The Organisational Challenges Faced By Debenhams Commerce Essay

The following report looks at an organisation (Debenhams) the author’s employer, its profile, culture and how the current economic climate has affected its profile and culture

What is an organisation?

“Organisations are social arrangements for achieving controlled performance in pursuit of collective goals”, Buchanan and Huczynski (1997). The collective goals at Debenhams are aimed at, identifying, creating and maintaining satisfying relationships with customers resulting in value for both the customer and the organisation.

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Profile

Debenhams Plc is a public limited company. Founded in 1778 as Flint & Clark, Debenhams operated as an independent company until its hostile takeover by the Burton Group in the late 1980s. In 1998 Debenhams regained its independence when it was “demerged” from the Burton Group, which subsequently changed its name to Arcadia Group plc. The Groups principal activity is selling of fashion clothing and accessories, cosmetics and products for use in the home. It retails womenswear, menswear, homewares, health and beauty, accessories, lingerie and childrenswear. The Group trades from department stores and small store formats .Brands include Designers and Debenhams, including third-party brands. The Group has 161 department stores including 10 Desire by Debenhams stores, across the United Kingdom and Ireland with approximately 11 million square feet of trading space and around 27,000 employees.

The Group has a portfolio of more than 55 own brands such as Debut, Maine New England, Red Herring and Thomas Nash including 25 Designers of Debenhams brands. Company brands account for about 70% of sales. Debenhams also offers a wedding gift service, in-store restaurants and cafes. The company has 51-plus international franchise stores in 19 countries including, Bahrain, Egypt, Indonesia, Malaysia, Saudi Arabia and Turkey and will soon be opening 8 in Denmark. Debenhams also extends its customer reach by making direct sales through its website. Debenhams is company that is registered and trades its shares on the London Stock Exchange (LSE). Its registered office is at:

1 Welbeck St

London W1G 0AA

United Kingdom

The company’s key people are the Chairman: John D. Lovering, CEO: Rob Templeman and Deputy CEO and Director: Michael Sharp.

Structure

An organisation structure according to Mintzberg (1979) “is the sum total of the ways in which it divides it’s labour into distinct tasks and then achieves coordination between them” An organisation structure determines task allocation, reporting lines, and formal coordination mechanisms and interaction patterns. According to Basset and Carr (1996) “an organisation’s structure should emphasise flexibility of response to market and environmental forces, this is accomplished by appropriate variability in the leadership role to fit the circumstances.” As a retail organisation, Debenhams emphasises its structure in response to market and environmental forces by identifying and developing new talents to suit what’s happening in the market and the retail and business environment in general.

Wright and Burns (1998) state that, organisation structures largely depend on what kind of business the organisation is e.g. primary (e.g. extraction of raw materials, secondary, (e.g. conversion of raw materials to finished goods) and tertiary (e.g. services). The structure of an organisation is also affected by ownership and number of employees in the business. Debenhams is a public owned company. Its functional organisation based on product/brand but has a flat organisational structure headed by a Chief Executive Officer (CEO) and organises employees into different departments selling different products “The functional structure groups employees together based upon the functions of specific jobs within the organization.” Melissa Bushman (2007). The author belongs to the Home department where they deal in home wares including wedding gifts. Other departments include Men’s wear and Women’s wear. The dividing of employees according to departments in Debenhams allows managers to exert control on a smaller number of employees, making it easier to manage, be more efficient and allows for easy communication between employees and management.

Culture

The culture of an organisation refers to the unique configuration of norms, values, beliefs, ways of behaving and so on that characterize the manner in which groups and individuals combine to get things done, Eldridge & Crombie (1974). At Debenhams they have a unique configuration of norms, values and beliefs that characterize the manner in which they work as a group to get things done. They have a way which sets them apart from others. Drennan (1992) defines culture as, ‘how things are done around here’. It is how things are done at Debenhams that makes them who they are. Its about their brand, their people and how they market themselves. Schein (1990) suggests a view of organisational culture based on distinguished three levels of culture, from the shallowest to the deepest artefacts and creations, values and basic assumptions. The Debenhams culture is about excellence, its about design and innovation. The culture at Debenhams goes with the times but its traditions remain intact and have been so for two centuries.

Debenhams culture is based on being a premium department store retailer. A family friendly store who supply designer labels at affordable prices. The best statement to Debenhams culture is its people.

Retail is a fast-moving, exciting business where teamwork really makes an impact. At Debenhams they think everyone can have an impact on their success.

Wherever you go in Debenhams you will meet friendly, welcoming people who will care about your well being and support your development but also expect you to be a valuable member of the team. If you want to push your boundaries and take the initiative, they help you do it.

Whether you are a sales advisor or merchandiser, Debenhams growth and breadth of opportunity and focus on personal development makes it the ideal place to develop your career. From the sales floor where people can influence customers to behind the scenes roles, every person can influence the performance of Debenhams. Our senior management team listens and acts on feedback.

At Debenhams they want people who have a real passion for what they do, people who are self-motivated. People who will use their initiative to act on the freedom they are given and will drive their own development.

Sutherland & Canwell (1997) say “if employees share the cultural values of the organisation then they will be more likely to be committed to it.” At Debenhams employees are committed to the organisation as they believe and share in its culture and values.

Certain organisations stress the importance of personal initiative and achievement; indeed they reward employees for personal performance. On the other hand, other organisations positively encourage competition between departments or sub-division of the organisation, Sutherland et al (1997). The Debenhams culture stresses personal initiative and achievement and at the same time positively encourages competition between departments of the organisation. Both individual and team initiative and growth are encouraged.

The culture in Debenhams is one that is caring, daring, enabling and encourages sharing.

According to Blanchard and Bowles (1998) and their Gung Ho culture, an organisation should aim to create a culture of committed employees who love what they do by adhering to the following three principles:

Worthwhile work driven by goals and values- An organisation should focus on worthwhile work, use of case studies, review goal standards for individuals and team members.

Putting workers in control of achieving the goal.

Cheering each other on- the power of feedback, rewards and recognition and action planning.

The Gung Ho process aims to address the following:

Improve morale and productivity

Reduce employee turnover

Develop a sense of purpose

Improve creativity and innovation

Improve service to internal and external customers

Empower individuals and teams

The author feels Debenhams their employer, fulfils principles as described in the Gung Ho process by Blanchard et al (1998). This is so because the work is driven by goals and values. Good standards are maintained through regular training and review of individuals and team members. By setting reasonable and realistic targets workers are put in control and are able to achieve set goals and even outdo themselves by going beyond. The organisation recognises the power of feedback by holding regular meetings where everyone participates. It also recognises the importance of rewards and action planning. Rewards help boost morale and productivity while action planning and develop a sense of purpose.

Current Economic Climate and how it might affect profile and Culture

The past eighteen months has seen the economy of the UK and the rest of the world badly hit and seriously bruised by the credit crunch. The current economic climate could have great impact on the profile and culture of Debenhams as an organisation. These impacts could be Political, Economic, Social, Technological, Environmental and Legal, shortened to PESTEL.

PESTEL Analysis of Debenhams

Political changes-E.g. a change in government or a change in government policy.

Government plans to implement the scheduled VAT increase (back to 17.5 per cent) on New Year’s Day. To change every price in all of its 161 stores at that time would take 250,000 man hours.

Debenhams has been encouraged by government’s decision on Local Employment Partnership Scheme (LEP) to create employment and will create 1200 jobs between 2010 and 2011and receive government assistance in meeting its training needs.

Economic changes-Relate to changes in the wider economy such as rises in living standards or the general level of demand, rises or falls in interest rates, etc.

UK markets have been affected by economic concerns through the credit crunch. Lower available income will impact and strategic focus may need to change to lower priced basic products with less focus on higher priced brands suggesting a switch in price architecture.

The economy is predicted to grow out of recession in the coming year. As the US economy, the worlds biggest has started growing the growth of exports to that country will create more jobs in the UK economy and as a consequence more consumers will buy the Debenhams brand.

The continuous fall in the value of the Pound Sterling against the Euro is likely to bring in more tourists from the EU and beyond who will purchase Debenhams products at a competitive price.

As most of the world recovers from the current economic crisis. Debenhams are likely to spearhead their expansion into the international market, introducing new customers to new brands in an exciting retail environment.

Social changes-Relate to changes in wider society such as changes in lifestyles e.g. more women going out to work, changes in tastes and buying patterns.

Debenhams has added customer ratings and reviews to its online shop to enhance its customers’ online shopping experience and drive sales. Debenhams’ customers don’t just have to rely on a brand’s professional opinion – they will also now be able to hear what fellow shoppers think.

The group is also improving its web site, adding features such as social networking capability, video and catwalk/outfit projection, an online outlet that leads to current offers and promotions, a facility that allows customers to shop by size, as well as product reviews and surveys.

The call for fair trade is also another thing that Debenhams has to observe. For example Debenhams restaurants now stock only Douwe Egberts Good Original Coffee. Every cup of Good Original Coffee can be traced back to the farm where it was grown and has been certified by Utz Kapeh, a global non-governmental organisation. This is ensuring we are helping farmers look after their workers, their families and the environment in which they live and work.

Technological changes-Relate to the application of new inventions and ideas such as the development of the Internet and websites as business tools.

New internet and television technology which use special effects in advertising will make Debenhams products known and attractive to more customers as more people are now making use of the internet.

Debenhams has opened online stores due to advancement in technology of the internet and can now sell its products without using shop space. This will allow it to compete favourably in this harsh environment.

Positive performance online is helping lift yearly profit at Debenhams, this is despite the harsh economic turmoil in the domestic and international market

Environmental changes-Relates to what is happening with respect to the ecological and environmental aspects.

Debenhams have also joined calls to reduce impact on global warming by driving a Store energy saving plan, reviewing timings for lights, escalators and air conditioning. Overnight shifts have been reduced with light focussed only in the areas it’s needed. As a result of these efforts the organisation has achieved the Energy Efficiency Accreditation awarded by the energy Institute.

Debenhams is now contributing to a national fund which will help to develop specific WEEE (Waste Electrical and Electronic Equipment) collection centres to ensure that more WEEE gets recycled.

Debenhams offer a collection service on a like for like basis, for example if you buy a washing machine we can take away your old one. All the appliances we collect are then sent to be recycled.

More eco friendly measures have to be implemented, for instance Debenhams have developed a more eco-friendly packaging for the bra collars on Lingerie, by using a new type of board and are now able to maintain the print quality, whilst introducing 20% recycled content.

Legal changes-Relate to changes in legislation. This may impact employment, access to materials, quotas, resources, imports/exports, taxation etc.

Debenhams has been affected by the WEEE (Waste Electrical and Electronic Equipment) directive from the government and is doing its bit to help care for the environment.

The directive states that as a retailer we are responsible for increasing the amount of WEEE (Waste Electrical and Electronic equipment) that is recycled in the UK.

Debenhams reactions to the current economic climate

Trigger events like the credit crunch affect organisations in many different ways. Towards the end of 2008, Debenhams struggled as customers were no longer buying much of their products as the economy slid into recession.

The current economic climate is likely to impact on Debenhams’ profile and culture. The report by Graeme Wearden, in the Guardian of (21st October, 2008) gives a clear example of how the current economic climate has affected Debenhams.

“Debenhams has slashed its dividends after a sharp fall in sales during the past few weeks as the economy deteriorates,”

“Debenhams is planning cost-cutting measures to reduce debt of £994m, which it admitted was causing uncertainty over its future.”

“It also plans to strip out £15m of costs, and is cutting almost £40m from its capital expenditure.”

The profile of the organisation might change as it could be more difficult to raise funds for new ventures or expansions and also might reduce the current size of the company as there could be downsizing. The negative trends in the economy also might affect the culture of Debenhams as its employees will be operating in a culture of uncertainty.

However, the negative trends in the economy have had some positive effects on Debenhams as reported in the Waterford Today (6th January, 2009).

“On the day (6th January 2009) Debenhams released its interim management statement for the 18 weeks to the 3 January 2009, it also reported that sales of designer gear normally associated with boom times rather than bust, are back in vogue thanks to a new type of shopper, the recessionista.”

“Spring/Summer 09 at Debenhams draws the latest influences from catwalks around the globe with a strong focus on wearability all with famous name designer influences but with high street price tags.”

ClickPress (14th January 2009)The retailer reported double digit sales growth across its Designer at Debenhams offer in the run up to Christmas, as well as seeing sales and profits increase and market share gains in all major clothing categories, while reducing its debt.

The current economic climate has shaken Debenhams, but the Debenhams culture that encourages initiative has seen them shake off the initial fall in sales which shrunk the organisations profile and brought a culture of uncertainty as Debenhams struggled to survive. Whilst Debenhams is a premium department store retailer the external factors of banks going bust, rising unemployment adversely affected their operations. The public could no longer afford their products.

The organisation strategized and came up with the idea of selling designer labels with famous name influences but sold at high street prices.

Despite the credit crunch Debenhams has been able to maintain its culture of hard work and excellence through its people. The outgoing Chairman’s words sum up the Debenhams culture.

John Lovering said:

“I am proud of what Debenhams has achieved over the last six years whilst I have served as chairman. We have set direction for a sound future. Debenhams is a well managed, properly financed company with a clear and successful strategy and a number of exciting development opportunities. I hope my successor enjoys the role as much as I have.”

Debenhams has taken advantage of the recession; its combination of quality, price and design in its products has continued to attract customers. Sky News (17 March, 2009). The company’s profile will expand as in 2010 they’ll open eight new stores bringing the total number to 161 stores across the UK and will employee 1200 new people. The culture of the organisation has altered slightly as the perceived credit crunch crisis initially shook the organisation and drastic measures had to be implemented, the crisis brought a culture of uncertainty across Debenhams. The measures implemented have seen the UK’s second biggest department store chain continue to take market share from its competitors in all major product categories. Sky News (March, 2009).

The culture change which has taken place at Debenhams is what Brown (1998) terms, specific evolution, which is the adaptation of particular organisational functions (such as research and development, data processing and marketing), to fit the environment. People at Debenhams had to adapt to the credit crunch and found working ways to rise above the crisis. The Debenhams culture has been sustained through new pattern- maintenance symbols, beliefs and structures.

Debenhams has been able to weather the storms of the credit crunch because of proper planning and effectively managing today’s business risks. Reuvid (2005) points out that organisations should spend time researching the possibility of a risk occurring and the probability of that risk occurring and interrupting business’s flow, then find ways to reduce and mitigate these risks. The organisation should continuously be evaluating the overall risk management infrastructure and investments necessary to look beyond financial statement, risk to enterprise and external risks should not be undervalued and cannot be underscored enough. The organisation needs to protect itself from excessive risk. This should be top priority for management and the audit team. They should understand the extent to which the company is exposed to financial, operational or strategic risks. Because of its preparedness and strategic use both of its financial, creative talent and its human capital Debenhams has survived the worst recession in decades and remains standing strong.