CASE THREE:

REORGANIZATION

To: HR Directors

From: CHRO

Re: Reorganization

Dear HR Directors,

A recent meeting with the strategic planning team and the board of directors revealed that we have a substantial problem with several stores in the Mountain Region $($Wyoming$,$ and Montana$).$ Data obtained from these stores reveals that they are severely underperforming and their revenue numbers are not nearly strong enough. The Board wanted to simply close $6$ stores that are underperforming and lay off employees. I told them that I would have a team run some numbers and provide a proposal on the possible next steps. We need to have this done by the end of today.

There are $6$ stores that are of primary concern to the executives. Included below is a variety of data $($based on our balanced scorecard process$)$ to help you understand the current performance of these stores. For example, I have included revenue data, labor cost data, employee satisfaction and customer satisfaction data. Using this data, and other resources as needed, I would like you to do the following: $(1)$ fully analyze the current state of these stores and report your results; $(2)$ identify $2$ proposed solutions to the problems noted, and $(3)$ make a compelling case for why your proposed solutions are in the best interest of Tanglewood.

Part of your analysis should include reviewing the performance metrics in the tables below. Our performance metrics for these stores is dire in a variety of ways. First, as you can see from the labor cost and revenue data below, the stores are clearly underperforming. Stores in other areas of the country are bringing in $2-3$ times the amount of revenue as these stores are. I believe you have already analyzed the customer satisfaction data as well as out employee data. The customer data is of significant concern to executives, however they seem to be overlooking the employee data. We need to do a thorough analysis of both datasets so we can provide an accurate internal and external review of what is happening. There is no doubt that the low satisfaction ratings and the poor service quality are related. The data suggests that we have also not invested in these stores the way that we have invested in other regions of the country in terms of training and development, employee assistance programs, and other things. I know this is a lot of data to comb through, but I wanted your team to have a complete picture of the situation as you begin your analysis and create recommendations.

I would like you to propose at least two alternatives for the executive team to consider as they work to resolve the problem. Every option is on the table, but any proposed solution should be justified and thoroughly explained in terms of benefits$/$drawbacks of the proposed solution. Use data where appropriate to justify your proposed solutions.

Thanks for your continued assistance. I am confident we can find some alternative solutions for the board to consider.

Sincerely, CHRO

Table $1$: Labor Costs

Store : Wyoming $1$ Number of Employees Average Cash Comp Average Benefits

Store Manager

Asst. Store Manager

Department Manager

Shift Leader

Store Associates $1$

$3$

$5$

$11$

$11963,500$

$51,850$

$41,500$

$35,500$

$26,50010,200$

$8,350$

$7,300$

$5,900$

$3,500$

Store : Wyoming $2$ Number of Employees Average Cash Comp Average Benefits

Store Manager

Asst. Store Manager

Department Manager

Shift Leader

Store Associates $1$

$3$

$6$

$11$

$12163,500$

$51,850$

$41,500$

$35,500$

$26,50010,200$

$8,350$

$7,300$

$5,900$

$3,500$

Store : Wyoming $3$ Number of Employees Average Cash Comp Average Benefits

Store Manager

Asst. Store Manager

Department Manager

Shift Leader

Store Associates $1$

$3$

$7$

$12$

$12463,500$

$51,850$

$41,500$

$35,500$

$26,50010,200$

$8,350$

$7,300$

$5,900$

$3,500$

Store : Wyoming $4$ Number of Employees Average Cash Comp Average Benefits

Store Manager

Asst. Store Manager

Department Manager

Shift Leader

Store Associates $1$

$3$

$5$

$12$

$12063,500$

$51,850$

$41,500$

$35,500$

$26,50010,200$

$8,350$

$7,300$

$5,900$

$3,500$

Store : Montana $1$ Number of Employees Average Cash Comp Average Benefits

Store Manager

Asst. Store Manager

Department Manager

Shift Leader

Store Associates $1$

$2$

$4$

$10$

$11460,500$

$49,500$

$39,000$

$32,000$

$25,0009,250$

$8,000$

$6,900$

$5,600$

$3,300$

Store : Montana $2$ Number of Employees Average Cash Comp Average Benefits

Store Manager

Asst. Store Manager

Department Manager

Shift Leader

Store Associates $1$

$3$

$5$

$11$

$12660,500$

$49,500$

$39,000$

$32,000$

$25,0009,250$

$8,000$

$6,900$

$5,600$

$3,300$

$*$labor costs $=$ number of employees $($average cash $+$ average benefits$)$

Table $2$: Revenue per store

Store Revenue in Millions

Wyoming $110\mathrm{.}23$

Wyoming $29\mathrm{.}36$

Wyoming $39\mathrm{.}87$

Wyoming $48\mathrm{.}44$

Montana $18\mathrm{.}62$

Montana $27\mathrm{.}21$