CHAPTER FOUR

4. ORGANIZING AND STAFFING THE RETAIL FIRM

Organization is essential to any group of people having a common purpose or goal. Whether the group is
an army, a church, a football team, or a retail business, organization is the binding force that coordinates,
channels, and propels the group toward its stated mission.
Retailers use a vast number of different organizational structures to organize their people. All retailing
organizations, however, incorporate certain common organizational elements and principles structured
around one of several basic organizational forms.

4.1. Elements of retail organization

The particular organizational foundation a retail firm adopts depends on several factors. Some of these
factors are (1) the type of merchandise to be offered, (2) the variety and assortment of the merchandise
stocked, (3) the type and number of customer services performed, (4) the type and number of locations
used, (5) the availability and quality of personnel employed, and (6) the legal requirements and /or
restrictions. Given these vast array of influential factors, the firm’s organization must center around
specific organizational objectives and tasks.

4.1.1. Organizational objectives

In retailing, the firm’s organizational foundation focuses on achieving the firm’s objectives. Establishing
well-defined organizational objectives is an important step because it forces the retailer to think through
what the firm is trying to accomplish, where the firm is going, and how the firm intends to get there. In
addition, organizational objectives provide a realistic orientation to the retailer’s planning process as
well as a means of evaluating the firm’s past performance and its current status.
Three levels of organizational objectives correspond to the three general levels of retail management.
Strategic goals - are broadly defined targets or future end results set by top-level management. Such
goals typically address issues relating to the organization as a whole rather than specific divisions or
departments and may sometimes be stated in fairly general terms. Strategic goals are sometimes called
official goals because they are formally stated by top management.
Tactical goals - are targets or future end results usually set by middle management for specific
departments or units. Goals at this level spell out what must be done by various departments to achieve
the results outlined in the strategic goals. Tactical goals tend to be stated in more measurable terms than
is sometimes true of strategic goals.
Operational goals - are targets or future end results set by lower management that address specific,
measurable outcomes required from lower levels.
4.1.2. Organizational tasks
In developing the retail organization, the retailer must identify and assign the various tasks necessary to
realize the firm’s stated organizational objectives. The number of organizational tasks that can be
identified is large. Figure 4.1 lists the basic organizational tasks inherent to any retail organization.
Although these tasks can help a retailer develop a general organizational structure, a more detailed
description of tasks must be made in assigning responsibilities and authority to each position in the
organization. Moreover, the retailer should develop written job descriptions for each job classification.

1|Page
Table 4.1-Basic organizational tasks

1. Operating the store 5. Procuring the merchandise

 Recruiting store personnel  Ordering merchandise
 Training store personnel  Receiving merchandise
 Supervising store personnel  Checking merchandise
 Planning information systems  Marking merchandise
 Meeting legal obligation  Stocking merchandise
 Designing store facilities 6. Controlling the merchandise
 Maintaining store facilities  Planning sales
 Ensuring store security  Planning stocks
2. Finding the best location  Planning reductions
 Analyzing regional markets  Planning purchases
 Assessing trading areas  Planning markups
 Appraising site locations  Planning margins
3. Developing the merchandising  Controlling inventories
mix  Taking inventory
 Determining consumer product needs  Valuating inventory
 Evaluating product alternatives  Evaluating inventory
 Planning product product-mix strategies
 Determining consumer-service
7. Pricing the merchandise
requirements
 Evaluating service alternatives  Setting prices
 Planning service-mix levels  Adjusting prices
4. Buying the merchandise 8. Promoting the merchandise
 Identifying sources of supply  Planning advertising strategies
 Contacting sources of supply  Selecting advertising media
 Evaluating sources of supply  Preparing advertisements
 Negotiating with sources of supply  Designing promotional displays
 Planning promotional events
 Gaining favorable publicity
 Managing the personal-selling effort

4.2. Principles of retail organization

There are several basic principles of organization that every retailer should consider in establishing a
retail organization. Organizational principles that are particularly appropriate to the retail firm are the
principles of specialization and departmentalization, of line of authority and responsibility, of unity of
command, and of span of control. By applying these principles, retailers can avoid managerial confusion
and employee discontent.

4.2.1. Specialization and departmentalization

Specialization and departmentalization are inherent parts of any efficient organizational structure. With
job specialization, employees concentrate their efforts on a limited number of tasks. Retailers have
learned that specialization improves the speed and quality of employee performance.
Departmentalization occurs when tasks and employees are grouped together into departments to achieve
the operating efficiencies of specialization for a group performing similar tasks. Specialization and
departmentalization can be based on product type (such as apparel, home furnishings, and appliances),
2|Page
activity (such as buying, selling, and stocking), activity location (such as main store, branch store, and
warehouse) and consumer type (such as household consumer and business customers). In choosing
which of these bases to use in departmentalizing the store, a retailer should select the one providing
management with the best level of control and producing the highest employee efficiency.

4.2.2. Authority and responsibility

Lines of authority and responsibility are the organizational principle that each store employee
(managerial and non-managerial) should be given the authority to accomplish whatever responsibilities
have been assigned to that individual.
As equally important aspect of this principle is that all members of the organization know and respect
the established lines of authority and responsibility. A retailer’s chain of command comprises lines of
authority that link together the various managerial levels of the organization. Line and staff relationships
are the linkages that join management levels and create organizational hierarchies. Line relationships are
affiliations among managers at different organizational levels or between a manager and a subordinate
within the same level who are directly responsible for achieving the firm’s strategic, operational, and /or
tactical objectives. In a line relationship, the manager has direct authority over the subordinates. On an
organizational chart, line relationships typically are shown as solid lines. Staff relationships are advisory
or supportive and appear on organizational charts as broken lines. Staff employees are typically
specialists with expertise in a particular area concern (for example legal affairs, taxation, or market
analysis), and their primary function is to assist line managers to realize their objectives. To avoid
confusion, duplication of effort, and territorial disputes, an organization needs to distinguish clearly the
responsibilities and authority of each line manger and supportive staff.

4.2.3. Unity of command

The principle of unity of command states that the organizational structure of the retail firm should
ensure that each store employee should be directly accountable to only one immediate supervisor at any
time for any given task. Most employees find it difficult if not impossible to satisfy several superiors at
the same time. It is not unusual for different supervisors to want subordinates to accomplish a particular
task in a different way at a different time. The store employee who must serve several masters at one
time is often confused, inefficient, and frustrated.

4.2.4. Span of control

Every organization must determine how many subordinates one person can manage.

4.3. Forms of Retail Organization

In planning an organizational structure, the retailer must ask two critical questions. The first is how
many organizational levels are needed for effective and efficient operation of the firm; the second, how
the various tasks should be organized into areas of responsibilities (jobs) and how many of these areas
should be designed.

Job and task organization

The exact form of organizational structure of any retailer depends on how the retailer classifies jobs
that employees must perform. A retailer can classify jobs on the basis of their functional nature,
geographical location, product involvement, or some combination of the three. Using the functional
approach to retail organizational structure, the retailer groups tasks and classifies jobs according to such
functional areas as store operations, buying and selling merchandise, promotional activities, or
recruiting and training store personnel. In essence, the functional approach is one of task and job
specialization in one or more general functions.
3|Page
The geographic approach to organizational structure is one in which the retailer organizes tasks and
assigns jobs on the basis of where those tasks and jobs are performed.
In the product approach to retail organizational structure, the retailer organizes the store by product
line. This organizational form centers around task and job specialization to meet the consumers’ buying
needs for certain products. For many shopping and specialty goods, for example, consumers think, shop,
and buy in terms of product groupings.

4.4. Patterns of retail organization

Over the years various retail organizational patterns have emerged as the result of the diverse sizes and
natures of firms. To characterize these patterns, we shall look at the organizational structures of small,
independent retailers, department store retailer, and chain store retailers.
1. Small store organization
Many retailers began business as a one-person, owner-operator shop. In these cases, the owner-operator
was the organization. As such, the individual had the responsibility and authority for all organizational
tasks. As the firm grew, the owner-operator hired additional store personnel to handle the increasing
number of complex tasks that accompany a larger, more formal organizational structure.
The typical organizational structure of the small, independent retailer has previously been characterized
as flat, typically with two levels and a general organization and a limited amount of specialization. As
illustrated in figure 4.1 below, the owner manager develops store and personnel policies; administers
expense, sales, and merchandising budget; and oversees accounting and other control procedures. In
most small retail firms, however, it is common for the owner-manager to become directly involved with
many of the routine merchandising tasks and day-to-day operations.
Figure 4.1-Small, independent retail organization

Owner-Manager
 Plans
 Executes
 Controls

Merchandise Manager Operations Manager

 Develops merchandise mix  Recruits store personnel

 Buys the merchandise  Supervises store personnel
 Procures the merchandise  Plans information systems
 Controls the merchandise  Designs store facilities
 Prices the merchandise  Maintains store facilities
 Promotes the merchandise  Ensures store security
 Sells the merchandise

4|Page
2. Department store organization
Department store organizations are more formal and complex than small retailers’. As mentioned
earlier, the organizational structure of department stores is taller and more specialized than small retail
stores. To understand department store organization, we shall examine the Mazur Plan of retail
organization.
Figure 4-2 Mazur plan for departmental store organization

President

General

Manager

Finance General Promotions Operations

Merchandise
Manager Manager Manager
Manager

Basement Main

Store Store

3. Chain store organization

Chain store organizations vary considerably in size, geographic spread, local markets, product mix, and
number of operating units. Although all of these factors influence how a chain store will organize, three
distinctive elements characterize all chain store organizations: centralization, specialization, and
standardization.
Centralization is the concentration of policy and decision making in one location, either called central
headquarters or the home office. Within the chain-store organizational structure, the authority and
responsibilities for most operating and merchandising functions are assigned to home office
management personnel. Greater effectiveness and cost reductions are two important reasons why chains
pursue a centralization policy.
A high degree of specialization is another distinguishing feature of chain store organizations. Typically,
the chain store incorporates a greater number of functional divisions in its organizational structure. In
addition to the four basic functional divisions of finance, merchandising, operations, and promotions,
many chain stores include one or more of the following functional divisions: distribution (traffic and
warehousing), marketing, real estate and construction, personnel, and industrial relations. Some large
chains also specialize geographically.
The third distinguishing feature of chain organizations is a high degree of standardization, or
similarities between the operating and merchandising operations of the business. To support
standardization, chain store management establishes an elaborate system of supervision and control
5|Page
mechanisms to keep fully informed. Through standardization, the chain projects a consistent company
image minimizes total costs of doing business.

4.5. The Retail Staffing Process

The retail staffing process can have the following steps:
1. Describing the job
The first step in the staffing process is to develop a well-defined and clearly expressed job description.
Not only does this step force the retailer to carefully determine its personnel needs, but it also provides
the potential employee with a means of evaluating the job. Before writing a job description, the retailer
should conduct a job analysis to determine (1) specific job-performance objectives and standards; (2)
the tasks, duties, and responsibilities of the job; and (3) the skills, aptitudes, experience, education, and
physical abilities that potential employees must possess to meet the minimum job requirements.
After the job analysis is completed, the retailer can write a job description containing the following
items: (1) the job title (for example sales representative, assistant store manager); (2) the job location
(for example store, department); (3) the job position and relationships with the firm’s organizational
structure (for example identify supervisors and subordinates, if any); and (4) job description (i.e., duties
and responsibilities).
2. Specifying the job
A job specification clearly states the minimum qualifications a person must have to obtain the job
applied for. Qualification criteria include education and training requirements and/or basic knowledge
and skill requirements.
3. Recruiting store personnel
Recruiting is the active search for qualified employees. The astute manager recruits personnel by
aggressively seeking lists of qualified prospects, screening large numbers of applicants, and maintaining
a pool of prospective employees. Successful recruiting is the process of knowing where to look, what to
look for, and how to find qualified people.
4. Selecting store personnel
From the list of qualified applicants, the retailer must select the individual best suited to the job.
Matching job requirements to employee attributes is the point of the selection step of the staffing
process. In finding the best match, the retailer has several available methods of generating additional
information on the prospective employee before deciding to make an offer. These methods include
application forms, personal interviews, reference checks, testing instruments (psychological and
achievement tests), and physical examinations.
5. Training store personnel
Training programs are needed not only for new employees, but also for existing employees to update
their knowledge and skills. Training programs are designed to help both the employer and employee
reach mutually beneficial goals. Regardless of the retailer’s individual situation, however, every sound
retail training program should address three basic questions. These elements are what type of training
the employee should have, where the training should take place, and how the training should be done.

6|Page
6. Supervising store personnel
Supervision is the process of directing, coordinating, and inspecting the efforts of store employees to
attain both company and individual goals. Effective supervisors can successfully satisfy the needs of the
retailer (such as quality job performance, company loyalty, satisfactory profits) and the needs of the
employee (such as fair treatment, a decent standard of living, a chance for advancement). The key to
good supervision knows how to motivate employees. Motivation is the drive that moves people to act.
Employees are driven to excel in a variety of ways. Some employees are motivated by money, others by
praise, and still others possibly by the promise of free time to spend with their families. The supervisor
must discover the key that motivates each employee.
7. Evaluating store personnel
This step in the store staffing process is the development of personnel evaluation procedures. Each store
employee, regardless of position or level, should be periodically evaluated. The purposes of personnel
evaluations are (1) to determine compensation, (2) to recommend or deny promotions and transfers, and
(3) to justify demotions and terminations. Conducted constructively, personnel evaluations can be used
to motivate employees, to improve store morale, to generate information for planning purposes, to
encourage employee self-development, and to improve communications between the employee and
employer. In developing the store’s personnel evaluation methods and procedures, the retailer should
decide when to evaluate, what to evaluate, and how to evaluate.
A smart retailer evaluates personnel continuously. It would be unfair to judge an employee’s
contribution and performance at the end of an arbitrary time period, such as the end of the fiscal year.
Instead, retailers should provide their employees with immediate feedback on their progress. This
informal feedback, however, should also be accompanied by an established, formal evaluation in which
employees receive a detailed account of their job performance.
Retailers have learned that the most important employee factors to evaluate are performance-
demonstrated skills and personal attributes. These factors appear to relate most closely to employee
success.
Retailers use a variety of methods for evaluating store personnel depending on the degree of objectivity
and formality that the retailer wants. The objective employee evaluation methods are based on factual
and measurable criteria while the subjective methods are based on the evaluator’s perceptions, feelings,
and prejudices. Formal methods are regularly scheduled evaluations while the informal ones follow no
set of schedule, and the criteria and procedures may or may not be known to the employee.
8. Compensating store personnel
Equitable compensation is an integral part of the retailer’s staffing process. A well-defined
compensation package is not only an important factor in rewarding past performance but also an
important incentive for future performance. Compensation methods include the straight-salary plan, the
straight commission plan, the salary plus commission plan, and the salary plus bonus plan.

7|Page