visual approaches are extremely helpful.

Education Required: As with most retail positions, a high school diploma or GED is the only education requirement. College degree in business, or a closely related field, may substitute for a portion of the required experience.

Compensation: Salary will vary with store sales and location. Compensation ranges from around $20,000 to $35,000. Visual merchandisers may receive medical benefits.
RETAIL BUYER: A retail buyer selects merchandise and develops product assortments to grow the business and increase market share.

Key Responsibilities: Retail buyers are responsible for developing product assortments using market trend analysis information as well as managing sales and margins. It is a multi-faceted position that includes contract negotiations, inventory management, sales planning, forecasting and close coordination with the merchandising and operations teams. Buyers will identify growth opportunities and risks in assortment, and develop contingency plans. This person will be expected to build strong vendor relations and put together solid business plans, including strong and detailed promotional programs. Some travel may be required.
Summary of Experience: Retail buyers need a sense of retail and product trends and strong analytical experience. Previous retail experience required. Buyers will have computer skills and working knowledge of resource planning and forecasting. Excellent leadership, negotiating, and planning skills also a must.

Education Required: A Bachelor's degree in retail, fashion, marketing or other related field preferred. Additional computer training may also be required.

Compensation: Salary will vary with size of operation and number of departments buying is responsible for. Compensation ranges from around $45,000 to $80,000. Buyers generally receive full benefits package, and occasionally relocation allocation.



An example of a simple organization chart for a one-person retail business.

The Buying Function: checking catalogues, finding suppliers, placing orders, receiving and stocking, seeing salespersons, taking inventory, viewing showrooms
The Selling Function: advertising, prepare inside displays, maintain store cleanliness, pricing, selling, trimming windows
The Controlling Function: cashiering, checking invoices, issuing credit, keeping records, making bank deposits, paying bills, securing loans