Chapter Four

Organization Management: Organizing and Staffing the Retail Firm

Organizing is the function of management that involves developing an organizational structure
and allocating human resources to ensure the accomplishment of objectives. The structure of the
organization is the framework within which effort is coordinated. The structure is usually
represented by an organization chart, which provides a graphic representation of the chain of
command within an organization. Decisions made about the structure of an organization are
generally referred to as organizational design decisions.
Organizing also involves the design of individual jobs within the organization. Decisions must be
made about the duties and responsibilities of individual jobs, as well as the manner in which the
duties should be carried out. Decisions made about the nature of jobs within the organization are
generally called “job design” decisions.
Organizing at the level of the organization involves deciding how best to departmentalize, or
cluster, jobs into departments to coordinate effort effectively. There are many different ways to
departmentalize, including organizing by function, product, geography, or customer. Many larger
organizations use multiple methods of departmentalization.

Through a retail organization, a firm’s structures and assigns tasks, policies, resources, authority,
responsibilities in order to efficiently and effectively satisfy the needs of target market,
employees, management and shareholders. An organization is a formal structure of roles and
positions put in place to achieve some specific goals. The structure of a retail organization
defines the role of employees and the way in which the organization functions.

4.1 Elements of Retail organization

Retail organizations most commonly choose to centralize key strategic processes like
merchandising, marketing and IT to exercise consistent control and to gain scale economies.
They also usually centralize back office processes like HR and accounting to make them efficient
and consistent, while they may choose to decentralize certain decision-making within Store
Operations to allow flexibility to respond to local market conditions. In addition, over the past
ten years retailers have increasingly chosen to outsource – contract with an external service
provider -- to perform certain functions and processes, in order to take advantage of even greater
economies of scale and the lower costs available through offshore labor resources. It can be
attractive for a Retailer to outsource relatively standardized processes that do not involve issues
of competitive advantage; these typically include processes within the accounting, HR and IT
functions, among others. The illustration below shows a typical Retail structure.
What are the structural elements of a retail organization?
Most retail organizations (centralized or decentralized) consist of 8 departments:
 Merchandising/Buying
 Distribution and Logistics
 Finance and Accounting
 Human Resources
 Information Technology (IT)
 Marketing
 Merchandise Planning
 Store Operations

Retail Marketing Handout Page 1

Each department has defined responsibilities and adds value to the retail organization.
Understanding its significance is critical for you as a sale professional.
Merchandising/Buying Department: The Merchandising department’s primary role is to select
the merchandise that will be offered to customers, negotiate the best possible terms with supplies
for procurement of these goods, and determine how this merchandise will be presented to
customers in a way so as to drive the highest possible sales and profit.
Responsibilities:
 Achieving planned sales, gross margin and inventory turnover objectives.
 Attending trade shows and using other methods to keep on top of current trends
and the merchandise that should be considered for inclusion in the assortment
 Performing market research on products.
 Developing strong vendor relationships.
 Developing and maintaining a working relationship with the merchandiser.
 Developing product assortment plans.
 Managing the open-to-buy fund.
 Managing advertising and pricing plans to optimize turnover and profitability.
 Performing market research on products.
 Placing purchase orders with vendors.
 Setting buying and pricing plans.
 Recommending or initiating markdowns.

Distribution and Logistics The distribution and logistics department is charged with managing
the movement of goods from receipt from vendors, through distribution centers and
warehouses, to the stores, as well as the processing of returns to vendors. It’s goal is to
achieve the most efficient and low-cost product movement through the supply chain, while
balancing this with the need to avoid lost sales due to out-of-inventory situations and supply
disruptions. By working with this department, IBM can help improve the efficiency of the
movement of goods throughout the supply chain management process.

Responsibilities:
 Ensuring that goods match the purchase order and shipping requirements.
 Flowing goods to stores.
 Managing distribution centers (DCs).
 Managing relationships with logistics and transportation companies.
 Receiving merchandise from vendors.
 Taking returns for return to vendors.

Finance and Accounting : Finance and Accounting monitors ongoing operational accounting
and the integrity of financial controls, maintains accounting records, prepares financial
statements, sets long-range organizational financial goals, monitors budgets, prepares tax returns,
conducts real estate planning, disburses cash and provides credit services. The leadership of the
finance and accounting department is responsible for evaluating the potential viability and return promised by
the various projects that a Retailer may consider making capital investments on. The CFO is also responsible

Retail Marketing Handout Page 2

for managing the Retailer’s overall capital structure, including, if the Retailer is a public company, the issuance
of stock and reporting of results and analysis to Wall Street and the community of financial analysts.

Responsibilities:
 Developing capital and operating budgets.
 Establishing leasing and buying policies.
 Financing purchases and monitoring inventory levels.
 Managing cash flow and cash accounting for stores.
 Managing credit by researching and establishing financing sources.
 Monitoring corporate targets such as sales, gross, net and pretax profit.
 Performing controller functions/internal financial controls and accountability.
 Valuating and managing assets.

Human resource: Advances in technology eliminated many jobs in other industries, but store-
based Retailing remains a labor-intensive business that places emphasis on human interaction.
From merchandise buying and displaying to customer service, people are an important factor in
Retail, and the industry is a leading source of entry-level jobs in most national economies.
The human resources department manages all matters related to the company’s employee workforce,
including recruitment, compensation and incentive plans, benefits, workers compensation, and compliance
with legal obligations and regulations related to employment.
Responsibilities:
 Developing human resources policies.
 Ensuring that the organization understands and works within legislative requirements.
 Managing the human resources functions -- for example, recruitment, training, career
path identification, salary management, payroll, employee benefits and employee
evaluations
 Participating in or monitoring labor relations.
Information Technology (IT): The IT department plans, implements and maintains the
infrastructure of the organization and the business applications that execute the various processes
and functions within the organization. It is IT’s responsibility to work with the business
personnel to understand how the business needs to be supported in doing their work, and
how to provide such technology support so as to make the enterprise as efficient and profitable as
possible. As the range and sophistication of available information technology has proliferated
over the past several decades, the role of IT and of the IT department has become a critical
source of competitive advantage for Retailers. Working with IT departments is a core
competency of IBM and is usually the foundation of our Retail executive relationships.
Responsible for establishing and maintaining:
 Databases
 Operating systems
 New and existing business applications
 Reporting capabilities
 Hardware systems:
 Point-of-sale
 Servers
 In-store processors

Retail Marketing Handout Page 3

Marketing: The marketing department publicizes a positive image of the Retailer to its
consumers, stakeholders and competition. This has traditionally taken the form of advertising,
whether on TV, in newspaper ads and inserts and on the internet, but the advent of sophisticated
Customer Analytics has dramatically expanded the range of possibilities that must be considered
as ways for Retailers to market themselves, and to tailor such marketing and offers to different
sets of consumers, so as to maximize sales and the return on marketing spend.
Likewise, the rise of online social media and networks in the past few years has greatly expanded the ability
of consumers to communicate with each other and share opinions and ratings of Retailers and the products
they carry --and being able to monitor and respond to what’s being said about them online is another area that
Retailers are just now beginning to recognize and grapple with.
IBM can assist this department by providing a range of services and products around marketing
processes, customer analytics, and social media analytics.
Responsibilities:
 Conducting customer analytics to understand how to target different types of consumers.
Building advertising and promotional activities.
 Designing and producing advertising and circulars.
 Developing the market plan and performing market research, such as focus groups.
 Increasing market share through customer loyalty programs.
 Working to deliver the highest possible incremental return of sales and profits from
marketing spend
Merchandise Planning: The merchandise planning department establishes item-specific goals,
such as sales and profitability, and works closely with other supply-chain related functions in
order to achieve the smooth and efficient flow of goods through the supply chain. This activity
builds upon the Merchandising /Buying department’s work, in defining the merchandise
assortments. At some Retailers, the merchandise planning function constitutes its own
department, answering directly to the operational executives. At other Retailers, the merchandise
planning function may organizationally fall within the Merchandising department, i.e.,
merchandise planners may report to the Merchants/Buyers.
Responsibilities:
 Analyzing sales and inventory results on a weekly, monthly and seasonal basis.
 Creating the visual merchandising environment.
 Developing and maintaining a working relationship with buyers.
 Developing seasonal merchandise plans.
 Ensuring that promotional inventory requirements are forecasted and met.
 Establishing corporate targets, like sales, gross, net and pretax profit.
 Formulating allocation models.
 Managing inventory levels for maximum productivity.
 Managing the open-to-buy fund.
 Re forecasting in-season.
 Recommending and initiating markdowns.
Store Operations: The store operations department is responsible for running the stores --
getting received merchandise onto the shelves, making sure that merchandise as well as the store
as a whole reflects the design and image the Retailer wants to project, employing store associates
to interact with customers, perform checkout and accept returns.
Store Ops is the one major Retail function that by its nature has to be largely decentralized, simply because it
involves a large number of people performing many tasks at a large number of diverse geographic locations.

Retail Marketing Handout Page 4

 While policies and processes as defined for store ops may be standardized and intended to be followed closely
at all stores, actual execution of these processes may vary widely depending on the training and experience of
the individual store associates and managers. Most Retailers experience relatively high turnover amongst these
employees, which also contributes to the problem of inconsistent execution. And since customers interact with
stores and store associates in an on-site, in-person way, lapses and inconsistencies in store execution can be
very damaging to the Retailer’s image and reputation.
Information technology is used widely in store operations to standardize processes so as to make
their execution as consistent as possible, and also to create accountability and to
incentivize/reward consistent and successful behaviors. And with the widespread adoption
of ‘smart’ phones and mobile technology by consumers, Retailers are beginning to explore ways
to enhance the customer’s store experience by providing tailored information and offerings to
their smart phone based on the identity of the customer and our pre-existing data about their
interests and buying patterns, and also based on where exactly the shopper may be physically in
or near a store.
Responsibilities:
 Maintaining safe and inviting store facilities by efficiently using space and visual
merchandising.
 Meeting the sales budget.
 Providing customer service.
 Controlling the security of assets.
 Communicating customer needs to merchandising and buying departments.
 Recruiting, hiring, training, retaining and scheduling staff.
 Participating in the local community.

4.2 Principles of Retail Organization

 Show interest in employees
 Monitor employee turnover, lateness, and absenteeism
 Trace line of authority from top to bottom
 Limit span of control
 Empower employees
 Delegate authority while maintaining responsibility
 Acknowledge need for coordination and communication
 Recognize the power of informal relationships
4.3 Forms of Retail Organization
(1) Hawkers. Such retailers don't start any shop anywhere. Rather they go on wandering here and
there and thus affect sales of the commodities in piece-meal or smaller quantities, to the
consumers. The following are some of their popular names:
i.) Wandering Retail Vendors;
ii.) Vendors of the Foot-Path;
iii.) Vendors of the Fairs and Village Markets.

Retail Marketing Handout Page 5

(2) Retailers Having Established Shops. The permanent retailers, by setting up their shops on a
specific place, resort to the sale of the commodities to the consumers in small quantities, as per
their needs.
(3) Large-Scale Retailers. Some traders or the organizations resort to take up retail trade on large-
scale some of which include the following:
i.) Departmental Stores;
ii.) Chain Shops;.
iii.) Mail-Order Business;
iv.) Super-Bazars;
v.) Consumers' Co-operative Stores;
Retail also classified as:
Sole proprietorship is an unincorporated retail firm owned by one person
A partnership is an unincorporated retail firm owned by two or more persons, each with a
financial interest
A corporation is a retail firm that is formally incorporated under state law; it is a legal entity
apart from its officers

4.4 Patterns of Retail Organization

Organizational patterns are structures of relationship, usually in a professional organization,
that help the organization achieve its goals. Organizational structure refers to the way companies
arrange their departments and reporting authority. Some companies build their organizations
around various functions such as marketing and finance to combine knowledge and skills. Other
companies, such as retailers, use product organizational structures to better focus on specific
product lines. Whatever the case, every type of organizational structure contains certain common
key elements or characteristics.
Hierarchy: A company's hierarchy or height in its organization is largely contingent upon size.
Organizational structure is depicted with boxes that represent various employee titles. Employees
that are on the same level, such as marketing and brand managers, represent the width of an
organization. The hierarchy refers to the vertical aspect of the company. Executives are usually
at the top of the organization while, in order of rank, directors, managers and coordinators are
one to three levels down, respectively. An employee will generally report to the person who is
directly above him. Companies accomplish better coordination and communication through a
hierarchy, according to the Food and Agriculture Organization of the United Nations.
Span of Control: Span of control in organizational structure refers to the number of people who
report to a particular executive or manager. For example, a vice president of finance may have a
finance director and analyst reporting to her. Consequently, her span of control would be two.
However, even in small organizations, plant managers or supervisors may be in charge of dozens

Retail Marketing Handout Page 6

of employees. As with schoolteachers and students, most companies limit span of control to a
level that supervisors can effectively manage.
Work Specialization: Work specialization pertains to the degree to which work is divided. Very
small companies may have one person performing a certain job. However, most department
employees specialize in a specific area. For example, a company marketing research department
may include a research director, research manager and research analyst. The research director
may be in charge of assigning projects and ensuring the department meets all deadlines. The
research manager may specialize in hiring agencies to field various surveys and writing reports.
Additionally, the research analyst may stay in daily contact with the agency and create special
graphs for the report.
Geography: Companies may need to decentralize various functional areas, such as field
marketing or finance. For example, a company may place field marketing and finance person in
each of six different regions. One reason for decentralization is that customer tastes may vary per
region. Restaurants often decentralize their management functions to better serve their customers
locally. Additionally, companies often divide their sales department into various regions to better
service customers. Consequently, support people such as marketing managers may be needed for
sales support functions.
Many retail businesses rely on a structure that places emphasis on three areas: centralized
operations, store operations, and regional operations.
Centralized operations include duties such as store planning and human resources.
Store operations include merchandising and marketing and are performed daily by retail stores.
Regional operations refer to distribution and warehousing. This organizational retail structure is
beneficial because it encompasses all areas of a business.
Organizational structure depends on the company and/or the project. The structure helps define
the roles and responsibilities of the members of the department, work group, or organization. It is
generally a system of tasks and reporting policies in place to give members of the group a
direction when completing projects. A good organizational structure will allow people and
groups to work effectively together while developing hard work ethics and attitudes. The four
general types of organizational structure are functional, divisional, matrix and project-based.
Functional Structure: People, who do similar tasks, have similar skills and/or jobs in an
organization are grouped into a functional structure. The advantages of this kind of structure

Retail Marketing Handout Page 7

include quick decision making because the group members are able to communicate easily with
each other. People in functional structures can learn from each other easier because they already
possess similar skill sets and interests.

Divisional Structure: In a divisional structure, the company will coordinate inter-group

relationships to create a work team that can readily meet the needs of a certain customer or group
of customers. The division of labor in this kind of structure will ensure greater output of varieties
of similar products. An example of a divisional structure is geographical, where divisions are set
up in regions to work with each other to produce similar products that meet the needs of the
individual regions.

Matrix Structure: Matrix structures are more complex in that they group people in two different
ways: by the function they perform and by the product team they are working with. In a matrix
structure the team members are given more autonomy and expected to take more responsibility
for their work. This increases the productivity of the team, fosters greater innovation and
creativity, and allows managers to cooperatively solve decision-making problems through group
interaction.

Retail Marketing Handout Page 8

Project Organization Structure: In a project-organizational structure, the teams are put
together based on the number of members needed to produce the product or complete the project.
The numbers of significantly different kinds of tasks are taken into account when structuring a
project in this manner, assuring that the right members are chosen to participate in the project.
4.5 Human resource in retail organization

Human resource management involving, recruiting, selecting, training, compensating and

supervising personnel in a manner consistent with the retail organization’s structure and strategy
mix.

Retail companies employ at least two fundamentally different types of employees: office staff
and store employees. Retail operations may also employ warehouse and distribution staff, but
smaller retail companies are likely to outsource these functions. For store staff, retail companies
generally start front-line employees at minimum wage or slightly higher. Front-line managers
hired directly into their positions are offered more than store associates but are still often paid
less than most office personnel. For office staff, retail operations set starting salaries based on
specific job titles, as well as job candidates' previous experience and education.

4.5.1 Describing the Job

There are lots of different jobs that you can do in retail, from junior customer service roles right
up to area manager, responsible for several key stores. Describing the Job is includes:
 Ensure job specifications accurately reflect the role that the appointee will play in
relation to the team as a whole.
 Take into account the views and requirements of all relevant personnel prior to
completing the specification.
 Write clear and concise job specifications according to relevant legislation.
 Confirm specifications with relevant personnel prior to recruitment action according
to store policy.
4.5.2 Specifying the Job
 Functional- divides jobs by task
 Product diversification divides jobs on a goods or service basis
 Geographic- is useful for chains operating in different areas.
 Combination – large organizations find it easier to use a combination

Retail Marketing Handout Page 9

4.5.3 Recruiting Store Personnel
Recruitment is an ongoing activity for human resources in the retail industry, as are the duties
associated with hiring and terminating employment. These enterprises are strictly governed by
employment laws, which focus largely on protecting employees. Discrimination when
interviewing or hiring, and wrongful termination cases are but two of the complex issues
employers in retail may face. It could be highly beneficial to a retail business owner to leave
these tasks to professionals trained in human resources issues.
Once you start getting flooded with resumes and prospective candidates, there's still interviewing
selected individuals, and choosing which ones will make the cut.
 Hire people to work more hours, more shifts
 Look for employees who play well with others
 Past behavior determines future behavior
 Sell them on why you're a great place to work
 Don't trust your gut
 Hire after a cooling off period

Procedures to efficiently generate sufficient applicants are:

3.1 Maintain and monitor staff recruitment procedures.
3.2 Advertise employment vacancies internally and externally according to store policy.
3.3 Conduct job interviews and employment appraisal tests according to store policy.
3.4 Enact staff selection policy and procedures to comply with equal opportunity and equal
employment opportunity legislation.
3.5 Ensure wages and conditions comply with relevant awards and agreements and store policy.

4.5.4 Selecting Store Personnel

4.1 Conduct assessment and selection process according to store policy and procedures and legal
requirements.
4.2. Judge information obtained from each candidate against specified selection criteria, and note
any additional influencing factors
4.3. Promptly seek advice from relevant personnel where difficulty in interpreting the selection
criteria exists, or there appears to be a conflict of criteria.

Retail Marketing Handout Page 10

4.4. Identify and correct unintended deviations from agreed procedures before making selection
decisions.
4.5. Maintain complete, accurate and clear records of assessment and selection processes.
4.6. Ensure selection recommendations are communicated to authorised personnel only.
4.7. Promptly and accurately inform all candidates of selection decisions following each stage of
the selection process.
4.8. Promptly communicate recommendations for improvements to any aspect of the selection
process to appropriate personnel.
4.9. Ensure that assessment and selection processes used and evidence gained justify the
selection choice.
4.5.4 Training Store Personnel
Training comprises both basic and advanced aspects. It covers all activities concerning the
development of the employees' job-related qualifications. These training periods are relevant
because customer personnel need to possess special knowledge and skills that can identify and
solve the problems of a customer. In this way good service quality can be offered, sales can be
generated and, last but not least, customers can be retained. Success and failure in retailing
largely depends on the know-how of its staff. Training allows personnel to feel confident in the
encounter with the customer, in completing the transaction and in dealing professionally with all
situations. In the internal marketing context staff training and development aim at developing
customer consciousness. Training given when:

 Idea is new for the employee

 Employer is new for the organization

 The company need more improvement

4.5.5 Supervising Store Personnel

Retail Store Supervisors are in charge for overseeing daily operations in a store. Common duties
listed on a Retail Store Supervisor resume example are finding solutions to maximize profits,
setting sales targets, ensuring high-quality customer service, scheduling shifts, working on store
displays, and adhering to safety standards. Based on our collection of resumes for this position,
the most sought-after skills for Retail Store Supervisor are leadership, organizational skills,

Retail Marketing Handout Page 11

strong communication and interpersonal abilities, sales management expertise, customer focus,
and computer competences. Formal education is not compulsory for this job.
4.5.6 Evaluating Store Personnel
By performing retail store evaluations, retailers examine various aspects of the business to
collect information on what needs to be improved. Every store owner or manager is skilled in
certain aspects of retailing. Some are great buyers; some excel at visual merchandising and
displays; others are strong salespeople. Retailers tend to focus on their strength as the most
important aspect of the business and often ignore other factors that need to be evaluated. To
avoid this mistake, consistently evaluate your store using a set of comprehensive standards that
ensure all aspects of the business.
Performance appraisals are formal reviews of employee performance over a set period, generally
one year. Results of a performance appraisal can be tied into employee compensation policies to
boost operational efficiency, ensuring that the highest salary costs are paid to the most
productive employees. Developing comprehensive performance appraisal and compensation
policies can pose distinct challenges in small retail companies. The first performance appraisal of
a new retail store employee is likely to focus on the employees' level of success or struggle with
learning the various tasks of the job, including customer service, running a cash register and
stocking shelves.
4.5. 8 Compensating Store Personnel
Many retail businesses engage in compensation practices that are not fair or equitable to woman
or various ethnic groups. A regional survey of 435 retail workers completed in December 2011
by the Retail Action Project revealed that women in retail jobs, especially those of color, were
being paid $1.13 per hour less than their male counterparts. Engaging in biased work practices
can bring to your door discrimination litigation from which your business may not fully recover.
Human resources professionals work to ensure your business treats all workers fairly and
consistently.
Employee benefits are a form of compensation in addition to base salaries and hourly wages.
Full-time retail office staffs are generally offered comprehensive benefits packages in addition to
their salaries. This may be challenging for newer small businesses, but companies should always
plan to offer benefits as soon as it is financially viable.

Retail Marketing Handout Page 12

Promoting employees into higher positions should always be a component of performance review systems. Retail
organizations face a large and distinct decision in this area, as a result of their workplace dichotomy. Retail
organizations can decide to promote outstanding front-line employees to office positions from time to time or they
can choose to fill entry-level office positions with outside applicants.

Retail Marketing Handout Page 13