The Organizational Issues That Lead to the Economic Decline of Sears

The Organizational Issues that Lead to the Economic Decline of Sears

MGCR 222

Section 003

Professor Young Ho Song

Urko Gagnon

Claudio Sanchez Malespin

Fotini Sevdalis

Gabrielle Zsigri

December 8th 2016

Sears was once known as the leading department store for the average middle class homeowners, however, the multi-billion dollar corporation is in a state of organizational and economic decline. Sears, officially named Sears, Roebuck and Co. in the United States, was originally established in 1886 by Richard Sears as a small-scale watch retailer (“History”, 2016). The company became public in 1993 and has since become one of the largest chain of department stores in North America (“History”, 2016). Sears sells a variety of home appliances, hardware, outdoor equipment, apparel, jewelry and cosmetics. Sears claims that their purpose is “provide quality products and services at great value when and where our customers want them, and by building positive, lasting relationships with our customers” ("About Us", 2016).

        Currently, Sears has 705 locations in the United States and 95 locations in Canada, with the number of operating locations decreasing each year (“Annual Report”, 2016). Although they are separate entities with different Chief Executive Officers, both Sears, Roebuck and Co. and Sears Canada Inc. are an extension of Sears Holdings, a holding corporation that holds over 50% and 11.7% of each company, respectively (“Annual Report”, 2016). Edward Lampert, the Chief Executive Officer of Sears Holdings, established a decentralized and hierarchical organizational structure with a wide span, however, the reporting systems appear to be more tall in nature. Lampert restructured the organization by firstly separating the organization into thirty separate business divisions, based on products, services and brands. Each unit operates as an autonomous business, functionally departmentalized with their own president, chief marketing officer and board of directors. Each unit is required to create their own financial statements in order to determine the most profitable units (Kimes, 2013). The managerial structure currently in place at Sears is both task and goal oriented, whereby, the executives of each unit are granted bonuses relative to their divisions performance and profit (Kimes, 2013).

Since Edward Lampert was appointed in 2013, the company’s situation has worsened dramatically, its share on November 11th 2016 being $12.67, compared to $21.51 on November 19th 2008 (Yahoo Finance, 2016). Although Lampert is considered a genius in the financial world, his strategy is considered to be leading the company to its downfall.

Organizational Behaviour Issues

Lampert is both Sears’ CEO and its largest investor, which has a direct impact on the way he operates the firm. He mainly focuses on buying back shares and yielding high profits (Allison, 2016). To do so, he divided the company into over 30 business units to maximize returns on investment, making Sears an asset to his eyes rather than a retailer. Even though he could be considered as a structural type of leadership for his will to make the company attain certain goals by following a structured procedure, he enacts an authoritarian leadership style and fails to take suggestions from other executives, ultimately neglecting other important issues such as the state and of the remaining stores.