1. CENTRALISATION OF INTERNAL SERVICES IN
AN INTERNATIONAL RETAILER
A CASE STUDY OF RETAILER TK
İBRAHİM BAŞTANOĞLU
20123108004
JULY 2013
2. ABSTRACT
In this study organizational change which is happened in Retailer TK will be
analyzed. Change in the organization structure covering a certain centralization of
some processes. Retailer TK is international company which heading from UK.
Company is doing business in twelve markets with more than five hundred thousand
workers. Retailer TK is a market leader in UK but in Turkey, Retailer TK is in fifth
position according to market share. Retailer TK firstly was entering to market in 2004
with acquisition of local retailer in İzmir.
Most of international company is prioritizing to reduce all type of costs. Because of
being very challenging market, retailing always needs to decrease expenses and
responding to customer as fast as companies can.
Organizational change of retailer TK is started with an affect of centralization like
other four Europe countries of company. This organizational change is started in
September 2011 with mainly all departments. In earlier years, other countries except
Turkey began to centralize with some way of workings. This change firstly will provide
decreasing labor costs and managing some activities more comfortably. Also steps
that centralization lived through will be discussed and after change, new structure of
company will be examined with its advantages and disadvantages. Impact of
organization and people who is passed through this organization change is other
main factors are scanned.
Theoretical background of this case was about modeling of change management.
Steps of change management are becoming clearer with these models.
Retailer TK which is an international company existing in nine different countries will
be a case study topic with its organizational changes happened in 2011 in Turkey
organization. Study will be covering three parts which are before the change, the
change and after the change.
3. INTRODUCTION
Mainly the change’s meaning is doing something different. You can cause something
to change, or you can bring change upon yourself. It might be very intangible
definition with its own but when we combine this word with management, we will
come up with an approach to transitioning individuals, teams and organizations to a
desired future state. Also change management is the application of appropriate
planning, tools, and processes to effectively implement change and ensure its
successful adoption. The driving force behind change is usually a business
requirement, often driven by competition. It is a systematic approach to dealing with
change, both from the perspective of an organization and on the individual level. For
an organization, change management means defining and implementing procedures
and/or technologies to deal with changes in the business environment and to profit
from changing opportunities.
Why is it important to understand the change? Unfortunately change is unstoppable
and if any organization or individuals can not settle, there is no way to consist. Since
change is going to happen, you have two choices. You can manage change or you
can let change just happen on its own. Market leaders, international or/and
spearhead companies always wants to prefer first option.
Study is aiming to analyze effects of the organizational change of Retailer TK in a
perspective of both people who is affected and organization. How was the business
before centralization and how is it now? Steps of change for some specific
departments that is respond well or opposite will be gone deeper mostly. Also
departments which are managing organizational change better than others will be
viewed according to steps that it followed and there will be some comparison how
managers react on change. How they can manage the people who are resisting
changing because of the fear of firing?
Managing differences between departments and managers, response of employers
to change duration of adaptation of change, advantages and disadvantages,
difficulties of managing change will also be discussed.
This study is also intending that because of being a real business case in an
international retailer how was the effect on this change to sales? Study will look for
the answer to is it only improving way of workings meaning passing the some admin
jobs like data entry or placing orders which is taking too much time but not important
for company’s customers in the sense of adding value or the expectation of company
is getting high sales revenues after change because of remaining staff will try to
improve business for customers.
4. THEORITICAL BACKGROUND
While some resistance to change is inevitable, this article suggests that inept
management strategies can often cause the normal unease associated with a
change to accelerate into more severe problems. Reasons for negative reactions to
change are explored and practical solutions, based on findings of research studies,
are offered (Baker, 1986).
While there are many change management models, most companies will choose at
least one of the following three models to operate under:
1. Lewin’s Change Management Model
2. McKinsey 7-S Model
3. Kotter’s 8 Step Change Model
Lewin’s Change Management Model
This change management model was created in the 1950s by psychologist Kurt
Lewin. Lewin noted that the majority of people tend to prefer and operate within
certain zones of safety. He recognized three stages of change:
1. Unfreeze – Most people make an active effort to resist change. In order to
overcome this tendency, a period of thawing or unfreezing must be initiated
through motivation.
2. Transition – Once change is initiated, the company moves into a transition
period, which may last for some time. Adequate leadership and reassurance is
necessary for the process to be successful.
3. Refreeze – After change has been accepted and successfully implemented,
the company becomes stable again, and staff refreezes as they operate under
the new guidelines.
While this change management model remains widely used today, it is takes time to
implement. Of course, since it is easy to use, most companies tend to prefer this
model to enact major changes Lewis, R. (1994).
5. McKinsey 7-S Model
The McKinsey 7-S model offers a holistic approach to organization. This model,
created by Robert Waterman, Tom Peters, Richard Pascale, and Anthony Athos
during a meeting in 1978, has 7 factors that operate as collective agent of change:
1. Shared values
2. Strategy
3. Structure
4. Systems
5. Style
6. Staff
7. Skills
The McKinsey 7-S Model offers four primary benefits:
1. It offers an effective method to diagnose and understand an organization.
2. It provides guidance in organizational change.
3. It combines rational and emotional components.
4. All parts are integral and must be addressed in a unified manner.
The disadvantages of the McKinsey 7-S Model are:
- When one part changes, all parts change, because all factors are interrelated.
- Differences are ignored.
- The model is complex.
- Companies using this model have been known to have a higher incidence of failure
(Day,Wendler, 2005).
Kotter’s 8 Step Change Model
6. This model, created by Harvard University Professor John Kotter, causes change to
become a campaign. Employees buy into the change after leaders convince them of
the urgent need for change to occur. There are 8 steps are involved in this model:
1. Increase the urgency for change.
2. Build a team dedicated to change.
3. Create the vision for change.
4. Communicate the need for change.
5. Empower staff with the ability to change.
6. Create short term goals.
7. Stay persistent.
8. Make the change permanent.
Significant advantages to the model are:
- The process is an easy step-by-step model.
- The focus is on preparing and accepting change, not the actual change.
- Transition is easier with this model.
There are some disadvantages offered by this model:
- Steps can’t be skipped.
- The process takes a great deal of time.
It doesn’t matter if the proposed changed is a change in the process of project
planning or general operations. Adjusting to change is difficult for an organization and
its employees. Using almost any model is helpful, because it offers leaders a
guideline to follow, along with the ability to determine expected results. This is helpful
because change is difficult to implement and manage (Naughtin, 2009).
7. RESEARCH
RETAILER TK CASE STUDY
In September 2011, Retailer TK announced the organizational change in its
structure. This structure is a well planned one because it’s covering almost every
department. This change is all about centralization of internal services like other
countries already lived through. In September Company’s sales are going well and it
adopting a very aggressive strategy in the sense of new store openings and
promotions. World head offices (UK) are supporting this change due to its two
reasons. First one is of course reducing labor costs and the second one is letting
employees to concentrate on value adding activities for its customers.
Company is active about sales on four Europe countries which are Poland, Slovakia,
Hungary and Check republic. The fifth one is Turkey. But Turkey is in a different
situation because of being Non-European Union County yet. All other four countries
are already centralized in terms of buying and internal service activities. Buying
activities are doing from UK because of being a member of Europe union.
Centralization of buying is providing to “buy for less” activities. Bulk buying is also
providing to do strong promotions in every country. Internal service centralization of
these four country is done in 2008 to 2010 with the same way of Retailer TK has.
SERVICE CENTER
The center who gives services to other countries states in India. India is well known
country in the perspective of being a heart of the world with its software knowledge.
Many international firms are opening service centers in India because of this factor.
Other factor is like China labor costs are very low. This opportunity is providing to
think that admin jobs can be done with in India rapidly. Last reasons that can be
count that English. Indians are speaking English and this is insures adaptation of
these kind of changes. The first two factors are also providing Retailer TKs
organizational change.
Retailer TKs service center is locating in Bangalore. This city is known with its service
centers. There are three main buildings in facility and it’s always living being. Working
hours of service center is related with the local hour of the country which is provides
service. Although being in other hemisphere India Service Center is supporting USA.
Indian workers are coming to office at mid night and leave at morning. It is very
8. important for the company that working synchronized with supported country. All
offices are open office. Offices are separated by the country which is supported.
BEFORE THE CHANGE HAPPEN
In commercial department, Retailer TK holds positions of admin jobs. These
employees are mainly responsible for data entry and placing order works.
Commercial team is dividing into three departments according to product of selling.
These are main commercial team which includes grocery non-food grocery, fresh
foods, bakery, frozen goods. This discrepancy is caused by Retailer TKs sales.
Nearly seventy percent of total sales are coming from this department. Departments
head is commercial director who is reporting to CEO and category managers are
responsible with their department dynamics with reporting to commercial director.
Next level contains buyers and buyer managers who are also managing their product
categories. Orders of these departments are managing by supply chain department.
In the commercial team data entry jobs are doing by date entry employees who are
expert on company systems. Job descriptions are covering product creation, buying
and selling price setting and promotion defining. Date entry people are reporting to
one of category manager because there were never be a department of data entering
before.
Second biggest section of commercial department is Nonfood (general merchandise
and electronics). This department has different structure than other commercial team.
Product groups are home related lines electronic goods and seasonal group which
includes stationery, entertainment, toys, sport, luggage and camping. This section
has also own its category managers and buyers. But different than others there are
Merchandise planning department which are responsible of stock and availability
management with controlling ordering. Data entry team is locating in this structure
and data entry employees are reporting to senior merchandise planning manager in
Nonfood department.
Third and the last commercial department is Textile department and this department
has only a few buyers which are only responsible for buying of local goods like school
uniforms and slippers. Other lines are company’s own brand and managing by UK
head office. It has also category manager who is reporting to commercial director and
there are also some merchandise planners. Data entry team of Textile is reporting to
category manager of Textile.
9. All data entry team have same job descriptions and there are not routine works which
they are doing and they are always needs to be fast in terms of responding buyer ad-
hog requests.
In nonfood department of commercial team ordering is managing by merchandise
planning team and there are order specialists who are only responsible for placing
orders into system and sending related suppliers. Orders are planning by
merchandise planners and order specialists are reporting to them.
THE CHANGE
In September 2011 all category directors are announced the change of organization
structure at the same time. This is a decision that UK head office call and it will affect
all departments. A short statement claims that this will be the change of admin jobs
and organizational structure changes. The main reason is concentrating on the
customer focused works will be prioritize. If there are some non value adding
processes or time wasting activities new service center will continue to do it and
Retailer TK head office will more focused on to their customer needs.
In commercial team all data entry activities starter to handing over. Service center
representatives traveled to Turkey and learned what needs to be done. Firstly
commercial data systems are showed because the system was totally Turkish. Then
respectively, product creation, product set ups, promotion definitions are showed.
Finally representatives and buyers are agreed on fixed templates for requests. After
tutorials, some Turkish representatives are chosen and signed their contracts for
working in India for two years. At the same time, employees who were working this
position were offered for new roles in the company. Some of them accepted
alternative roles but a few of them selected to leave company.
For ordering, meanwhile order specialists and merchandise planners were following
similar change processes and merchandise planners of nonfood department were
demonstrating how to place orders and also another agreed activities are internal
reporting and data providing for service center. It was an incredibly important task for
a retailer employee due to being a tool of understanding customer needs.
This new organizational change affects almost all departments. Marketing will be
working with service center for promotion management, accounting department will
use service centers support about invoice matching and treating notes of suppliers
into financial systems, supply chain will work with service center for ordering and
allocations like nonfood department, space range and display (SRD) department
which is managing floor plans of stores and shelf conditions will work with service
center with internal system management. All processes were same in a similar way.
These handover activities took approximately two months. After handing over all
processes and internal crisis were managed by integration representatives. Because
10. of being very dynamic sector, retailing needs to response all moves at market fast.
Although, planning and controlling were the priority values in company culture, this
period learned that these kinds of organizational changes needs always plan B and C
in case of crisis. Retailer TK faced very critical internal depressions about promotion
and price management due to inexperienced employees of service centers. These
crises were handled by experienced self denial merchandise planners.
AFTER CHANGE
New structure of Retailer TK was pretty different than before. Even though some
Turkish employees are not speaking English, every personnel used to work with their
new service centers. At first they were resisting the change but in time they
accommodate to live in this situation. Due to closure of positions, previous data entry
team and order specialists were started to work in their new roles which are offered
by company. Even some of them were promoted.
There were new way of workings and it provides to speak all employees and
stakeholders same language. Recent processes were also easily understandable.
There were some departments that working very jointly with new service center. For
instance, some suppliers of nonfood department were using services centers support
very effectively. Suppliers of these categories also were supportive with new
structure (there were mainly corporate ones). Their feedbacks were configuring
Retailer TKs new organizational structure better.
DISCUSSION
As Lewin’s model, Retailer TKs employees were resisted to change naturally. But this
was caused because of depression which they have lack of information of new
structure. Obviously model was suggesting three steps of change with theoretically
way. But the changes were happened with these steps. Major changes like Retailer
TK did were supporting these models steps.
But on the other hand McKinsey were pointed out some factors including style and
staff. Unfortunately Retailer TKs organizational change was not mainly related with
company style and its staff. It was the first time that company was experienced afore
and top management was not very willing in the perspective of managing employees
and their needs. Only change guidelines were followed and initiatives were not taken
by individuals.
Most likely, Kotter’s step change model should have been followed. But the
announcement seems that it was not increased the urgency for change. Style of
Retailer TK was it was autocratic approach for its employees. Teams were defined
but there were not any vision to be created. At least the massage was not presumed
11. by employees. However step number seven which was staying persistent was
implemented very successfully. Finally making the change permanent step was
lasting.
My first observation of this organization change in Retailer TK was it was needed and
after change many department concentrated on to customers and their expectations
more. Although some employees were obliged to lose their jobs generally adaptation
and harmony of Retailer TK employees were impressive. It also might be caused of
the fear of financial difficulties of living.
Secondly the approach of the company to change were also solid and even some
departments were failing company were not retreat and problematical processes
were supported with hiring temporary personnel from HR companies. These areas
were related with accounting and its invoice processes. These organizational change
stages were endangered the relationships with some big suppliers.
My suggestions to managers who are thinking or/and managing organizational
changes like Retailer TK would be explaining all changes processes to employees.
Also need of change should be transmitted well. Because, employees will resist to
change as a human reaction. Forecasted structures or new way of workings are also
well emphasized. It should not be a reason to shown that it is a top level decision and
every employee respect and implement.
Ongoing changing processes also should be modifiable. As Retailer TK case study
approaches, there might not be one ideal way to follow. Natural or/and cultural
reactions should be well forecasted.
After change, all steps that were experienced should be well analyzed. “What was
good” and “what was not so good” questions should be ask and researched. Did
company really do good job with the management of change? Or where did the
company mire down?
Finally, it was shown once more that there is nothing permanent except change in the
world. Organizations or individuals who are attuned to change will be more
successful than other. Change is inevitable.
12. EXIBIT 1: TRAINING SCHEDULE OF SERVICE CENTER REPRESANTATIVE
Function Sub Process Who(HSC1) Proposal
Slot/
Morning/Afternoon
Time
Commercial
Nonfood
Commercial Nonfood Buying processes -
supplier negotiation,registration,
contracts,product set up, price
maintenance, promotionplanning and
pricing,stock and availabilityfollow up
Pavithra WK1 Morning 9 to 12
Commercial Nonfood -Data entry for
product data-supplier registration-
supplier allocation-price,data
maintenance
Pavithra WK1 Morning 10 to 12
Commercial Nonfood -Promotion&
event coordination,criticalpaths follow
up, leaflet set & up follow up for Nonfood
Pavithra WK1 Morning 9 to 12
Commercial Nonfood -Replenishment
calculation& ordering for Entertainment,
data of products entrance to system,
calculationof RTV need & range
management for entertainment
Pavithra WK1 Morning 9 to 12
Commercial Nonfood -Replenishment
calculation& ordering for Toys & Baby
Nursery, data of products entrance to
system, calculationof RTV need & range
management for entertainment
Pavithra WK1 Morning 9 to 12
Commercial Nonfood General
management
Pavithra WK1 Morning 9 to 12
Commercial Nonfood Import Pavithra WK1 Morning 9 to 12
Commercial
Nonfood
Commercial Nonfood -Project to
eliminate manual order entry
Pavithra WK2 Morning 9 to 12
Commercial
Nonfood
Commercial Nonfood -Ordering for
Electronics,data of products entrance to
system, stock cover bystore report for
Nonfood
Pavithra Wk3 Morning 9 to 12
Commercial Nonfood -Ordering for
Home Cook, data of products entrance
to system
Pavithra Wk3 Morning 9 to 12
Commercial Nonfood -Ordering for
Home Maintenance, data of products
entrance to system, follow up for returns
to vendor
Pavithra Wk3 Morning 9 to 12
Commercial Nonfood -Replenishment
calculation& ordering for Home Cook,
data of products entrance to system,
calculationof RTV need & range
management for entertainment
Pavithra Wk3 Morning 9 to 12
Commercial Nonfood -Replenishment
calculation& ordering for Home
Furnishing & Stationary,data of products
entrance to system, calculationof RTV
need & range management for
entertainment
Pavithra Wk3 Morning 9 to 12
