Outputs at the Different Levels of the Company
Introduction
The aim of the current case study is to evaluate organizational performance from the Congruence Model for Organization Analysis perspective. The paper represents an attempt to trace organizational performance from three different perspectives: individual, group, and system. Also, the paper is targeted to analyze the level of interaction between three organizational levels and evaluate the overall performance.
1. Congruence Model for Organizational Analysis
1.1 Description of Nadler-Trushman Congruence Model
One of the approaches to the organizational overall performance was developed by Nadler and Trushman in 1977. The model consists of three components: inputs, transformation process, and outputs (Falletta, 2008). Resources, history, and environment are considered the inputs within the Nadler-Trushman Congruence model (NTCM). Transformational process includes such system components as tasks, formal and informal organizational arrangements, and individual components. Performance, organizational effectiveness, products and services are considered the outputs within the model. Also, the outputs are divided on individual, group, and system outputs (Nadler & Trushman, 1980).
1.2 Key Assumptions
The model is based on certain assumptions, namely:
organizations are seen as social systems which are opened to the outer environment;
organizations are supposed to be dynamic entities;
there are three levels of organizational behavior: individual, group, and system;
all of three levels of organizational behavior interact.
Thus, the model is mainly focused on the organizational strategy as the most important input among other model components. The model emphasizes performance, effectiveness, products and services as main outputs (Nadler & Trushman).
2. Analysis of Kohl’s Case
2.1 Outputs Description
Kohl is one of the largest department stores on the territory of the USA. It has been operating for about fifty years at the retail market having approximately 1100 stores and more than 130,000 associates. It represents a moderately-price retailer competing with Target, Wall-Mart, K-Mart, Macy’s, and other well-known retailers. The store provides customers with footwear, accessories, apparel, cosmetics, housewares and home furnishings. The Corporation has its own web site and is involved in electronic commerce. Kohl’s categorizes its items for women’s, men’s, and children’s apparel, accessories, footwear and home reporting its sales in these classes of goods (Kohl’s Corporation, 2011).
2.2 Measurement of Organizational Performance
Sales in the forth quarter 2011 made up $1.07 million in comparison to $1.24 million by the end of 2010. Evidently, sales declined in 2011 for 13.7%. Net profit expressed as a percentage of sales is an important measure of operational efficiency. Net income in 2011 made up $1,120.0 million compared to $973.0 million (2010), $857.0 million (2009), $1,083.0 million (2008), $1,108.68 million (2007). Thus, it can be suggested that the Corporation returned to the level of income of 2007 (before world crisis) with a little improvement (Kohl’s Corporation, 2011).
2.3 Financial Ratios Analysis
Return on sales in 2011 was 0.2%, receivables per day sales were $2.01. It is a good measure of this ratio for a supermarket chain. It is quite possible that Kohl’s is operating efficiently because it relies on high volume to be generated an acceptable level of return on invested capital. Average return on assets (ROA) in retail industry is 7.9%, it is a little bit higher at Kohl’s, but within the normal range (8.3%) (Kohl’s Corp., 2012).
2.4 Market Share and Customers’ Satisfaction
In 2010 Kohl’s started to intensively implement aggressive market capture policy. Since Kohl’s is operating inside the USA, it opens many stores all over the USA territory. In the second quarter of 2010 Kohl’s profit increased 28%, total sales raised 8.5% (Kohl’s Corporation, 2011). In 2010 the Company had expanded market share at the expense of married women aged from 25 to 50 years thus slightly improving its customer base.
In accordance with Hoff (2008) research, Kohl’s had the best satisfaction rating in the retail industry. There were Wal-Mart, K-Mart, Target, Mervyn’s, and many other large supermarkets included in the American Customer Satisfaction Index. In 2011 Kohl’s got 92% net satisfaction taking the second place after Barnes & Noble (93%) (Kohl’s Corporation, 2011).
3. Kohl’s Subsidiaries and Their Effectiveness
Kohl’s Corporation expanded effectively in 2010-2011 in the retail market. The Company proceeds focusing on expanding its market share despite of challenging market environment (Kohl’s Corporation, 2011). Kohl’s is represented by a chain of department stores and a number of subsidiaries, such as Kohl's Pennsylvania, Inc.; Kohl's Department Stores, Inc.; Kohl's Investment Corporation; Kohl's Indiana, Inc.; Kohl's New York DC, Inc. to name a few. As it can seen from the group’s names, they are both geographical and functional.
The large quantity of store is conditioned by the necessity to support corporative strategy which is based on convenience and closeness to the customer. Some researchers consider that the large quantity of stores and subsidiaries makes effective management more difficult to implement (Falletta, 2008).
4. Interaction Between Individual and Group Performace
The efficiency of outputs depends on the base of comparison. For example, most of the measures evaluated are satisfactory if compared to the previous years’ performance. On the other hand, if compared to the planned level, the performance cannot be called satisfactory. The evaluation of the individual performance of Kevin Mansell, Kohl’s CEO, varied from “unsatisfactory” and “inconsistent” to “satisfactory”. Naturally, CEO’s performance is tied to the corporate performance (Kohl’s Corporation, 2011).
The overall performance can be identified as medium taking into account an aggressive competitive environment. Otherwise it would be evaluated as poor.
5. Recommendations
Evidently, Kohl’s overall performance in 2011 was quite satisfactory that was not the aim of the Corporation. In accordance with the Annual Report (2011), there was planned an outstanding performance. Satisfactory performance can be explained by the fact that the US market is oversaturated and there is a need to work out a plan of foreign markets capture. For example, US business starts to actively develop African, Asian, and the Middle East region. Kohl’s performance is excessively tied to the fluctuations of the US economy. It is important to level this negative impact.
One of the main issues is that the consolidation of the department stores could lead to a lower gain of the market share in comparison to an expected level.
One of the opportunities for Kohl’s Corporation is to create strong identities for its brands. Thus, an effective interaction between sales and marketing department is required. Sales department would provide marketing department with the information that is necessary to analyze current market situation. Marketing department will generate the ideas of improving Kohl’s own brands. Sales strategies must be improved by learning market conjuncture and competitors’ strategies.
Also, sales and accounting departments could effectively interact with merchandise and marketing departments in order to develop new unique products to increase sales. It is very important to strengthen private label merchandise in order to improve the overall situation.
Conclusion
References
Falletta, S. (2008). Organizational diagnostic models [A Review & Synthesis]. HR Inteligence Report, 1-47.
Hoff, K. (2008). Can you “Expect Great Things” at Kohl’s? Economics & Business Journal: Inquiries & Perspectives, 1(1), 128-140.
Kohl’s Corporation. (2011, May 12). Annual report 201. Retrieved from
http://www.kohlscorporation.com/InvestorRelations/pdfs/Kohls2010Proxy.pdf
Kohl’s Corp. (NYSE:KSS). (2012). Ratios and Returns. Retrieved from
http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=KSS
Nadler, D.A. & Tushman, M.L. (1980) A model for diagnosing organizational behavior. Organizational Dynamics, 9(2), 35-51.
