Sloan & Wu, Inc., wants to get closer to its customers. Over the past six years, the large chain of department stores had acquired three major regional department store businesses that enjoyed loyal customers and solid profits. But sales volumes slipped as each of these organizations was converted to the Sloan & Wu brand with standardized store designs, merchandising, and marketing. The merchandising and marketing was centralized to such an extent that the company’s expensive pre-Christmas advertising campaign for winter coats also appeared in Florida and southern California where few of those coats are sold. Another gaffe occurred when the company distributed a large stock of swimsuits in February to stores located in the northern states.

As sales and profits continue to decline, Sloan & Wu is reversing itself with a new organizational structure that gives more autonomy to local districts and stores to personalize merchandise and marketing for customers in that area.

This change is part of its “Sloan, Wu, and You” initiative.

The strategy’s objective is for customers to feel a more personal connection to the Sloan & Wu outlets in their area by ensuring that those stores provide merchandise assortments, size ranges, marketing programs, and shopping experiences that are more closely aligned to local needs.

“Better earnings come from better creative thinking and engagement with our customers in every store,” states Sloan

& Wu CEO Nadia Dhillon. “This is achieved by reallocating our resources, placing more emphasis and talent at the local market level, and empowering our local store and district leaders. We will drive sales growth by understanding what the locals want and then acting quickly to deliver on those expectations.

We also believe this will speed up decision making and simplify the process of working with our vendors.”

Sloan & Wu’s previous organizational structure (after the recent acquisitions) had 30 districts spread across five regions of the United States. The new structure consists of 45 districts in three regions (East, South, and West). District managers and their small staff of store merchandisers and planners will be responsible for an average of 10 stores rather than 15 stores in the previous structure. With fewer direct reports, district managers will be able to work more closely and effectively with each store. District managers report to regional directors, but the five regions are being consolidated into three regions.

The new structure will add 250 people in district offices.

But it will also result in about 2,000 layoffs, mostly in regional offices where many of the company’s merchandising and operations decision making previously occurred. The company is also removing one management level—assistant regional managers—from the company.

The district store merchandisers will liaise with Sloan &

Wu central buying teams to understand and act on the merchandise needs of local customers. The district planners will provide market-specific intelligence to the company’s planning office. Sloan & Wu is introducing radio frequency identification technology that precisely tracks each merchandise item, so customers are assured that products listed online for a particular store are actually in stock at that store. The sales database will also more accurately document which items, brands, garment sizes, and colors are preferred by customers who shop at those specific locations. Furthermore, district offices will receive resources to participate in local events.

Will the “Sloan, Wu, and You” initiative be effective?

One retail analyst sees the benefits, but also warns that it is a costly experiment. “This degree of localization can inflate costs, whereas the previous standardization missed the mark in different customer needs across the country,” she explains.

Another analyst thinks fewer stores per district manager is

“just adding another layer of close supervision” to store managers and employees. “It seems that centralized control is just being replaced with district manager control over the store managers and their staff.”

But Sloan & Wu CEO Nadia Dhillon doesn’t see the changes in that light. “I’m really excited about this devolved structure,” she says. “Giving our district managers fewer stores enables them to discover what local customers are buying and what they would purchase if we had the product available. Ultimately, that’s how we grow sales and keep ahead of our competitors.”

Discussion Questions 1 Describe the proposed changes at Sloan & Wu in terms of the four elements of organizational structure.

2 What contingencies suggest that Sloan & Wu’s new organizational structure is appropriate or inappropriate?

3 What problems do you think Sloan & Wu might experience with the new organizational structure?

Explain why these problems might occur.