Diagnosing the Change - Ford and General Motors

Diagnosing the Change: JCPenney and American Apparel

HRM 587 Week 4 Assignment

Student Name

Professor: Dr. Derek Crews

Date

Introduction

Both JCPenney and American Apparel have been through extraordinary change within the last couple years. This change is still taking place and it’s unclear whether or not the organizations can be successful amid such difficulty within the clothing retail space. Nevertheless, there are tools and strategies organizations can employ in order to address these challenges. Change does not come easy, but understanding the many factors and multi-faceted realities is important in order to overcome resistance and restraints. Likewise, the appropriate diagnostic model helps us to ascertain the driving forces within the successful implementation of change. Most of these models would be helpful, but based on the present realities it appears that the 7-S Framework is the most fitting model to address their present circumstances.

Overview of the 7-S Framework

There are two essential parts to the 7-S Framework. These include the concepts that “organizational effectiveness comes from the interaction of multiple factors” and “successful change requires attention to the interconnectedness of the variables” (Palmer, 2008).

The following list is the seven categories included:

1. Structure

2. Strategy

3. Systems

4. Style

5. Staff

6. Skills

7. Superordinate Goals

(Palmer, 2008)

Applying the Data Based on the 7-S Model

Each of these categories is applicable to the organizations in some way. By highlighting the realities within each category, the obstacles and potential catalysts to foster change can be determined. As depicted in the diagram, all of these categories are integrally connected. At the center is “Superordinate Goals.” This is essentially the vision of the organization, and thus plays a central and unique role within the model.

Structure

As clothing retailers, JCPenney and American Apparel have similar company structures. One of the main differences is the size of the organizations. JCPenney has been around much longer and is far larger in size and scope. Consequently they have a larger hierarchy and bureaucracy, potentially making change more difficult and costly. In the case of JCPenney, part of their failed transformation included cutting management at high levels of the organization, particularly at its headquarters (Tally, 2012). Though much smaller, American Apparel is vertically integrated and is not reliant on outsourcing (American Apparel, 2014). Its CEO and founder, Dov Charney, has held close influence over the organization up until recently. The board of directors has been criticized for their incompetence and their desire to oust and/or usurp the influence of Charney (Reuters, 2014).

Strategy

For clothing retailers, the strategies of JCPenney and American Apparel are very different. JCPenney reverted to their traditional brand appeal as a discount retailer targeting a wide-range of potential customers, i.e. all ages, both sexes, many different styles. Their prior CEO, Ron Johnson, tried to change the company’s approach by renovating the stores and eliminating the gimmicky sales promotions in favor of everyday low pricing (Berfield, 2013). American Apparel’s strategy is mainly (though not exclusively) to appeal to young adults, through slightly alternative and immodest advertisements and product selection. However, they also emphasize that their product is made in America and that their employees are paid reasonable wages (Casey, 2008).

Systems

The systems change at JCPenney was tied into the layoff off many employees. The remaining staff and any new hires were retrained, and an attempt at recreating the company culture was made. This included making it more appealing to younger people and helping older employees to think and act in a new way (Michele, 2012). In terms of systems change at American Apparel, things have mostly remained the same. Their high industry wages, emphasis on diversity and creativity is not only one of their strengths; it’s also a core part of their brand that they’ve seemed to maintain.

Style

The style at JCPenney has not changed much, though there has been an increasing emphasis at appealing to young people. This can be seen in a lot of their recent advertising, such as going back to school sales. However, they’ve been trying to walk a fine line by both appealing to youth and parents, but also not alienating their older customers (Michele, 2012). The style of American Apparel has largely stayed consistent. A recent development has been their attempts to market to older segments of the population, such as seen on their recent advertisement with a 62-year old lingerie model (Gupta, 2014).

Staff

JCPenney’s staff has been through many changes in terms of its leadership and company culture expectations. The turnover and ambiguous strategies have been difficult for the organization. As for American Apparel, their staff has largely remained the same, though current developments related to the CEO and new board of directors could have an effect on the direction of the company and how employees perform their roles.

Skills

With the exception of higher level managers and individuals with special skillsets, JCPenney workers do not require advanced skills. The same can be said for most American Apparel employees; however, they also have many garment workers and designers. These are skilled workers in their craft, though technology or industry changes are not having a great impact on them. Overall, the skills required within these organizations do not require a lot of change. Where change may be required is within operations, marketing, and number of other leadership positions.

Superordinate Goals

The vision of each organization has been tested, and continues to be challenged. In the case of JCPenney, their attempt to reinvent themselves and forge ahead with a new direction has resulted in a lot of disillusionment. There has been a reversion to the past as a consequence of failed changes (Graham, 2014). American Apparel is in the process of establishing a new board of directors and the fate of its founder and CEO still hangs in the balance (Covert, 2014). Thus, both organizations are facing real challenges associated with the vision and future direction of the companies. Perhaps more than any other change, the decisions the companies make related to its brand and vision will have an impact on its long-term viability.

SWOT

The following table illustrates many of the Strengths, Weaknesses, Opportunities, and Threats of JCPenney’s and American Apparel.

Changes Made, Recommendations, and Possible Areas of Resistance

The changes made at JCPenney’s have been numerous. After the recession in 2008, they went through an extraordinarily difficult time. They switched CEO’s from Mike Ullman to Ron Johnson, back to Mike Ullman. During that time they alienated a large segment of their regular customer base through a new pricing / sales scheme, spent tens of millions on elaborate renovations, disposed of a large percentage of their workforce, and attempted to change the company culture by making it more appealing to young people. The great strides taken to make this transition were a failure. Hence, their board decided to reinstate the old CEO (Barfield, 2013).

At this point, JCPenney is still is survival mode. The most important change they can make is to continue to try to stop the bleeding, cut costs where possible, and identify those areas of growth and/or profitability. This might include improvements to their website, operations, and targeted promotional sales. For the most part, they appear to be doing these things. However, I think the company is still shellshock from the last round of change. Therefore, my biggest concern related to resistance is that they might be fearful to try something new, even if it’s small and relatively likely of succeeding. I would not recommend that they do anything drastic until there’s a cyclical rebound in the retail industry. Until that time I believe they should be conservative and pragmatic, while refining their offerings to their most profitable target market.

American Apparel’s story is quite different. Because there’s so much in flux, it’s hard to determine what should be done. The change that has already taken place include the tentative ousting of the founder and CEO, and vastly upgraded operational facility, the expansion of the company abroad, and an increase in internet and wholesale revenues. The main change I would recommend pertains to the CEO. By all indications there is wrongdoing by the Dov Charney. Of course, a legitimate investigation must be done. Nonetheless, he’s not a well-liked CEO and many investors claim to avoid support of the company as a result of his actions. Therefore, unless their findings on him are egregious, I believe they should keep him on as a consultant. This will help to maintain the brand, the company’s creative flare, but also serve to keep him at a distance – and less of a liability. The main resistance to this change would be Dov Charney himself. His company is his life (Covert, 2014).

Conclusion

The 7-S Framework provides a lot of insight into both companies. Even though they are going through different challenges and have very different clientele, they are both going through a very difficult time within the clothing retail industry. What they also have in common relates to poor leadership decisions and overextending themselves during this lackluster economic recovery. Nonetheless, I believe that the worst is over for both companies and that the next year could well be a turning point in their recoveries. Until that time there will surely be resistance, but this will mainly come from those in power and perhaps from activist investors, not low-skilled workers at the bottom.

References

American Apparel. (2014). Vertical Integration. Retrieved August 3, 2014, from

http://www.americanapparel.net/contact/vertical.html.

Berfield, S. (April 11, 2013). J.C. Penney Rehires Myron Ullman to Clean Up Ron Johnson's

Mess. In Bloomberg Businessweek. Retrieved August 3, 2014, from

http://www.businessweek.com/articles/2013-04-11/j-dot-c-dot-penney-rehires-myron-

ullman-to-clean-up-ron-johnsons-mess.

Casey, N. (April 12, 2008). American Apparel Bares All. In Wall Street Journal. Retrieved

August 3, 2014, from http://online.wsj.com/news/articles/SB120796037535209509.

Covert, J. (June 26, 2014). American Apparel lender demands $10M loan payment after CEO’s

exit. In New York Post. Retrieved July 17, 2014, from

http://nypost.com/2014/06/26/american-apparel-faces-cash-crunch-as-lender-declares-

10m-default/.

Graham, E. (July 9, 2014). Former JCPenney CEO Ron Johnson Tried To Resign Three Times.

In Racked. Retrieved August 3, 2014, from http://racked.com/archives/2014/07/09/ron-

johnson-speaks-on-jcpenney-failure.php.

Gupta, P. (January 30, 2014). American Apparel features 62-year-old lingerie model . In Salon.

Retrieved http://www.salon.com/2014/01/30/american_apparel_features_62_year

_old_lingerie_model/,

Ian Palmer. Managing Organizational Change, 2nd Edition. McGraw-Hill Learning Solutions,

2008. Page 125. VitalBook file.

Michele, S. (February 19, 2014). JC Penney, Your "Tagline" Is Inside Out. In Huffington Post.

Retrieved http://www.huffingtonpost.com/stephanie-michele/when-it-fits-you-know-it-

_b_4777195.html.

Reuters. (June 21, 2014). Investigation Finds Dov Charney Misused American Apparel Funds. In

undefined. Retrieved August 3, 2014, from http://www.newsweek.com/investigation-

finds-dov-charney-misused-american-apparel-funds-255836.

Talley, K. (April 5, 2012). Wall Street Journal Online. In J.C. Penney Trims Headquarters Staff.

Retrieved August 3, 2014, from http://online.wsj.com/news/articles/SB1000142405

2702303299604577325691393089080.