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The issue of entrepreneurial management is utterly important for any organisation, as it is responsible for the realisation of strategic plans and business objectives by means of the human resources available for a company. This report discusses the perspectives and challenges of entrepreneurial management in Marks & Spencer and particularly the issue of the relationship with human resources. The analysis of the problem relies on the models of organisational design context, organisational culture and entrepreneurial skills.
The author explores and analyses the changes that the organisational has undergone in respects to M&S's organisational structure and how their culture has been formulated. The necessary components of core managerial skills and competencies have been discussed in-line with M&S's entrepreneurial activities. These factors have been evaluated and recommendations have been made.
The author concludes that on the one hand, the recent reduction of the levels in the organisational structure of M&S is beneficial for the company as the communication between the level, transparency and overall effectiveness increase. On the other hand, precise hierarchy and centralisation (mechanistic structure) make the company inflexible and difficult to adapt. Also tight environmental conditions and the current strategic objectives emphasise the need for organisational learning and professional development for both common employees and managers, which should be oriented to develop their existing entrepreneurial skills. The author states that M&S should reward the most active and progressive managers creating motivation by all means. It is recommended that the organisational structure is flattened further, managerial control and communication should be improved to ensure better performances of M&S and that the company should act in a more consultative manner.
2. Case Study: Marks & Spencer
The company Marks & Spencer (M&S) was founded by Michael Marks in 1884. Michael initially opened a stall at Leeds Kirkgate market that sold various items such as nails, screws, soap and wooden spoons for a penny each. In 1893 Michael decided to return back to his home routes in Manchester, and set up a shop downstairs from where he lived. He decided to seek a business partner; the business partner being Thomas Spencer.
Today, M&S is the largest UK retailer with 600 domestic outlets. Furthermore, the company is presented in over 40 other countries (294 foreign outlets). Marks & Spencer concentrates predominantly of clothing and food retailing, which constitute 49% and 51% of its business respectively. The company offers stylish, high quality and great value clothing, as well as giving customers the opportunity to purchase food that is of outstanding quality that has been responsibly sourced from approximately 2,000 suppliers globally. The company has grown substantially throughout the years; the company direction and strategies have been manipulated to cater for the needs and desires of their existing and potential customer base and other stakeholders such as the employees, community, suppliers, shareholders and so forth. M&S believes that their company values of Quality, Value, Service, Innovation and Trust are not newly established, and state that they are the principles that the business was founded (M&S, 2010).
More than 75,000 are employed by the firm all over the world. In 2009, revenue of M&S was equal to £9,062 million; net income constituted £506 million. The company's profitability has been much higher prior to the recession. The company is listed on the London Stock Exchange (LSE) and is included in the FTSE 100 Index (M&S, 2009). The share price reached its peak in 2007, and took a dramatic fall in 2008.
M&S has a variety of competitors ranging from the main supermarket groups, to specialists in fashion and homeware. The competitive environment has changed in recent years due to the rise of home shopping, and more consumers purchasing products from catalogues and the Internet. M&S have to compete on price, what they have to offer, the rising expectations of the consumers and on the in-store experience.
M&S's management recognise the need to do business in an ethical way; to provide products and services to stimulate public interest and to abide by legislations/regulations such as consumers rights, environmental rules and other Industry regulations.
Management have attracted 21 million people visiting the stores each week by their entrepreneurial implementations through their decision making processes by acting competitively and innovatively, also by differentiating themselves from their competitors in the retail industry by what they have to offer and by their strong ethical stance. The organisational design, organisational culture and the entrepreneurial skills that the management possess have contributed to M&S's success in recent years. Management have been able to spot opportunities first were other competitors haven't, or have not been fast enough to act; such as in 2002 M&S announced that it was the first ever retailer to use only free-range eggs in all of their products, in 2005 M&S's Cafe Revive were the first UK Coffee chain to offer Fair-Trade tea and coffee as standard, and in 2008 by becoming the first retailer to remove all artificial colour and flavourings from their entire food and soft drinks range (M&S, 2008). M&S employees may therefore feel a sense of satisfaction for working for a well established, strongly ethical and successful company, thus potentially improving their co-operation and motivational levels.
Stuart Rose, the Chairman/Chief Executive of M&S expressed that the company has a key goal in everything they do: "to build a sustainable business for the long term, generating shareholder value through consistent, profitable growth whilst making sure that customers can trust them to do the right thing." Rose states that customers of M&S have "told us that despite the impact of the recession our commitment to the environment and trading fairly is still important to them" (M&S, 2009). M&S have planned ambitions to satisfy the general public by challenging themselves with the implementation of Plan A, "aiming to become the world's most sustainable major retailer by 2015" that could also prove to be a factor that encourages customer loyalty and help establishing a competitive advantage. Plan A was launched in January 2007 and is a five year eco-plan which has a positive contribution to the environment and society in every aspect of how M&S do business so that they grow in a sustainable way.
The plan addresses challenges across five areas: Climate change, waste, sustainable raw materials, fair partner and health (http://plana.marksandspencer.com).
M&S has a standard centralised organisational structure that is characteristic to the majority of the UK multiple retailers. The organisation structure is vertical (Whitehead, 1994). M&S has moved to a new flatter structure recently, which implies the reduction of organisational layers in the structure (Varley, 2006); this therefore makes the organisation faster to perceive any changes and respond to them. Due to the organisation having a large complex structure, M&S have to ensure that managerial control and communication throughout the hierarchy is efficient and effective to try ensuring high employee morale and motivation, thus a more efficient and effective workforce to meet M&S's strategic objectives. This is a key problem area that M&S need to focus on. The structure of the hierarchy is complex; therefore employees' attitudes and values may only be conveyed to the employees' line manager. This reflects the importance of communication in M&S between the vertical levels of authority. The leadership style is autocratic; the business decisions are typically made and influenced by management only with a lack of consultation of the employees. Consultation could give employees recognition, motivation and a sense of belonging/need.
The recession has had direct effect on M&S in terms of profitability and their entrepreneurial thinking in decision making processes, due to the serious nature and potential negative associations that can follow from such an economic downturn. In October 2008 Stuart Rose stated that "Consumer confidence remained fragile and the retail environment was unpredictable" (http://business.timesonline.co.uk); this enforcing company management to act in an entrepreneurial way, by being alert and acting rapidly in the best interests of the organisation and its stakeholders. M&S's management realise that there is an importance of having the ability to spot any opportunities available; in the scope to improve customer loyalty and confidence in the brand to attempt to overcome the negative side effects of the recession and assisting the creation of stability/prosperity for the company.
According to Morgan (2001) the corporation provides the training of technical skills and business competencies of their employees. Afterwards, the effectiveness analysis of the learning is conducted within six months (Schutt, 2006). The learning process is necessary for the management to develop entrepreneurial skills to lead the workforce in an effective, appropriate and motivational manner.
In January 2009 management announced that they were to cut costs by reducing their workforce by 1000 staff members across the retail stores, head office and their support functions (www.telegraph.co.uk). This reflects the need for strict management of the workforce and certain constraints to be implemented in such a dynamic environment to meet short/long term company objectives.
The company comprehend the requirement to ensure that there is a focused balance between each of the stakeholders' needs and desires; sacrifices such as these cost cutting measures have been implemented in attempts to outweigh financial uncertainty. According to Stiegert and Kim (2009) the rewards and bonuses for the employees in M&S have been reduced considerably with the coming of the global financial crisis; which could be detrimental for the workforces' future efficiency, motivation and morale; thus potentially affecting customer satisfaction levels.
M&S strive to satisfy stakeholders through the utilisation of the management team and their employees. They emphasise the need for effective managerial control in-line with company objectives; for the employees to know the entailment of their job specifications to provide efficiency that may contribute to a competitive advantage being established for M&S. The outcome of this process will decide the company's future competitive stance in their market.
3. Context of Organisational Design
According to Ferrell (1979) and Gibson et al. (2003), the notion of organisational design is directly associated with the creation of formal relationship, roles and processes within an organisation. The researcher has chosen the model that describes the context of organisational design, since it is necessary to analyse the framework and conditions of the management process and managers' roles within Marks & Spencer from the very beginning. According to Stanford (2005), the model of the context of organisational design is five-fold, where all the components are mutually influenced.
Figure : Context of Organisational Design
Source: Stanford, 2005
The context of organisational design in Marks & Spencer can be presented as follows:
M&S has a standard centralised organisational structure that is characteristic to the majority of the UK multiple retailers. Marks & Spencer does not possess any manufacturing facilities in Great Britain. This means that the success of this retail business is determined by greater centralisation. The company has a vertical structure (Whitehead, 1994). M&S has moved to a new flatter structure recently, which implies the reduction of organisational layers in the structure (Varley, 2006). The composition of the second-layer management team is the following: human resources, international business, retail, IT and logistics, food, store marketing and design, merchandise, finance and operations, marketing (M&S, 2009).
It can be argued that such hierarchy and the reduced number or levels in the organisational structure to be an advantage (mechanistic structure). The communication between the layers is better arranged, tasks and responsibilities are clearly defined, which is the key to stability. However, it may be argued that the whole organisation is less flexible and adaptive as in the case of organic structure. This deals predominantly with the initiative of lower rank managers.
According to the size, Marks & Spencer can be classified as a large business, since the company employs more than 75,000 people all over the world (M&S, 2010). Huge size implies extensive hierarchy from the CEO to a common worker (Coe, 2004). Despite the fact that organisational structure has been flattened recently, it is complicated anyway. Huge size obliges M&S to state and restate precise responsibilities on a regular basis. The fulfilment of duties raises the problem of advanced managerial control.
The environment in which Marks & Spencer operates can be characterised as complex. The company is to respect consumer rights, operate according to the regulations in the industry and comply with environmental rules such as waste control (Bevan, 2001). Furthermore, M&S is responsible to provide timely salaries and wages to its employees (Jones and Simmons, 1990). Moreover, the company is to adjust to recent social changes, which imply that the UK residents tend to spend more time online than outdoors. It is valid to argue that such a complex environment makes the management process within M&S more difficult. Better entrepreneurial skills are required from the top management. And more sophisticated strategies should be used. It can be argued that in such conditions, there is a pressing need for greater integration of the departments of Marks & Spencer.
The technologies implemented in Marks & Spencer would be rather characterised as routine technologies. Being of a clothes and food retailer, the company faces automatic and frequently repeated processes and tasks. Very few employees are required to demonstrate a creative approach to their responsibilities (non-routine technologies) (Dobson et al., 2004). It may be argued that routine technologies in M&S can be explained by the considerable hierarchal organisational structure. In such a case the presence of bureaucracy is inevitable. It is valid to argue that the existing bureaucratic organisational structure should be improved by a more creative management process. This requires better entrepreneurial skills from the managers themselves. But this will enable to upgrade the inter-level communication quality.
Corporate strategy is quite a broad notion, but it can be stated that the key objectives of M&S is to accentuate its own brand, to improve the clothing segment in order to reach the balance between food and clothing retail. Furthermore, the company seeks to improve the line of Home & Beauty in its retail stores, to accelerate the programme of store renewal, improve the supply chain and start to use the space in outlets more effectively (M&S, 2009; M&S, 2010). In May 2008 a press release stated that international sales and profits were up by 16.8% and 33% (http://news.bbc.co.uk); it could be suggested that M&S are hoping to overcome some weaknesses of the UK's current economic climate with geographical diversification by increasing stores internationally.
As it is seen, these business strategic issues require optimisation and rationalisation of the existing directions. This means that M&S is to provide professional training and organisational learning for its employees. According to Morgan (2001) the corporation provides the training of technical skills and business competencies of their employees. Afterwards, the effectiveness analysis of the learning is conducted within six months (Schutt, 2006).
It may be argued by the author that the discussed strategic orientation of M&S requires more specialised training of the employees. Furthermore, the training should not be academic by nature, but it must be integrated into the practical fulfillment of responsibilities. It is supposed that learning groups should be organised within departments and the team work is to be emphasised in such learning. The model of organisational design context can be criticised for the fact that it does not take into account the dimension of industry. Retail industry, in which Marks & Spencer is engaged, is attributed to numerous specific features that do matter in the aspects of organisational learning, entrepreneurial skills and competences. First of all, this industry is customer-oriented (Stanford, 2005). Second, the whole structure should be aimed to provide a stable and high-quality service. From this standpoint, culture of communication, fast reaction between the organisational layers and strong leadership are sufficient.
4. Organisational Culture
The Organisational Culture model presented by Pinches (1999) can be illustrated by means of the following scheme:
Figure : Organisational Culture
Source: Pinches, 1999
The model of organisational culture has been chosen for discussion because it embraces a wide range of management categories associated with the company. It is possible to discuss leadership styles, controls and rewards in organisational processes. Managerial ethics and inter-industry specifics are also included into the model (Pinches, 1999). As it was mentioned, the previous model lacked these industry-related issues. However, the framework was formulated on the foundation of "very fundamental assumptions about how organisations work and how they are managed" (Cameron and Quinn, 2006); these assumptions may not be true of all organisations in practice; the model also represents that each of the four inputs are of equal importance in prescribing culture, this may not always be the case.
Discussing the leadership styles in Marks & Spencer it is quite difficult to generalise since different managers can choose different leadership depending on personal preferences, educational background and experience. Nevertheless, the top managers of the company have been numerously characterised in the past as having an autocratic leadership style (Williams, 1992). This means that with such state of affairs the authority of managers is high, but the autonomy of departments, groups and individuals in the decision-making process is low (Messick and Kramer, 2005; Mullins, 2007). This is partially explained by the centralised vertical structure with considerable number of layers. It is difficult to judge whether this style is the best one for M&S, but it is valid to assume that it contributes to bureaucracy, lower motivation and absence of the necessity of personal development of employees. Hence, the management can be at least recommended to improve the autonomy of the creative departments. The employees engaged in non-routine technologies should be managed consultatively.
According to Stiegert and Kim (2009) the rewards and bonuses for the employees in M&S have been reduced considerably with the coming of the global financial crisis. A press release in May 2008 stated that "store teams are set to share £12.8 million"; the previous year M&S paid a record of £91 million in bonuses to its 75,000 staff (http://investmentmarkets.co.uk). This could generate negative effect on the motivation and productivity of the personnel. It can be argued that the corporation should find the possibility to reward the most active and progressive managers and employees. However, Stuart Rose believes M&S are "expecting market conditions to remain difficult for the foreseeable future and are managing the business accordingly. Tight stock control and management of costs are priority". (http://corporate.marksandspencer.com) The company announced cuts of 1000 jobs in January 2009; this could create uncertainty in the workforce that may lead to a lack of motivation, morale and increase absenteeism levels due to stress and anxiety.
One of the strongest features of M&S is that the company supports professional ethics. This characteristic refers to both the employees and customers of the company. Managerial decisions and actions cannot contradict to the existing regulations (M&S, 2010). Nevertheless, the process of strategic thinking is vertical as in the case of organisational structure. It is valid to argue that lower rank managers should be involved into the process of strategic thinking.
Group member behaviour in Marks & Spencer can be described as traditional teamwork. This kind of member and manager behaviour is characteristic to centralised vertical organisational structures (Morgan, 2001). Such form of behaviour implies lower control by group members and greater control by group facilitators. Again, the company can be criticised for increased control over employees and strict frameworks in which the employees have to perform their functions.
The values of Marks & Spencer are the following: quality, service, innovation, trust and commitment towards employees and valued people (M&S, 2010). The implementation of Plan A strives to meet the environmental concerns of the company, employees and customers, encouraging people to live a greener lifestyle (M&S, 2010). Human resources are among the highest values of the company. However, such direction is to be confirmed by the practical actions of the corporation.
5. Entrepreneurial Skills
Another model that can be applied to characterise Marks & Spencer is the entrepreneurial skills model. It has been chosen for the discussion because it vividly illustrates the necessary components of core managerial skills and competencies developing that take place within the company to contribute towards forming the organisations culture and design. However though, "research to determine whether identifiable relationships exist between the performance of the firm, the learning mode of the organisation and organisational competence does not provide clear statistically significant relationships and further work is clearly needed" (Chaston et al, 1999).
According to Nuthall (2010), the model of entrepreneurial skills can be presented as follows:
Figure : Entrepreneurial Skills
Source: Nuthall, 2010
Entrepreneurial skills- The necessary components of core managerial skills and competencies:
Research and practice connected to competence is focused by the ambition to achieve superior performance, and for economic gain or business success (Spencer and Spencer, 1993). As it has been already mentioned, the personnel of Marks & Spencer participate in regular organisational learning aimed to develop the core skills and competencies (Johansson, 2004).
However, the researcher argues that such learning is necessary in the first place for the management of the company to develop entrepreneurial skills; Deakins and Freel (2003) proclaim that there is need for "sophisticated knowledge and competencies to operate larger production runs and manage a workforce". It may be stated that the connection to the industry should be emphasised at every stage. The business should focus on the management to build a reliable customer-oriented service.
An Industry opportunity has been spotted by management in the implementation of Plan A, in which M&S feel has motivated employees and involved them in taking part in contributing to the good cause that they have an interest in - in the community where they and the customers live. Costs have also been reduced in result of Plan A, with a £50 million surplus in 2009/2010 (http://plana.marksandspencer.com).
It could be argued that the management team implementing these changes relate to the definition of an entrepreneur as according to Schumpeter and Kirzner. Shumpeter (1934) believed the entrepreneur is a special person who brings about change, whilst Kirzner (1979) believed the entrepreneur is anyone who is alert to the profitable opportunities for exchange; who has additional knowledge which enables the recognition and exploitation of an opportunity (Deakins and Freel, 2003). The skill to recognise and exploit the positive financial, environmental and employee motivational implications of Plan A appears to be welcomed by the general public (through the knowledge gathered from customers (M&S 2009) - which could establish a competitive advantage). Also by the company and its employees due to the improvement of environmental issues that may affect all of the stakeholders; and by the savings that have been made that can be utilised in other means to the company's strategic advantage.
Personal motivation is necessary for managers. If they possess this, it would be a transmitter to further organisational levels. According to Lussier (2009) managers have "come to realise that a motivated workforce can contribute powerfully to bottom-line profits" and that "the poor performance of employees can be caused inadvertently by managers themselves" potentially due to their lack of motivation. In this light, the bonuses and rewards for the managers are extremely important. David Michels (Deputy Chairman of M&S) expressed that he believes "good governance encourages entrepreneurship and innovation within a framework of accountability" (http://corporate.marksandspencer.com). The general management skills and human relationship skills appear to be the fundamental competencies for managers.
6. Conclusion and Recommendation
It may be concluded that on the one hand, the reduction of the levels in the organisational structure of Marks & Spencer is beneficial for the company as the communication between the level, transparency and overall effectiveness increase. On the other hand, precise hierarchy and centralisation (mechanistic structure) make the company inflexible and difficult to adapt. M&S can be recommended to flatten its structure even more because the number of departments and layers has remained high in spite of the restructuring that was attempted (M&S, 2010). Furthermore, communication, quality control and managerial control over the fulfilment of employees' responsibilities should be improved to ensure better performance in the company.
Tight environmental conditions and the current strategic objectives emphasise the need for organisational learning and professional development for both common employees and managers. In particular, the professional training of common employees should be carried out in real teams (departments) and should be practical. The professional development of managers in M&S should be oriented to develop their entrepreneurial skills. Marks & Spencer can be recommended to concentrate on industry specifics, general management and human relationship. Furthermore, the company is to reward the most active and progressive managers creating motivation by all means. M&S can be recommended to reconsider leadership styles with respect to creative workers engaged in non-routing technologies (from autocratic to consultative). In addition, lower rank managers are to be involved into the decision-making process of M&S that may encourage them to act in a more enthusiastic intrapreneurial way.