Essay: Organisational Change Theory - A Case Study Of JC Penny.

Each student will write a paper synthesising organisational change theory and practice in the unit. This project is creating a case study of an organization that requires a change intervention.

The paper will cover the change project and includes the following:

(a) what is/are the outcome/s expected from this change project;

(b) what is the current reality and how did it become so;

(c) how substantial is the gap between current reality and expected outcome/s;

(d) description and details of the proposed change

(e) address any resistance to or other barriers for change;

(f) identify the change agents and assess if they are willing and able; and

(g) given the responses to the previous questions, is change feasible? Implications of the change, both positive and negative as well as evaluation of the effectiveness of the post-change organization must be considered.

In this report change intervention for JC Penny which is a retail chain company has been discussed with illustration of their current issue that requires to be changed.  The organisational issue is discussed along with identification of JC Penny’s internal and external analysis followed by recommendation of change interventions. Also use of theory has been made for better illustration of change and effectiveness of understanding.

According to Naikal & Chandra (2013) JC Penny Company is a US departmental store chain with over 800 located stores across forty nine states of US and Puerto Rico. Along with offerings traditional merchandise items JC Penny outlets also house leased departments like Sephora, Seattle’s Best Coffee, salons, auto centres, optical centres, portrait studios and jewellery repair. JC Penny stores are largely situated in suburban shopping areas and earlier in 1966 these were mostly concentrated across downtown areas. As shopping malls became demanding in later years of 20^th century so following this trend JC Penny relocated many of their stores to developed areas which were popular shopping areas. Recently too JC Penny has successfully been able to follow the trend of consumer inclination and opened some freestanding outlets including some very nest to their rivals. Some of JC Penny stores are situated in power centres. Moreover JC Penny has also been successful to adapt to rising internet trend since 1998 and many of their catalogues and distributions have been streamlined and even some of their stores are undergoing renovation to improve store layout to modern retailing demands.  

As stated by Chernyak-Hai & Tziner (2014) the 111 year older retail chain had some complex organisational culture issues that led it to verge of failures and currently the chain has been struggling to survive. Soon after the period of recession between 2009-11, JC Penny stores struggled to come out of economic downturn and heavy phase of decline in their sales, which during this period were low from almost as 18 bn USD to 17 bn USD. That meant that JC Penny stores made a sale of around 150 USD per sq ft of store which had been definitely lower in context to department stores sales if not the lowest. Contrastingly, during same period rivals of JC Penny like Macy’s and Kohl’s made sales of nearly 220-230 USD per sq ft. There was terribly wrong within JC Penny over a long time and due to their poor organisational culture they had lost their identity and focus to bring in fresh change.  

As opined by Puia & Ofori-Dankwa (2013) before year 2009 JC Penny had over 1000 stores located mostly in popular shopping areas across US and they mostly targeted middle income people as major customers of their department outlets particularly in men and women apparel, kid’s items, home items and was very well known. JC Penny also had strong private label brands that credited most of their sales and their previous management worked hard to maintain costs and lessen supply chain. But after great recession it lost its identity as with less disposable income in hand and other alternative options for people clearly many switched to low priced Walmart, discounters like TJ Maxx, Kohl’s, Macy’s. Also there were several speciality stores available like The GAP and Gymboree which gave fewer reasons for customers to visit JC Penny for their shopping needs.  Obviously that resulted to sharp decline in sales that were more aggravated with fault in their culture and failure to adapt to change.   

Internal Analysis

Strengths: JC Penny has over 800 stores across US which makes its leading in retail industry in context to market share. It also has been oldest chain with 111 years old existence that gives a strong financial position to penetrate in new markets. According to Canadean Company report (2016) JC Penny have strong network of suppliers that makes them capable to handle supply chain bottlenecks and have strong dealer community where they facilitate JC Penny’s products to get more sales and revenues. They have good track of integration through M&A with complimentary companies like they have integrated with several tech firms to streamline operations and support reliable supply systems.

Weakness: JC Penny has high employee attrition rate compared to others in industry and have to make considerable huge investments in contrast to rivals for training and development of new employees. Also they have been facing issues to deal with discounter stores that are new entrants and have lost significant shares to niche segments. Also JC Penny has not been successful in incorporating strong work culture (Canadean Company report2016). Moreover JC Penny has poor product demand forecast that has resulted to high rate of missed opportunities in contrast to rivals and in most cases JC Penny has ended in maintaining high inventory for both in-house and in channel.

Opportunities: JC Penny has stable free cash flows which offer opportunities of investment in new product segments, new technology integration so it should attempt to venture into different product category.  Also new technology offers opportunity to JC Penny to explore differentiated pricing approaches in new market segments that will support them in maintaining loyal customer base with better services and value driven propositions (Canadean Company report 2016). Also new customer trends and change in behaviors gives JC Penny opportunities to tap into new market by building new revenue streams and diversifying into new segments.    

Threats: According to Canadean Company report (2016) JC Penny faces threat from counterfeit and low quality products that are imitated specifically in emerging and low income markets. Also crisis of skilled workforce in global market is a steady threat in growth objectives of JC Penny along with increase in raw material prices which can affect their profit margins. Moreover new technological advances of rivals and market disruptors can result to serious threats for JC Penny from mid to long term future. Also rise of power of local suppliers can create threat as rivals may pay better margins to local distributors to capture shares due to intense competitive pressures. The intense competitive pressure has affected profit margins and overall sales of JC Penny which can be threatening over long period impacts.  

Political: as retail industry depends on minimum wage regulations and retail being biggest job provider in US so any change in federal regulated minimum wage laws can negatively impact profit margins of JC Penny. In 2017 governors of NYC and California voted in approval for rise in wage laws for two states over next 6 years which can rise to 15 USD wage/hr by 2022. These congress laws will impact profits of JC Penny specifically in these states. Also retail industry has turned more political and is taking stand on social issues which is making retailers like JC Penny encounter unstable political climate in US as they have identified that social identity behind brand is vital (Newstex 2018).  Example, political volatility and order of government like travel bans by Trump administration may affect negatively as government regulations and policy are directly affecting profits by impacting economic climate of US. Also there is more political climate pressure as Asian economies are growing rapidly than US. Though JC Penny has no strong political alliances but political pressures due to regulation and policy changes can negatively affect its operations and business policies.

External Analysis

Economic: according to News Bites US (2017) as retail is major industry of employment in US so increase in online stores has led to over 22 prominent retailers in US to shut down their physical outlets in 2017. Even JC Penny is struggling for survival amid rising impact of e-commerce and on-the-go ease shopping trend. In 2017 they closed nearly 138 stores in attempt to restructure their business to meet customer demands. Also policy changes like tax cuts and infrastructure spending can improve consumer expenses but trade restrictions can result to rise in cost of goods thus lowering consumer spending and resulting to more job slashes. JC Penny is struggling to maintain their physical stores along with overcapacity of workforce and consumer’s interest for online shopping is forcing them to cut jobs to maintain costs.     

Social forces: according to Newstex (2014) consumer’s preference for e-commerce shopping platforms is declining sales and profits of JC Penny and these social change shifts have driven to closing of many of their physical stores. Also culture and inadaptability of workforce in JC Penny to leverage to new changes is challenging to be maintained in competitive pressures. Also the situation is complex due to high attrition rate so to overcome human capital loss JC Penny needs urgent change intervention approaches. Even, economic downturn and job cuts have resulted to rise in turnover and JC Penny must immediately act to cope with this crisis to operate and survive in future.

Technological: as more consumers have shifted to online shopping so JC Penny needs to make considerable technological developments to engage more consumers through their online platforms. More futuristic advances in artificial intelligence and IoT in retail has resulted to more pressure over JC Penny to integrate their online websites and stores to overcome competition with better and unique technological developments that can benefit stores with decentralized technologies.

Environmental: according to M2 Presswire (2018) energy and waste management have been focus of optimization process at JC Penny which has helped them reduce environmental footprints. Also to engage their suppliers in environment sustainability procedure they need to increase significance of developing their standards by targeting audit, support and training of suppliers. Besides, they have aimed to lower water consumption by 5% in US operations and recycle 85% of annual domestic waste by 2020 as efforts towards environment. Moreover there is need for more association with energy efficacious transport carriers to lower their freight related emissions.

Legal: JC Penny has been facing constant pressures under highly regulated department store industry and some of these includes coping with labor laws which regulate rights of employees. Also, JC Penny needs to check laws that govern immigration as immigrant employees have been a vital factor among US employment concerns.

As stated by Suwaryo, Daryanto & Maulana (2015) organisational culture is collective behaviour of workforce and their response to organisational values, beliefs and visions. Culture shapes assumptions and behaviour patterns by influencing the manner they learn, feel, think or assume in conformity with organisation. So in condition of diverse and conflicting culture that coexist it is important that these are guided by effective actions and interpretations to lead to adequate responses to situations. Culture and change in organisation has direct relationship as these can either promote or hinder change implementations. Culture can promote change as it is strong and influences firms people as well as support of culture towards change can foster innovation in firms, so both change and culture are interrelated. Moreover culture supports development of people, facilitates team collaboration, hence applying culture in change interventions is rewarding to contributions as culture includes brainpower and not physical power. As such radical and continued change can be promoted with assistance of culture as it influences both process and staffs and has strong implication on implementation and sustainability of change as culture exerts control over employee’s responses so change can be easily executed with strong culture (Essawi 2012). Moreover along with benefits culture also can create complexity to change as strong culture can hinder creation and maintenance of support for change due to strong uniformity and loyalty driven with culture. Strong culture can drive behaviour that can act as barrier to response of firms towards changes. Also involvement of culture in change can drive assumptions that all firms encounter similar opportunities and setbacks due to lack of empirical evidences thus resulting to barrier.

According to Singh (2013) in order to support change in organisational culture, McKinsey’s model and evaluation of 7’S aspects i.e. strategy, structure, systems, shared values, style, staff and skills can help to execute necessary change as JC Penny had been facing issues of cultural difficulties that had made employees resist to adapt changes and hence has led to chaos and loss of company’s traditional identity. Also since few years JC Penny has lacked focus on its vision and one of the prime issues is shift from culture of transparency to one of capacity to revive profits which has resulted to no protocol or corporate process with JC Penny. More often directions are offered for product changes that have resulted to employee’s confusion and chaos and this lack of culture has driven troubles to change to new needs of business. More often employees at JC Penny are not allowed enough space to ask questions or get aware of happenings in stores which has proved fatal to culture of open communication thus driving high employee frustration and attrition rate due to poor corporate culture.

This can be overcome by adapting McKinsey’s model of change where JC Penny needs to assess their strategic approach to understand their purpose, leverage advantage over rivals, become flexible in process to adapt changes without damaging culture. They also need to improve their structure and should be open, fair and transparent so that information and effectiveness to drive change can be nurtured in culture. Moreover JC Penny needs to evaluate their process to manage effectively by learning about business systems, track and evaluate outcomes to initiate change process, so they need to understand employee engagement, team management and HR practices to streamline change of culture and effectiveness in employees. Also, JC Penny should include values and enable culture to manage change as it is a powerful tool that associates values and culture to changes and makes employees more agreeable to adapt (Kalaiselvan & Naachimuthu, 2016).  Further JC Penny needs to interpret their management and leadership styles to idealise change with better embracement of culture and employee engagement in decisions pertaining to change which will drive collaboration and effectiveness.  The most important is JC Penny needs to understand their staff and evaluate the shortages in skills, adaptability etc to fill the gap of culture as well as frame adequate policies that can help to collect their feedback and develop skills to perceive changes. The understanding of 7S will give an idea what needs to be initiated to plan change without disrupting regular operations by helping JC Penny identify their weakness and highlight areas that needs attention to implement change.

The implications of change in case of JC Penny will be development of clear strategic vision amongst the employees with clearly defined values, strategic directions that will help to demonstrate commitment of management from top down thus motivating employee’s confidence and needed consent to drive change and stick to planned interventions. Another implication will be attainment of cultural change with better communication and actions from management level that will lead employees with role model to motivate at highest level for better adaptability. The effectiveness of change in culture in employees of JC Penny after change intervention process can be seen through their support towards better culture and organisational changes. With better culture in employees they will remain more committed to their roles and will strive harder to perform which can be seen with high level of customer satisfaction and dedicated customer relationship as reflected by employees. A strong and inclusive culture will help employee to become brand ambassadors of JC Penny to achieve better outcomes and growth for company.

As change is evident and continuous so to develop ethical sensitivity in employees towards changing a culture it is important that a rational and sense of embracing organisational values is nurtured in employees of JC Penny through sustained awareness and learning to initiate effective change implementation. Also the management should be ethical in their practises to not force change on employees rather discuss with them on current issues, change prospects and better solutions so that change is adapted with agreement and not in breech to regulations of policies.

Conclusion 

Hence from the discussion it can be concluded that as employees are core assets of organisations so developing a strong culture through learning and awareness is significant to drive any kind of change without complexity and resistance. Also to best utilise culture as enabler of change the involvement of employees in all dimensions of change process can be encouraged so that culture of a firm can be turned as promoter of change and not a barrier for enhanced outcomes of change interventions.

References 

Canadean Company report (2016).  J. C. Penney Company Inc.: Retailing - company profile, SWOT & financial analysis. Basingstoke: Progressive Digital Media. Business Premium Collection. Retrieved from https://search.proquest.com/docview/1829940119?accountid=30552[Accessed on 3 Nov. 2018]

Chernyak-Hai, L., & Tziner, A. (2014). Relationships between counterproductive work behaviour, perceived justice and climate, occupational status, and leader-member exchange. Revista De Psicología Del Trabajo y De Las Organizaciones, 30(1), 1-n/a. Retrieved from https://search.proquest.com/docview/1553449665?accountid=30552 [Accessed on 3 Nov. 2018]

Essawi, M. (2012). Changing organizational culture through constructive confrontation of values. Journal of Organisation and Human Behaviour, 1(2), 46-50. Retrieved from https://search.proquest.com/docview/1478026055?accountid=30552 [Accessed on 3 Nov. 2018]

Kalaiselvan, K., & Naachimuthu, K. P. (2016). Strategic approach to talent management: A theoretical model. Journal of Contemporary Research in Management, 11(1), 1-22. Retrieved from https://search.proquest.com/docview/1862134679?accountid=30552  [Accessed on 3 Nov. 2018]

M2 Presswire (2018). Global online apparel footwear and Accessories Market 2018 key players: Amazon, E-bay, Amway global, gap, J. C. penny, Macy’s, sears, Wal-Mart, academy sports + outdoors, Amway global, ATG stores.com. M2 Presswire Retrieved from https://search.proquest.com/docview/2082002728?accountid=30552[Accessed on 3 Nov. 2018]

Naikal, A., & Chandra, S. (2013). Organisational culture: A case study. International Journal of Knowledge Management and Practices, 1(2), 17-24. Retrieved from https://search.proquest.com/docview/1845265395?accountid=30552 [Accessed on 3 Nov. 2018]

News Bites US (2017). Post earnings coverage as J.C. penny's earnings surpassed expectations. News Bites US - NYSE Retrieved from https://search.proquest.com/docview/1904830399?accountid=30552 [Accessed on 3 Nov. 2018]

Newstex. (2014). ValueWalk: J C penney company inc (JCP): The bull case. Chatham: Newstex.  Retrieved from https://search.proquest.com/docview/1642660735?accountid=30552  [Accessed on 3 Nov. 2018]

Newstex. (2018). Zacks investment research: J. C. penny, synchrony extends alliance with multi- year deal. Chatham: Newstex. Retrieved from https://search.proquest.com/docview/2119927696?accountid=30552 [Accessed on 3 Nov. 2018]

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