The Critique of Sears Leadership Style
Richard Warren Sears and Alva Curtis Roebuck founded Sears in 1886. The currently Illinois-based company has a broad business history of financial plummeting mainly because of macroeconomics fluctuation. The 1893 national panic that caused a drop in sales for the then mail order catalogue company is one of the fluctuations. 1919 to 1921 national depression also hit the company to it best extend. The infamous Sears 1993 move of replacing the merchandise catalog with a holiday Wish Book. This management decision was because of weak sales and profits. In 2005 Sears changed, its name to Sears Holdings after an acquisition by Kmart. Eddie Lampert, the majority owner of Kmart, is the man behind the purchase of Sears; Eddie also brought the new current leadership style in the company.
Sears before an acquisition was managing their affairs in departmentalized model with the department heads running the product line but under the same marketing team. This model worked relatively better compared to the current strategy as imposed by Eddie Lampert. After successful of Sears and renaming it Sears holding, the management act was overhauled. In place of the old departmentalized division, all related and interlocked to one merchandising team Eddie restructured the whole model. The new and current leadership model established in 1993 involves thirty autonomous units within the company. These groups operate independently of each other. They have their presidents, separate profit and loss account and even board of directors. The groups work out their competitive strategies and use to full their resources, to proof their worth in the market share.
The operational model of running the company like a hedge fund portfolio is evidently doing more damage to Sears than growth. The business segments fighting for the CEOs attention is evidently running the show causing a cutthroat conflict over scarce resources. A visit to some stores is a clear indication of operation model that is not working for the company; the store carries some more retail cashiers than customers. Interviews with many employees who have dropped off Sears have a view that Eddie Lampert, who single-handedly runs the company, has created what they would term as “hunger games” or “warring tribes” among the department.
When questioned asked about this model of management, Eddie claims that the autonomous businesses in the company that he has created has shown the lot more hard work to win their pie share. The strategy results are evidently not as Eddie puts it. Evaluation of this leadership style indicates it to cause more havoc to the company than productivity. The current state and future strategic objectives of Sear are at stake here, as we all understand it. Leadership style is the primary indicator of the direction the company follows, and it is preferable it be leading the company to horizon expansion than a crisis.
The state of leadership and operation has evidently come in as a battle for supremacy. The divided units are sometimes ready not to give up any of their resource or all another form of support for the success of their parallel division. This type of competition caused by the divisive leadership is currently detrimental on Sears. The impacts of this scenario are; getting lowered productivity and lack of cooperation and teamwork in the company. This leadership style will lead to the team focusing so much on their targets to some extent forgetting the strategic business goals. In such a scenario, leadership becomes a complex matrix and meeting meant to bring consensus will create divergence and conflicts.
The lowered productivity and operation inefficiency is throwing Sears into life-saving decisions, which are desperate and detrimental. The recent move to change in employee remuneration from hourly payment to the base wage is one of the decisions. The cut in salaries and commissions has ruined employee relation in the firm and Sears is evidently struggling with employee relations since 1992 when the policy became effective. However, the impacts of the strategy once again are not as purported by the top management. Despite this cut on the wages, the company is evidently flailing and struggling with employee relations. This policy will further plunge Sears into employee and workforce crisis. Sears still recorded a drop of 13% in profit in 2010. This decline in profitability is a clear indication that the policy has lowered the employee motivation and morale.
Sears Holding has closed down than 1000 stores. Out of these 300 stores closed as a strategic move to be able to reduce the risk and to increase the operation capital. Management experts root this move from operational inefficiency and failure to grow. It the multiplier effect of the error made by the top management. The leadership model for creating the autonomous businesses in the industry has resulted in the chaos in Sears. We feel that now a prepackaged bankruptcy file may be the best alternative for Sears Holding. Summarily what the two points up here indicate is that the model of operation in Sears has caused further deeper moves that are plummeting the flailing further deeper into a financial abyss and market loss.