McGregor’s Ltd. Department Store A report Executive Summary The McGregor Ltd. Department Store as founded in 1871 and since then it has acquired the image of being old fashioned and traditional. The President of the Store wants to change the image of the Store and to achieve higher efficiency and profitability by creating more business sense in the policies of the Store. Mr. McGregor has devised a new discount scheme for employees confirming with the current practices in other stores. Mr. President wants to communicate the new scheme without creating any resentment in the senior staff and to simultaneously implement the same without delay.
The options available to Mr. President are either to call for the meeting of the executives or to write a memo to them detailing the new scheme. Further he has to decide either to continue with the existing scheme or to implement the new discount scheme. Each option has been evaluated in terms of profitability and effect on employees’ morale. On the basis of this evaluation, it is recommended that the President calls for the meeting of the executives and implement the new scheme. Situation Analysis The McGregor is a retail store in downtown Boston.
The President of the store is of the opinion that the store is not able to achieve high profitability and rapid turnover. The Store is also not yet ready to keep pace with emerging forms of retailing. However, he is of the firm belief that large discounts to senior grade staff, is the main cause for store’s lower profitability and discontentment among the lower staff; and, it has further led the customers and the other members of the staff to believe that the store is old and a traditional one, and is meant for old clients only.
In order to attract new customers, to change the image, and increase the profitability of the store, the President wants to propose a new scheme of employees’ discount (as shown in Exhibit 1). Objectives proposed to be achieved: • • • • • Greater efficiency in services being rendered to the customers. To increase the margin of profitability. Boosting sales with a rapid pace. Leaving no chance for the company to be taken over. Creating a fusion of traditional and new world by maintaining the old world harms with what may be of attraction for the young customers. Measures to achieve the objectives: • • • Employees’ Discount Scheme to be modified. Infusing new staff equipped with the latest managerial theory and skill. Rapid turn over to be achieved through greater reliance on special sales. Problem Statement • How to communicate and implement new discount policy without creating resentment, specially, among the senior staff. • How to modify the image of the store from being a traditional to a modern one.
Criteria for evaluation • • • • Current discount scheme vis-a-vis profitability of store Number of foot-falls of the young customers turning towards the store Effect on employees’ morale (softer factors) Competitive advantage through recruitment of young sales force Options (b) • • • (b) Communication Writing a memo Calling group meetings Soliciting opinion on the new discount scheme Continuance of the existing Discount scheme or implementation of a new one. Evaluation of Options 1.
Writing a memo/Group meeting/ Soliciting opinion on new discount scheme The new scheme is of such a nature which calls for participation of senior executives and buyers more so, because they are going to be adversely affected by the implementation of the new scheme. Therefore taking them into confidence before the implementation is a better option lest the change should be interpreted as a forced decision. All the 114 senior staff members should be called in for a meeting, it would provide an occasion for face to face interaction thereby enabling the President to proceed as the situation unfolds itself.
Secondly, the staff will not feel that anything has been imposed upon them without taking them into confidence. Soliciting opinion of each member of the staff on the new discount scheme, would be something cumbersome and more time-consuming, resulting in the implementation to be delayed. Therefore, calling the meeting and announcing the scheme is the best option. 2. This new scheme has been devised to create better business sense and to increase the profit margins.
The current scheme does not take into account performance and discriminates on the basis of grades of the staff, while the new scheme would be helpful in creating parity, uniformity and ensuring better involvement of all employees, specially of the lower grades. With the current scheme the growth rate in net sales over the previous year is 7. 5%, the new scheme is expected to maintain this much at least, even if we apprehend the fall in the total bill of the managerial staff, because contribution of the Employees’ total bill is 0. 7% of the net sales. Further, the sales from the lower grade employees would also increase, due to increase in discount for them. The new scheme would be able to boost the morale of the sales people, and more new customers may be attracted. Even the low- profit- margin goods would not yield losses because of lower discount rates. Further, it will save the time of the sales people, and, facilitate efficient services to the external customers, thereby taking care of rapid turnover, high profitability and increase in the sale volumes.
Assuming that the loss on account of discounts to the senior executives/buyers would be approximately 50%, which may be compensated by a small increase (as shown in Exhibit 1) in their salary. This step will help in not only expeditious implementation of the scheme, but also the senior staff will be motivated by this increase. This benefit will be on a recurring basis and even without going for any new purchases from the store. Regarding the financial benefits to the Store, the implementation of the scheme would be able to save $19024(assuming 15% avg. discount on total purchase of $400,000).
Further the employees of Grade 5 & 6 would increase their purchases by 40- 50%, and Grade 7 employees would go for purchases due to new scheme, which will add to the revenue of $16665. The raise in salary would cost $11520 which can be compensated by the rise in purchases only. It will also help the store to keep pace with the emerging forms of retailing, as the new discount Scheme matches with that of other Competitors. Alternative Options The senior level executives and buyers may be given fixed grade allowance @ $25 p. m. and $12 p. m. respectively in order to set off the loss caused because of the implementation of the new scheme.
Thus the change will not generate resentment, and will keep the morale of the employees, high (see Exhibit 2 for financial impacts). Recommendation Mr. McGregor should to go for the option of holding the meeting of the entire managerial staff, and, announce the new discount scheme detailing the merits of the same. As such the implementation of the scheme offers participation of the entire staff, motivation of the sales force, and, increasing of the foot-falls of the young customers. Action Plan • • • Conduct the meeting with the managerial staff Inform the sales staff about the scheme Implement the scheme immediately after the meeting —