Case Study Final Report:

Change Management Issues, Interventions and Processes within

David Jones

Adrian Petrie

MMH356

Change Management

Unit Chair: Jan Fermelis

Tutor: Jan Fermelis

Trimester 2, 2012

Submitted: 3 September 2012

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MMH356 Case Study Final Report ii

TABLE OF CONTENTS

TABLE OF CONTENTS………………………………………………………………………………………………………………………….ii

EXECUTIVE SUMMARY………………………………………………………………………………………………………………………iii

BACKGROUND .............................................................................................................................. 1

I. INTRODUCTION ..................................................................................................................... 2

II. DAVID JONES AND ITS ENVIRONMENTAL FRAMEWORK ........................................................... 3

III. KEY CHANGE-RELATED ISSUES AND INTERVENTIONS ........................................................... 4

A. Management Restructure .................................................................................................. 4

B. Technological Investment .................................................................................................. 5

C. Physical Presence .............................................................................................................. 5

IV. ADOPTED CHANGE PROCESSES AND STRATEGIES ................................................................ 6

A. Management Restructure .................................................................................................. 6

B. Technological Investment .................................................................................................. 8

C. Physical Presence .............................................................................................................. 9

V. CONSEQUENCES.................................................................................................................. 10

VI. CONCLUSION................................................................................................................... 12

VII. RECOMMENDATIONS ...................................................................................................... 13

A. Management Restructure ................................................................................................ 13

B. Technological Investment ................................................................................................ 13

C. Physical Presence ............................................................................................................ 13

REFERENCES…………………………………………………………………………………………………………………………………….14

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MMH356 Case Study Final Report iii

EXECUTIVE SUMMARY

This report aims to analyse key organisational changes within David Jones, by evaluating

change interventions, the issues behind these interventions, and the strategies and the

processes adopted by the company. Consequences associated with the organisational

changes are discussed, followed by recommendations for each observed change.

Organisations must continually adapt their business practices to retain a competitive

advantage and avoid becoming stagnant in an increasingly competitive market. An

organisations ability to adapt to environmental pressures, and alter strategic plans

accordingly, will ultimately determine the success or failure of change initiatives.

The three key change initiatives analysed for David Jones are concerned with managerial

restructures, technological investments and the expansion of the company’s physical

presence. Management within the company has been restructured to combat a decline in

sales (Durie 2012) and more accurately reflect various functions within the business (David

Jones 2012a). David Jones is heavily investing in improvements to online services, including

website functionality and mobile applications, in addition to constructing new stores across

Australia to allow for greater customer engagement (David Jones 2012a).

To implement the various changes more effectively, it is recommended that David Jones

strategise ways to differentiate itself from its competition. These recommendations

include:

Managerial involvement with employees at ‘shop floor’ level, enabling interaction

and a more horizontal flow of communication.

Fast distribution channels for online purchases, with options available to customers

for further improved delivery efficiency.

Provide an unprecedented level of commitment to customer service through the use

of fashion stylists, with expert knowledge and fashion ideas that can be shared with

customers should they choose to have this interaction.

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MMH356 Case Study Final Report 1

BACKGROUND

David Jones is an Australian department store which operates in the retail industry, selling a

wide range of fashion, beauty and home products of national and international brands

(David Jones 2012b). Located nation-wide, except for in the Northern Territory, customer

satisfaction and engagement are of top priority for an organisation founded on its original

mission ‘to sell "the best and most exclusive goods" and to carry "a stock that embraces the

everyday wants of mankind at large"’ (David Jones 2012b). Services are also an integral

aspect of the organisation, with various incentive programs, gift cards and personal services

such as bra fitting offered to enhance customers’ experiences (David Jones 2012c).

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I. INTRODUCTION

Competing in an ever-growing global market, organisations must continually improve their

operations in order to secure or maintain a competitive advantage. One such aspect is

change, which involves adapting business practices to align with altering values and

expectations within society.

Implementing appropriate interventions to align with strategic plans and manage

environmental factors is key. Waddell, Cummings & Worley (2011) describe an intervention

as a set of ‘planned actions or events that…help an organisation increase its effectiveness’.

This report analyses key change processes within David Jones, and implements change

management theory into the case study. In addition it aims to highlight the opportunities

available for growth and development when organisations ‘get change right’.

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II. DAVID JONES AND ITS ENVIRONMENTAL FRAMEWORK

There are numerous factors which affect how an organisation operates within its market.

Forces which are external to an organisation’s control, that affect how it makes decisions

and adapts to changing needs, are known as environments (Waddell, Cummings & Worley

2011, p. 275). Mason (2008, pp. 48-49) describes environments as ‘complex adaptive

systems’ that are unpredictable by nature but provide opportunities for an organisation if

managed and accepted appropriately. The environmental framework can be broken down

into the general, task and enacted environment. Waddell, Cummings and Worley (2011, pp.

275-276) explain the three environments as follows:

General environment – external forces that influence an organisation, such as legal,

technological, and economic forces.

Task environment – groups that have a direct interaction with an organisation and

affect its success/failure, such as customers, competitors or suppliers.

Enacted environment - the perception management has of its organisation’s

standing in the environment, such as customer satisfaction for certain products.

Whilst David Jones has no control over the general environment at all, it can certainly

influence how it operates within the task environment. Declining profit margins and recent

reductions in company performance (Durie 2012) have resulted in the various management

changes, and more varied avenues for customers to interact with the business. The

organisation cannot control the number of customers who shop with them, but it can

attract a larger number if more avenues to do so are given to consumers.

Whilst David Jones must compete with large scale rivals such as Myer in an online

marketplace, it also faces challenges from other existing competitors. David Jones has been

relatively slow in promoting online shopping, compared to other organisations. For the

most part, online customers already have preferred shops and websites to spend their

money, such as ASOS or Amazon (Stafford 2012). Appealing to customers is an easy task

when a need exists, but no solution is currently available. However when other online

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options have already been available and proven successful, attracting these customers

towards the online methods of David Jones may be more difficult.

III. KEY CHANGE-RELATED ISSUES AND INTERVENTIONS

A. Management Restructure

A major change related issue currently observed within David Jones surrounds the

restructuring of its management. Following accusations of sexual harassment in 2010,

former chief executive officer, Mark McInnes, resigned from his position in response to legal

action being taken by a company employee (Fife-Yeomans & Byrnes 2010). McInnes was

accused of making ‘unwelcome[d] comments of a sexual nature and unwelcome[d] sexual

advances’ (Kontominas 2012). The immediate resignation and subsequent legal battle lead

to the appointment of Paul Zahra to the position of Chief Executive Officer (Fife-Yeomans &

Byrnes 2010).

Whilst his actions were both inappropriate and illegal, it can be argued that McInnes

handled the situation in a positive manner. Fife-Yeomans and Byrnes (2010) report McInnes

as acting proactively after learning of the legal complaint, informing the David Jones board

of his actions and resigning immediately. Whilst nothing short of a resignation would have

been accepted by the public or media, McInnes did not wait to be told his time at the

company was up – he initiated and accepted a punishment in a manner that deserves to

restore a level of credibility to him and to David Jones.

More recently, David Jones has undergone a restructure across all senior management in

addition to the change in chief executive officer. A decline in sales over the past year is a

major factor leading to the managerial changes (Durie 2012). The earnings of 2012 are

down from those in 2011. The first half saw a 20% reduction in profits, with a staggering

expected drop of up to 40% by the completion of 2012 (Williams 2012). Profits for 2011

reached $160m, and are expected to only arrive at $100m for 2012, after earning $85m in

the first half (Durie 2012). This significant decline in sales sparks a need for immediate

action, with one such intervention being a managerial restructure.

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B. Technological Investment

David Jones has found itself lagging behind competitors of late, in particular rival Myer,

‘falling behind…both in terms of ideas and sales growth’ (Durie 2012). Arguably the largest

area for growth and development for David Jones is in the field of technology, in regards to

sales methods for employees and online/mobile shopping resources for customers.

Sabherwal et al (cited in Guillemette & Paré 2012, p.530) explains how information

technology processes must correlate with business objectives, and be constantly adapted to

reflect changing environments and technological advancements. An inability to attract new

customers and satisfy existing ones through online avenues partially contributes to the

organisation’s declining sales and need for investment in technology. Online sales for 2011

in Australia accounted for merely 4.9% of total sales (David Jones 2012a p. 4). Despite this

being an extremely low rate, considering the possibilities of conducting business online, this

does allow for room for improvement. If this opportunity for growth is capital ised on,

revenue can dramatically increase going forward.

To intervene the poor performance, management plan to transform David Jones into an

Omni Channel Retailing (OCR) organisation, a concept described as ‘integrating the shopping

experience across all…marketing channels…and…sales channels’ (David Jones 2012a, p. 3).

The aim of this process is to provide customers with greater flexibility and avenues to

purchase goods at David Jones – including mobile applications to shop ‘on the go’, improved

website functionality and accessibility, and an improved customer service experience in

stores (David Jones 2012a).

Customers are satisfied in many different ways and shop according to certain needs and

wants. Providing a greater range of options for David Jones to appeal to customers through

the use of technology will assist the ease of interaction between business and customers.

C. Physical Presence

By comparison to other large scale organisations, David Jones imposes a relatively small

physical presence in terms of number of stores across Australia, totalling 36 department

stores nation-wide (David Jones 2012a, p.8). In an effort to align with the Omni Channel

Retailing strategy, David Jones explains that additional stores provides greater opportunities

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for customer interaction with the organisation, as it enables ‘customers to choose where,

how and when they wish to shop’ (David Jones 2012a, p. 8).

The intervention planned to increase store numbers and in turn, raise profits, is to construct

an additional six full-line department stores in growing regions, and also add ‘smaller format

stores’ to again increase opportunities for customer dealings (David Jones 2012a, p.8). The

smaller format stores are designed to complement the larger department stores and reach

‘demographics which do not have major shopping centres’ (Harper 2012). The creation of

these smaller sores is described as ‘making progress in the implementation of our…future

strategic direction plan’ by chief executive officer, Paul Zahra (Harper 2012) .

Consideration for smaller demographics highlights a well-rounded strategic plan for growing

the business. It demonstrates management’s understanding that in order to attract more

customers and increase market share, it must also provide physical locations to aid new

technological avenues. These locations enable consumers to experience the level of service

and commitment to customer satisfaction that David Jones emphasises.

Whilst they sell goods, retailers fundamentally operate in a service industry (Konti & Devi

2011, p. 80). Konti and Devi (2011) further explain that in order to compete with global

standards, offering high quality services to customers is essential to increase profitability

and customer loyalty. Without this face-to-face interaction, attracting and retaining new

customers is far more difficult, as customer satisfaction is often built upon in store

experiences.

IV. ADOPTED CHANGE PROCESSES AND STRATEGIES

A. Management Restructure

In order to restructure the management team, a number of steps have been implemented

to align management with the future strategic direction of the organisation. The first step

involved recruiting new candidates to fill seven new executive positions within the company

(Williams 2012). To improve their performance and regain a competitive advantage within

the market, David Jones employed new executives with a variety of different experiences in

other organisations. These were executives ‘who have held senior positions at a wide range

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of retail outlets’ (Williams 2012).

Furthermore, Williams (2012) explains how successful executives were sought to fill new

roles and restore a forward-moving culture, derived from strategic planning. Whilst some

positions have become redundant, new positions have also been created, such as the roles

of General Manager for marketing, promotions and publicity; Group Executive for marketing

and financial services; and Executive for strategic planning (Williams 2012).

It can be argued that by definition, this is not a restructure, but rather a reshuffle within the

organisation – an arrangement of new faces and ideas appointed to more strategy-specific

roles; and to clear out some of the ‘dead wood’ that had not seen David Jones progress in

recent years. Waddell, Jones and George (2011, p. 15) describe restructuring as the

downsizing of an organisation to assist in cost reduction and improve efficiency. Whilst

some management positions at David Jones have been discarded, others have also been

created.

A more accurate description of the change process undertaken would be that of re-

engineering. Waddell, Cummings & Worley (2011, p. 287) explain re-engineering as the

radical redesign of an organisation’s core work processes, which improves the cohesiveness

of different tasks to increase productivity and efficiency. It involves dramatically changing

the way work is done, and motivating the change.

Transparency and open communication channels across all levels of the organisation are

vital when such a dramatic change to management is the response to a redirection of

strategic targets. Communicating the reasons for decisions to stakeholders, particularly

employees, helps to create more understanding and acceptance of the change (Merrell

2012, p.20). In turn, this leaves employees feeling more valued within the organisation than

if they had been left in ‘in the dark’. Merrell (2012, p. 20) argues that open communication

can subsequently motivate employees and create a more positive culture than if changes

are thrust upon workers without their understanding for the need for changes.

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B. Technological Investment

Technology is continually advancing, changing the way organisations perform and execute

business activities on a daily basis.

Basing its new Omni Channel Retailing strategy on the success of leading international

department stores, David Jones is implementing a variety of different steps to enhance

technological systems and allow for greater flexibility and customer engagement (David

Jones 2012a, pp. 3-4).

To add to the customer experience, David Jones (2012a, pp. 4-5) outlines the key

transformation stages for the organisation, including the following:

The launch and update of a user friendly mobile site and mobile application, which

provides an avenue for people to shop ‘on the go’.

Appointing IBM to integrate Omni Channel Retailing resources and update systems.

Increasing the number of online SKUs available (providing a greater range of online

products).

Introducing a new Point of Sales system. This will aid employee efficiency, therefore

providing better customer service which often results in greater customer

satisfaction.

In order to manage the change effectively, David Jones must perform activities that will give

the implemented changes the best chances for success. Waddell, Cummings and Worley

(2011, p. 163) set out activities for managing change in 5 stages - motivating the change,

creating a vision, developing political support, managing the transition and sustaining

momentum.

In terms of technology, managing the change is a key activity, ‘transition[ing] from the

current state to the desired future state’ (Waddell, Cummings & Worley 2011, p. 162).

Bechkard and Harris (cited in Waddell, Cummings & Worley 2011, p. 172) explain that the

transition stage to implement change requires setting tasks linked to the goals of change

(activity planning); gaining the commitment and support of the change from key

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stakeholders (commitment planning); and creating organisational structures that help to

promote the change (management structures).

David Jones has put in place strategies to assist the administration of this change. Its

structural changes to management have not only aligned managerial roles to specific task-

related areas within the organisation, but have also provided an avenue to assist in the

introduction of new technology. Information Technology structures are continually

adapting to align with the Omni Channel Retaining strategy, via the addition of new staff

and experts to improve digital and online functions (David Jones 2012a, p.8).

C. Physical Presence

In order for further stores to be created and operate effectively, additional human

resources are required within the organisation. David Jones will be employing 200 new staff

to work across the new stores and transition into a more technologically advanced

organisation (David Jones 2012a, p. 8). As business needs lead to the emergence of more

staff, David Jones must consider the need for motivating new employees who have not

previously worked within the organisation, or perhaps even the retail industry.

Merely increasing the number of stores does not automatically increase revenue, unless

those working within them are committed to achieving organisational goals. Initial

enthusiasm for work might be self-motivating for some, however in order to maintain this

commitment to goals and tasks, employees must see a value or purpose in the activities

they are performing for the business. This ‘purpose’ is often rewards for work. Waddell,

Cummings and Worley (2011, p. 236) describe the relationship between rewards and

performance via the value expectancy theory, which explains that employees exert more

effort in achieving goals when they perceive the outcomes of work to be valuable.

According to Waddell, Cummings and Worley (2011, p. 236-237), rewards that motivate

employees are the ones that include the following features:

Availability – sufficient reward for work done

Timeliness – rewards given after work is complete, not having a large time distance

between task completion and reward

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Performance contingency – rewards that are suitable, depending on the level of

achievement

Durability – the length of time a reward last for

Equity – rewards that are perceived as fair amongst all employees

Visibility – rewards to one employee must be made known to others also. This

demonstrates that rewards are available and highlights the positive consequences

associated with high performance.

It will be essential for David Jones to effectively motivate employees through rewards

systems, in order for them to deliver the service and work that is required for the

organisation to achieve its strategic objectives.

V. CONSEQUENCES

Careful consideration of how changes are to be implemented is vital. Without such in-depth

analysis of potential outcomes, inappropriate implementation of changes may result, which

can adversely affect the success of that proposed change. Beer and Nohria (2000, p.133)

explain that vast amounts of information and available advice complicate change initiatives,

with this confusion leading to an alarming 70% failure rate for the changes. Put simply,

there are real consequences for organisations who fail to implement change successfully.

Managerial restructures affect the whole organisation and everyone working within it. As

new positions emerge and others are made redundant, confusion surrounding hierarchies

and whom to report to may result. Staff may disapprove of their new management, and

whilst this decision is largely out of their hands, their performance may decline as a result of

their dissatisfaction towards changes.

However, based on David Jones’ commitment to customer satisfaction through flexibility

and customer engagement (David Jones 2012a), it is likely that the new structural

hierarchies will be clearly explained to employees, so that they understand any new roles or

responsibilities that will affect how they serve customers. Communication between

employees and management should flow more smoothly, as positions have been aligned

with specific functions within the organisation (David Jones 2012a).

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Similarly, introducing new stores requires a period of adjustment as both the business and

consumers adjust to one another in a new demographic setting. Excitement and interest in

a new store may bring about high sales immediately, or there may be ‘settling in’ period

where sales are low to begin with. However, the planned stores are to be constructed in

‘high value, high growth areas’ (David Jones 2012a, p. 8), so regardless of speed, it is likely

that the new stores will be profitable.

The introduction of new technology systems, such as Point of Sales systems and additional

online services (David Jones 2012a) may confuse employees and reduce productivity whilst

they learn how to operate these resources. However, past successes of international stores

with similar Omni Channel Retailing models (David Jones 2012a, p. 4) would suggest that as

the changes in technology are completely implemented and understood by all employees,

productivity and efficiency should increase.

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VI. CONCLUSION

David Jones is currently undergoing change in three key areas. Management has been

restructured to realign business functions to strategic plans (David Jones 2012a).

Development in technology is observed in online shopping methods, via improved

functionality and layout for the company website (David Jones 2012a). In addition, mobile

applications allow for engagement with the business whilst customers are busy in their

everyday lives (David Jones 2012a). Finally, the physical presence of the company is

undergoing expansion, with six new stores and additional smaller format stores being

constructed across Australian communities to grow the business profile and further

enhance opportunity for customer engagement (David Jones 2012a).

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VII. RECOMMENDATIONS

A. Management Restructure

Managerial positions have been restructured to better correlate with functions within the

organisation (David Jones 2012a). To continue to develop these positions that represent

sub-sections within the company, David Jones could require all managers spend one day a

month working on the floor with salespersons. This could allow for more open

communication channels between employees and management, and for more ideas to be

voiced – ideas that can be taken to executives and potentially influence further decisions.

B. Technological Investment

To compete in a competitive online market, David Jones must differentiate itself from

competitors. The company will need to ensure that its distribution channels are efficient

and can offer prompt delivery of goods to consumers (Stafford 2012). A competitive

timeframe for deliveries would be 2-3 days, comparing to Myer’s delivery time which is

usually 4-7 days (Stafford 2012). To aid the implementation of technological strategies,

David Jones could offer priority shipping options, whereby customers can pay an additional

fee for faster delivery.

C. Physical Presence

Emphasis is placed upon customer engagement and satisfaction (David Jones 2012a),

therefore David Jones could attract customers by offering a unique service in its new stores.

Stylists with expert fashion knowledge may be employed to assist customers. Appointments

with stylists can be made, with no appointment fee charged after $500 is spent. This

demonstrates a higher level of service to the organisation’s customers and may attract

people to its new stores to ‘test’ this unique offering.

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no. 3, pp. 133-141.

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12>

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1, pp. 37-53.

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