Champion Stores are in trouble. Although the company is a major regional player with hundreds of stores in the upper Midwest, a sharp decline in the region’s manufacturing economy has put the company in a serious financial bind. Revenues have been consistently declining, forcing the company to switch their focus to very low-margin commodities, such as milk and generic drugs, as opposed to high-margin items that used to be the company’s mainstay products, such as cosmetics, specialty items, prescription drugs. In addition, the firm has had to close a few locations, reversing expansion plans for the first time since it incorporated. Since the company has not faced financial hardship before, this is new territory for senior management. Jeff Smith, the vice president for human resources, has been struggling with how to address the issue with employees. As things have worsened, he has noticed that employees were becoming more disengaged, with the concern about job insecurity taking a toll on their attitudes. Media reports about the company’s store closings focused on the company’s lack of advance notice or communication from corporate offices, as well as a lack of severance payments for departing employees. In the absence of official communication from the company, rumors and gossip have spread like wildfire among the remaining employees. A few laid-off employees started to post angry blogs about the company, making morale even worse. The company is changing in other ways too. The average age of its workforce has been steadily increasing and several factors have contributed to this shift. First, fewer qualified young people are seeking jobs in the area because many families moved south to seek more opportunities for employment. Secondly, many of the stores have been actively encouraged to hire older workers, such as retirees who are looking for supplemental income. Managers have been receptive to these older workers because they view them as more mature, miss fewer days of work, and do not have child care responsibilities. They also are often more qualified than younger workers because of the experience they have accumulated over their career. Overall, these older workers have been an asset to the company in these troubled times. However, if things get worse, they are likely to leave, taking their experience with them. Jeff Smith decided to propose a new direction for management to the company’s executive committee and they reluctantly agreed to try his suggestions. Over the past 6 months, stores throughout the company have used a performance management system that, as Jeff Smith says, “...gets people to buy into the idea that the idea of performing so that they can see real results in their stores. It’s all about seeing that your work serves a broader purpose. I’ve read about how some companies have been sharing store performance information with employees to get them to understand what their jobs really mean and participate in making changes. I thought that was something we would be able to do.”The Human Resource department came up with 5 options for the management system. The corporate level allowed individual store managers to choose the option they thought would work

best for their employees so that managers would not feel too much like a rapid change was being forced on them. Program I is opting out of the new idea by continuing to use the existing management system of providing employees with very little information and/or no opportunities for participation. Program II tracks employee absences and sick leave and shares that information with employees, giving them feedback about things they can control. Management takes no further action. Program III tracks sales and inventory replacement information across all shifts. This information is shared with employees but not the information about employee absences and sick leave. Program IV, the most comprehensive, tracks the same information as in Programs II and III. Managers communicate it in weekly brainstorming sessions, during which employees try to determine what they can do better in the future and make suggestions for improving store performance. Program V keeps the idea of the brainstorming sessions but does not provide any information to employees. Since implementing the new management system, Jeff Smith has spoken to several managers about what motivated them to choose the program they did. Allen Jones, who chose Program IV, said “I want to have my employees’ input on how to keep the store running smoothly. Everyone worries about their job security in this economy. Letting them know what is going on and giving them ways to change things keeps them involved.” Betty Collins couldn’t disagree more. She selected Program I. “I would rather have my employees doing their jobs than going to meetings to talk about doing their jobs. That’s what management is for.” Jose Alvarez also chose Program I and agreed with Betty. He said “It’s okay for the employees for feel a little uncertain---if they think we’re in the clear, they’ll slack off. If they think we’re in trouble, they’ll give up.” Cal Nelson also questions the need to provide information to the whole team but he chose Program II. “A person should know where he or she stands in the job but they don’t have to know about everyone else. It creates unnecessary tension.” Cal’s response is similar to Kathy Simko’s reason for picking Program V. “When we have our brainstorming meetings, I learn what they think is most pressing, not what the spreadsheet says. It gives me a better feel for what’s going on in my store. Numbers count, of course, but they don’t tell you everything. I was a little worried that employees would be upset if they saw we aren’t performing well.”Jeff Smith is convinced that the most elaborate program (Program IV) is the most effective, but not everyone in the executive committee is won over by his view. Although they have supported the testing of the various programs, others on the committee want to see results. CEO Robert Masters has asked for a complete breakdown of the performance of the various stores to see how the sales figures and turnover rates have been affected by each of the 5 programs. The company has been collecting information and prepared the following table which shows the sales and turnover rates, as well as the estimated dollar cost of staff time taken up by each program. These costs are based on the number of hours employees spent working on the program multiplied by their wage rate. Profit and turnover data include averages across all store locations; profit is net of the monthly time cost. Turnover information refers to the percentage of employees who either

quit or are terminated in a month. To see if any patterns emerged in managers’ selection of programs, the company calculated relationships between program selection and various attributes of the stores. Program I was selected most frequently by the oldest stores and those in the most economically distressed areas. Programs II and III were selected most frequently by stores in urban areas and in areas where the workforce was younger on average. Programs IV and V were selected most frequently in stores in rural areas and especially where the workforce is older on average. Program, Methods, Number of Stores, Average Turnover, Weekly Profit per Month, Monthly Staff Time Cost, No info or brainstorming 83, 30%, $5700+/- $3000, None. Share absence & sick leave info 27, 23%, $7000+/-$5800, $1960. Share sales & inventory info 35, 37%, $11000+/-2700, $2440. Share info & allow for brainstorming 67, 17%, $13000+/-$3400, $3420. Brainstorming without sharing info 87, 21%, $14000+/-$2400, $275.

This case deals primarily with issues of motivation, organizational culture, leadership, empowerment, and organizational change but feel free to utilize other concepts if you see them as relevant. Please make sure that you are thoroughly answering each of the questions by using course concepts and examples for the case to support your answers. This is your only major writing assignment for the course – be sure to give it adequate time and depth in developing your answers

(1) With respect to organizational change,

a. what do you think about Jeff Smith’s approach to this situation? Was it a smart idea to try out 5 different programs at the same time? Will it be more difficult to implement one of these in the long run?

b. if the executive committee were to choose your recommendation of the strongest program and it will be implemented company-wide, how do you think this should be implemented so that both managers and employees are on board with the change?