Question

What would you recommend regarding the issue solution and give the best solution ?

Case study to answer all these question is as follow :

When Robert Foster arrived at Home Improvement Inc. in December 2000, the deck seemed stacked against the new CEO. He had no retailing experience and, in fact, had spent an entire career in industrial, not consumer, business. His previous job was running Standard Electric’s power systems division, whose multimillion-dollar generating plants for industry and governments were a far cry from 410 light switches for do-it-yourselfers.

Foster was also taking over what seemed to be a wildly successful company with a 20-year record of growth that had outpaced even Build-All – but with latent financial and operational problems that threatened its continued growth, and even its future, if they were not quickly addressed.

Over the past five years, Home Improvement Inc.’s performance has indeed been put on a stable footing. Although its share price is well below the peak it achieved shortly before Foster arrived, and the rate of revenue increase has cooled from the breakneck pace of the late 1990s, the company continues to enjoy robust and profitable growth. Revenue climbed to around $80 billion in 2005, and earnings per share have more than doubled since 2000. Just as important, a platform has been built to generate future growth.

Home Improvement Inc. is one of the business success stories of the past quarter century. Founded in 1978 in Sherbrooke, the company grew to more than 1,100 big-box stores by the end of 2000; it reached the 40 million revenue mark faster than any retailer in history. The company’s success stemmed from several distinctive characteristics, including the warehouse feel of its orange stores, complete with low lighting, cluttered aisles, and sparse signage; a “stack it high, watch it fly” philosophy that reflected a primary focus on sales growth; and extraordinary store manager autonomy, aimed at spurring innovation and allowing managers to act quickly when they sensed a change in local market conditions.

Home Improvement Inc.’s culture, set primarily by the charismatic Claude Trempe (known universally among employees as “CT”), was itself a major factor in the company’s success. It was marked by an entrepreneur high-spiritedness and a willingness to take risks; a passionate commitment to customers, colleagues, the company, and the community; and an aversion to anything that felt bureaucratic or hierarchical.

Long-time Home Improvement Inc. executives recall the disdain with which store managers used to view directives from headquarters. Because everyone believed that managers should spend their time on the sales floor with customers, company paperwork often ended up buried under piles on someone’s desk, tossed in a wastebasket, or even stamped with a company-supplied “B. S.” stamp AND SENT BACK TO THE HEAD OFFICE. Such behaviour was seen as a sign of the company’s unflinching focus on the customer. “The idea was to challenge senior managers to think about whether what they were sending out to the stores was worth store managers’ time,” says Tom Taylor, who started at Home Improvement Inc. in 1983 as a parking lot attendant and today is executive vice-president for merchandising and marketing.

There was a downside to this state of affairs, though. Along with arguably low-value corporate paperwork, an important store safety directive might disappear among the unread memos. And while their sense of entitled autonomy might have freed store managers to respond to local market conditions, it paradoxically made the company as a whole less flexible. A regional buyer might agree to give a supplier of, say, garden furniture, prime display space in dozens of stores in exchange for a price discount of 10 percent – only to have individual store managers ignore the agreement because they thought it was a bad idea. And as the chain mushroomed in size, the lack of strong career development program was leading Home Improvement Inc. to run short of talented store managers on whom its business model depended.

All in all, the cultural characteristics that had served the retailer well when it had 200 stores started to undermine it when Lowe’s began to move into Home Improvement Inc.’s big metropolitan markets from its small-town base in the mid-1990s. Individual autonomy and a focus on sales with a focus on sales at any cost eroded profitability, particularly as stores were not able to benefit from economies of scale that an organization the size of Home Improvement Inc. should enjoy.

Foster’s arrival at Home Improvement Inc. came as a shock. No one had expected that Claude Trempe (then chairman) and Pierre Dion (then CEO) would be leaving anytime soon. Most of the employees simply could not picture the company without these father figures. And if there was going to be a change at the top of this close-knit organization, in which promotions had nearly always come from within, no one wanted, as Foster himself acknowledges, an outsider who would “SE-ize their company and culture.”

To top it off, Foster’s exacting and tough-minded approach, which he learned at Standard Electric, set him on a collision course with the freewheeling yet famously close-knit culture fostered by his predecessors, Home Improvement Inc.’s legendary co-founders, Trempe and Dion. It was this culture that Foster had to reshape if he hoped to bring some big-company muscle to the entrepreneurial organization (which, with revenue of $46 billion in 2000, was sometimes referred to as a “$40 billion start-up”) and put the retailer’s growth on a secure foundation.

Foster laid out a three part strategy: enhance the core by improving the profitability of current and future stores in existing markets; extend the business by offering related services such as tool rental and home installation of Home Improvement Inc. products; and expand the market, geographically and by serving new kinds of customers, such as big construction contractors.

To meet this strategy goals, Foster had to build an organization that understood the opportunity in, and the importance of, taking advantage of its growing scale. Some functions, such as purchasing (or merchandising), needed to be centralized to leverage the buying power that a giant company could wield. Previously autonomous functional, regional and store operations, for instance, to avoid conflicts like the one over garden furniture. This would be aided by making detailed performance data transparent to all the relevant parties simultaneously so that people could base decisions on shared information.

The merits of the current store environment needed to be re-evaluated; its lack of signage and haphazard layout made increasingly less sense for time-pressed shoppers. And a new emphasis needed to be placed on employee training, not only to bolster the managerial ranks but also to transform orange-aproned sales associates from cheerful greeters to knowledgeable advisers who could help customers solve their home improvement problems. As Foster likes to say “What so effectively got Home Improvement Inc. from zero to $50 billion in sales was not going to get it to the next $50 billion.” The new strategy would require a careful renovation of Home Improvement Inc.’s strong culture.

Shortly after arriving, Foster hired an old colleague from SE, George Watson, as his head of human resources. By placing a trusted associate in a position known for its conspicuous lack of influence to most executive suites – and by making him one of Home Improvement Inc.’s highest paid executives – Foster signalled that changing the culture would be central to getting the company where it needed to go.

Answer 1

It is very evident from the case that there has to be drastic changes made within the organisation. It has been a surprise for the employees to see an outside person with no relevant experience in the industry Robert Foster to be at the helm of affairs. It will take time for employees to accept the changes and over a period of time they have to see a substantial progress in the business to understand Robert Foster.

Sending a memo or notice regarding the new policies will only be buried under the already existing pile of papers. Robert Foster should call all store managers to the head quarters and have a meeting with them. In this meeting Foster can outline all the new strategies and explain how these are going to change the business. He needs to emphasise on the new three part strategy that he has formulated.

• Increasing the core profitability of the stores
• Offer related services like tool/machinery renting, home installation services etc
• Expand the market geographically and with target customers.

To achieve all this there must be centralized purchasing to leverage the huge buying power of Home Improvement Inc. Detailed performance reports to be shared among all stores and all data to transparent so that individual stores can benefit from shared data. The environment inside the store must be improved in terms of all the aisles to be arranged and proper signages to be installed so that it becomes easy for customers to identify products. Training has to be given to employees so that they become more productive to the company and useful to the customer by becoming knowledgeable advisors rather than just greeting customers. Effective training will also help in employees reaching higher managerial ranks. The hiring of George Watson as head of Human Resources will also bring a new perspective into the company and bring effective strategies for more employee engagement.

Store managers must be given considerable autonomy to make decisions regarding their stores with respect to local requirements without compromising on the overall objective,plan and strategy of Home Improvement Inc. A huge strategical change and shift in focus of this magnitude will definitely take time and resource. For this the employees have to cooperate and be motivated. Meeting all store managers and addressing all issues, concerns and how to overcome them effectively is a good way to get them on board with the change. meeting other store managers can also develop healthy competition and will foster better employee relationships.