Essay Instructions: HR Case Study: Realigning HR Practices at Egan’s Clothiers Grading Criteria (30 points)
*Introduction: (4 Points) Approximately 1 page in length
The introduction provides a brief background on the major topic addressed in the case (e.g., performance management, training, compensation, etc.) and why it’s important. This section should not focus on the case specifically, rather be a discussion of the central topic, in general. A brief discussion of an external article (from list in Appendix B of Text) and its relevance to the topic of the case should be included here to strengthen and augment this section (at least 4 – 5 sentences about how the article is relevant to the topic(s) of the case).
*Case Overview: (2 Points) Approximately 1 page in length
The case overview provides brief overview of the case and clearly and accurately identifies the problem.
*Case Analysis: (15 Points) Approximately 4 pages in length
1) Clearly and directly answers all questions posed at the end of the case.
2) Your responses to the case questions will be evaluated based on your thoughtful integration of the concepts discussed in the course.
3) Integrate external article(s) into your analysis to support your responses to the case questions.
*Lessons Learned (2 Points) Approximately 1 page in length
Summarize what you learned from completing this case by answering the following two questions. What did you learn from completing this case? How might you use this information in your current or future job?
Mechanics (6 Points)
Paper is well-organized, easy to follow, and sections of the paper are indicated by headings/sub-headings. Your major headings should be I. Introduction, II. Case Overview, III. Case Analysis, and IV. Lessons Learned. Note: Section III. Case Analysis, should have sub-headings related to each question. Has professional appearance; proper business tone, style, and length. Case is between 7-8 pages, double spaced, 12-point font, 1-inch margins and typed. Uses MLA or APA style to cite references.
You will need to research and find AT LEAST one academic and professional source that is relevant to your case and include a brief discussion of it in the Introduction section. In order to meet this requirement, you may be required to go to the actual library to research.
How to Get the Most out of Cases - Professor Advice
Case analysis allows students to apply what they have learned through lecture and in-class activities. Please see the MGMT 321 syllabus for specifics on how to write your case analysis paper.
Preparation
1. Read the case the first time quickly, just to get a general overview of the key issues in the case.
2. Re-read the case, putting yourself into the manager’s role. What do you think the important issues are?
3. Write down the key problems or issues and go through the case one more time. There may be more problem areas than you initially thought. The cases are roughly categorized into management topics but management is, of course, very complex and the cases reflect this complexity.
4. Develop a set of recommendations based on your analysis of the case. How should the manager solve the problems? What evidence do you have that this is the right way to go? What other elements should be considered in the decision?
-----The Case for the Report----
Realigning HR practices at Egan’s Clothiers
At the end of the fiscal year 2000, revenues at Egan’s Clothiers, Inc. had increased 21 percent over 1999 and had increased at a compounded rate of 24 percent over the past five years. That’s the good news. The bad news is that costs have risen at an even more rapid rate, thereby shrinking the company’s gross margins. As a consequence, Egan’s profitability (measured as return on sales and return on net assets) has actually fallen 14 percent over the past three years.
The retail industry in general has been enjoying growth due to a healthy economy, and this drop in profitability at Egan’s is particularly worrisome. In fact, according to Egan’s chief financial officer, Richard Coyle, if something isn’t done immediately to control material and labor costs, as well as administrative expenses, the company may need to restructure its operations. In the short run, Coyle, company president Karen Egan, and vice president of HR Jim Rooney have pit an indefinite freeze on all hiring. Further, they are contemplating layoffs of nearly one-quarter of Egan’s sales staff and are weighing the benefits of cutting back on HR-related expenses such as training. Compared to others in the industry, their labor costs are very high.
Company Background
Gene Egan and Pat Pollock opened their first store in Baldwin New York, in 1958. The company grew rapidly during the 1980s and now operates a chain of thirty-four medium-sized stores located throughout Connecticut, New York Pennsylvania, and New Jersey. Since the beginning, Egan’s customers have been primarily middle- and upper-middle-class families purchasing sportswear, dress wear, and fashion accessories. The company has established a longstanding tradition of quality and customer service. In addition to its thirty-four stores, the company maintains two distribution centers and its administrative offices in Stamford, Connecticut. The total employment currently stands at approximately 2,400 people: 15 executives, 40 staff specialists, 40 store managers, 215 sales managers, 250 administrative personal, 1,600 sales people, and 240 distribution workers. Except for the employees at the distribution centers, the company is not presently unionized. However, it is no secret that Egan’s management has been trying very hard recently to keep current labor organizing activities to a minimum. Especially in these times of growth and change, management view unionism as a threat to the company’s success. In this regard, the HR office had been called upon to conduct a program audit of various HR practices utilized at Egan’s. The purpose of this audit is to assess the impact of HR polices and practices on employee outcomes (e.g., performance, satisfaction, absenteeism, turnover). The corollary objective of this audit is to identify specific problem areas where policy adjustments may be necessary. The final report to the executive staff will include the HR department’s evaluation of current problems and recommendations for implementing changes in HR practices.
Human Resources and Management History
Over the past five years, Egan’s has made several changes in order to implement the best HR practices possible. Partially, this as been to circumvent unionization efforts, but primarily it is indicative of Egan’s longstanding belief that success in retailing depends on the competencies and efforts of its employees.
The commitment to HR is demonstrated by the fact that in 1998 the company spent 1.3 million on an intranet-based human resources information system (HRIS). The HRIS has successfully automated most employment records (e.g., job titles, salary information, sales levels, attendance, demographics, etc.) and connects each of the retail stores, distribution centers, and executive offices. Also, Egan’s has maintained an ongoing training program or the past five years to help salespeople improve their retail selling skills (RSS) and customer service. The annual cost of this program has been roughly 750,000. To further ensure high ability levels in their workforce, the company sets selection standards selection standards substantially higher than their competitors. Whereas other retail companies typically hire inexperienced high school students, Egan’s generally requires some retailing experience before considering an applicant for employment. While this policy increases labor costs Egan’s management has been confident that the added expense is well justified over the long run. However, recently even the strongest proponents of HR have been wondering if it might be a good idea to cut back on training, given the company’s current financial picture.
By fat the most problematic and volatile HR issues at Egan’s have been regarding promotions and salary increases. Because the company promotes from within, and distributes raises on a company-wide basis, comparisons generally have to be made across employees in different jobs and departments. To combat arguments of subjectivity and bias pertaining to these decisions, Egan’s links these rewards to objective measures of performance. Specifically, rather than utilizing subjective managerial evaluations of employee performance, ongoing accounts of sales results are maintained for each employee through use of the HRIS. On the basis of this information, each department manager assigns each employee to one of five categories:
Superior – top 10 percent
Very good – next 20 percent
Good – middle 40 percent
Fair – lower 20 percent
Poor – lowest 10 percent
Administrative decisions are then made across departments utilizing these standardized distributions. Additionally, in order to provide constant feedback to each employee concerning his or her relative performance, data are updated and posted daily. It is hoped that this feedback is motivating to employees, and in this way there are no surprises when the time comes for semiannual performance appraisal interviews. It is interesting to note that since these changes have been made in the performance appraisal system, there has not been one formal complaints registered regarding salary or promotion decisions. However, sales managers themselves have mentioned occasionally hat they do not feel as comfortable now that they are required to assign employees to the “fair” and “poor” categories.
HR Outcomes
Despite the concerted efforts of Egan’s management to create a first-rate system of human resources management, there are several troubling issues facing the company. The HR practices are not having their desired effects. For example, there have been recent complaints that the employees have not been as patient or courteous with customers as they should be. This was best summarized by Paul Kelly, a store manager in White Plains, New York, who noted, “My people are beating the clientele in order to make a sale – the very opposite of what the RSS program trains them to do.” This lapse in customer service is frustrating to management since the RSS training has proven effective in the past. Additionally, there seems to be a great deal of competition –within- departments that is hurting a team effort. Although intergroup rivalries –between- departments has always been viewed as normal and healthy, the lack of intragroup cohesiveness is seen as a problem.
Additionally, Egan’s has been plagued with increase in lost and damaged merchandise. Management attributes this to the face that storage rooms are disorganized and unkempt. This is in sharp contrast to the selling floors, which have remained fairly well orderly and uncluttered. Nethertheless, inventory costs have been increasing at an alarming rate.
Everyone notices that something is wrong. Bu the behavior patterns are perplexing. Absenteeism has decreased by 23 percent, but employee turnover has actually increased from 13 to 29 percent, thereby increasing labor costs overall. Unfortunately, many of those leaving the company (43 percent) are rated as very food to superior employees.
As executives in the company look at these trends, they are understandably concerned. The success of the company and its reputation for quality and service depend on solid investments in HR to ensure the best possible workforce. However, the expenses are eroding the company’s profits, and worse, it looks now like the investments are not paying off.
