Using Organization Methodologies and IT
To Resurrect Montgomery Ward’s
Margie Coltrin
Mylien Nguyen Tran
Humaira Ameer
University of Phoenix

Organizational Theory CMGT 320
John Fritz
23 February 200

Abstract

Montgomery Wards was a legacy company that couldn't seem to shake the tendency to go bankrupt in its later years. They had communication problems between departments. They were also unable to keep up with trends in consumer preferences and technology. The professional team of MGHM Enterprises took on the challenge of resurrecting Montgomery Wards into the new and improved company, Arron's (the first name of Ward). By using IT, foreign and virtual investors, and by flattening the organizations structure, the team was able to put together a plan to make Arron's productive once again. The newest innovation to Arron's is the incorporation of an e-business where the consumer is able to conduct business online. This added to the new look, business principles, and innovative mind-set has made Arron's into a competitive marketing enterprise.

Using Organization Methodologies and IT
To Resurrect Montgomery Ward’s Montgomery Ward, an American retail merchandising company, founded in Chicago in August 1872 by Aaron Montgomery Ward was a pioneer company selling merchandise directly to the people, it invented the “mail-order catalog” business. Montgomery Ward was famous for coining the phrase, “Satisfaction guaranteed or your money back.” It also was the creator of “Rudolph the Red-nosed Reindeer”. (Montgomery Ward’s Last Chapter). Montgomery Ward’s management lacked foresight and lost major market share to Sears, who has been their rival competitor since shortly after the inception of the company. In the year 2000 Montgomery Wards faced serious business problems and was forced to close its doors. We will analyze the failures and provide reason for the resurrection of Montgomery Wards.
Problem Identification within Montgomery Ward’s
Montgomery Ward’s had numerous problems with the way it conducted business. One failure was the inability to meet consumer demands. In addition, Montgomery Ward needed to address its structural failures. According to retail analyst, Kurt Bernard, “Montgomery Ward lost its reason for being. Sears dominated, and Montgomery Ward failed to establish and identity to make it stand out. It never gave shoppers a reason to go there.” (Montgomery Ward’s Last Chapter). The company also lacks the technology and the industrial know-how to interact with the customers. For example, Mylien bought a dining set from Montgomery Ward with 6 months of free interest, she has planed to payoff early with an installment of $200 a month. Each month, when she received the billing statement, it would show the interest accrued. She called the customer service department and told them she had bought the dinning set on a 6-month interest-free plan. Customer service department would take off the interest fee and happily adjusted her bill, but come the next month the same thing would happen and she had to call in again. This showed a lack of a communication infrastructure to serve the customer in a timely and effective manner. Organizational problems also contributed, they lost control over their manufacturing, distribution, and inventory costs. They had an ineffective corporate structure that was too tall and mechanistic. Having identified some of the key problems we will discuss potential solutions to these problems, different approaches for the solutions, and the pros and cons of those approaches.
Challenges and Solutions for The New Company Our biggest challenge is capital. Montgomery Wards is bankrupt. We are interested in attracting local and international investors who want to branch out to a global market. The pros of recruiting investors, they will be able to help us with business strategy, leverage current resources, and in the long run, benefit from our profits. The cons are potential loss of control of the company. Bank loans may provide us with more autonomy over the way we run the company. On the scale of 1 to 10, getting financial banking from investors ranks an 8 and relying on banks and financial institutes ranks a 3. Several other problems are with manufacturing and distribution costs. One of the solutions to this problem will be to cut manufacturing, overhead and distribution costs. We hope to achieve this by outsourcing product manufacturing and potential informational technology functions to ASP’s. We will also switch to Just-in-Time methodology for regulating inventory and distribution costs. The pros of these solutions are the low cost of outsourcing. The con for this solution is the reliance on third party vendors. We chart the problems and costs of doing our own manufacturing at 7 and the benefits of outsourcing at 9.
Organizational Structure of Montgomery Wards The organizational structure of Montgomery Wards was too vertical. Our solution is to cut the tiers of hierarchy making it a more flat and decentralized structure. We will also empower the employees to be responsible for certain aspects of the projects, and to make effective decisions within their functions. The pros of this are more motivated and empowered employees. The cons are that there is a potential for loss of organizational control. On the scale of 1 to 10, we rank the pros of decentralized, flat structure at 9. The pros of a rigid and tall hierarchy are ranked at 1. Other problems Montgomery Wards faced were ineffective communication and lack of integration between departments and customers. Our solution will be to implement an IT infrastructure to integrate the related departments, and to establish better communication within the company. The pros to these approaches will be better customer service, innovation, communication and a more organized flexible structure. The cons are the cost of implementing IT and training of personnel. Cons of an IT infrastructure (high cost) are rated at 5 and the advantages of having one at 9. The final problem is product differentiation. There was no product uniqueness our approach will be to offer an eclectic and diverse variety of products that appeal to a more sophisticated and savvy customer. Our idea is to develop a global product catalog, which utilizes high craftsmanship and workmanship from each targeted region. We also plan on resurrecting Rudolph the Red-nosed Reindeer as an icon and company mascot. The pros are the consumer will have a more diverse product selection and the convenience of doing business over the Internet. The cons are geographic product innovations might fail and newness of conducting E-business. To rank our pros verses the cons, the pros edge out the cons 8 to 4. Retail and E-business companies will have a real contender with the emergence of ARRONS.
IT Implementation Plan for Montgomery Wards The resurrection of Montgomery Wards now known, as Arron’s will need a new organizational structure that defines new roles and responsibilities. The emergence of new technologies will also play a big part in developing a new IT organization that is flexible and responsive to customer wants and needs. We will define an implementation plan, provide justification, identify resources and tools, and define measurements for success and failure within the new organization. The implementation plan will consist of six phases that will enable us to rollout a new IT organization. The first phase will be the requirements phase. We will identify requirements needed to function in the new company. The second phase will identify key processes, personnel and organizations. The third phase will identify the technology and applications needed for an e-business environment. The fourth phase will focus on training, and cross training initiatives. The fifth phase will focus on the technology infrastructure; key components will be hardware, software and network implementations. The sixth phase will be the deployment phase and the emergence of Arron’s on the consumer market.
Information Technology Strategy and Tools
Information Technology tools selected are Oracle 9i portal, Oracle Applications and OpenText Livelink. Oracle9i portal will allow us to develop, deploy and manage Internet E-business applications. Oracle Applications, enables us to integrate financials and manufacturing organizations into one central repository for driving enterprise profitability, while building a smarter business. Since Oracle Applications is flexible we can expand IT as our business needs increase. OpenText’s Livelink product will facilitate communication, eliminate information barriers between people and departments and increase access to the collective intelligence of the organization. “Livelink enables organizations to develop new ideas, implement them, and bring new products and services to market faster and more efficiently” (http://www.opentext.com/livelink/index.html).
Organizational Structure Reorganization The functional organizational structure of Arron’s will be flat and decentralized, organizational hierarchy will consist of only four layers. The top of the organization will be the CIO. The CIO will be the leader, visionary, and a hybrid with authority to create organizational change. His direct reports will be the Vice President of Finance & Administration, Vice President of IT & Technology, Vice President of Sales and Marketing, and Vice President of Business Operations. Reporting to the V.P.’s will be department managers reporting to them will be the individual employees. The V.P. of Finance and Administration will handle all financial and administration duties these include purchasing, accounting, controller, legal matters and human resources. The V.P. of IT & Technology will be responsible for research and development, networking, middleware, operations, applications, infrastructure, software and hardware. The V.P. of Sales and Marketing will be responsible for strategic planning, business development, marketing and sales. The V. P. of Business will be responsible for e-business and retail units.
Training and Staffing for The New Company Training and staffing issues will be addressed at Aarons by acquiring employees who are already trained and experienced on the new technologies. Third party vendors such as Oracle, Sun and IT vendors who specialize in a specific discipline will train employees who need training. To hire employees we will advertise on Internet sites such as “monter.com” and “hotjobs.com”. We will also utilize job fairs such as Westech and College recruiting services.
Measuring Success and Failure Arron’s will utilize three approaches for measuring success and failure they are external resource approach, internal systems approach and technical approach. “External resource approach evaluates the organization’s ability to secure, manage, and control scare and valued skills and resources” (Jones, 1998 p. 28) key indicators in this approach will be increased market share and stock price. Internal systems approach, measures a company’s innovation and response time to customer needs. Key indicators will be increased production, innovation and reduced decision–making time. “The technical approach allows managers to evaluate how efficiently an organization can convert some fixed amount of organizational skills and resources into finished goods and services”. (Jones, 1998 p. 29) Key indicators in this approach are increased quality, defect reduction, and reduced production costs. As these three approaches measure the success of the organization they also highlight the failures. Failures encountered in these approaches will enable us to re-evaluate processes and re-train personnel. Implementing a hi-tech IT organization will enable Arron’s to be flexible, innovative and responsive to customers need. By investing in IT employees and investors will reap huge monetary rewards, customers will also be satisfied by the product and services rendered.
Utilizing IT and Re-engineering the Organization to Foster Innovation and Communication
Arron's is up and running. The lack of communication between departments, customers and business managers has been resolved in the following manner: there is now integration and communication between departments through the use of ERP software and Internet enabled applications. The use of third party vendors and mentoring initiatives will allow Arron’s to have a technical and flexible work force.
Arron's Has More in Common
We have more in common with our customers through web enabled applications and surveys, which allow our managers to meet their needs. The customers are more pleased with our response time and our dedication to customer service. We have also been able to use feedback to keep track of the trends in shopping and the changing mind-set of our customers. We can now customize our inventory according to the desires of our customers.
How Arron's Measures Success Arron's measures its success in external resources with the use of statistics on increased profits, rising stock prices, which are higher than ever, and an increased market share. Innovative and productive workers will be key indicators whether are internal infrastructure and processes are working. Employees will be happier because they are allowed to make creative decisions. Because of this, more innovative and higher quality products will be delivered to the consumer on a regular basis.
Six Sigma to the Rescue We have implemented a Six Sigma program that has helped the quality increase by pointing out in specific ways things we must do to succeed. Therefore, defects in production have decreased sharply.
Failure is used as a Tool Our failures are viewed as tools to help us be more productive. Our Six Sigma implementation shows us where we fail and we take rapid steps to improve these shortcomings. When we detect failures in total quality management, we will look for alternative sources such as ASPs (Application Service Providers), retraining opportunities, and reanalysis of core processes. ASPs will supplement IT and networking. Outsourcing allows increased aid to our personnel to get us back on track.
Fall of Montgomery Wards and Rise of Arron's Summarized So, as we analyzed the troubles of Montgomery Wards and defined problems, which continued to hinder their financial success, we saw that we could help through restructuring, wise dealings with investors, and updated output. We noticed Wards couldn't keep up with the trends and technology because they didn't make the move to IT when other companies in their field did. We wanted to develop a plan to overcome their tendency to go bankrupt. The biggest challenge was to find the funds to support our new ideas and fix the outdated corporate structure. We did this by flattening the structure, reducing the levels of hierarchy, lowering distribution costs with Just-in-Time programs, updating our product line, and using new advertising strategies. There was ineffective communications between departments which we solved using training of our personnel in Oracle programs for cross-functional interaction. We updated the product line by empowering the creativity of the employees. The act of actually implementing our plan came down to identifying and investing in IT infrastructure, outlining the personnel requirements we had, and implementing what technology we needed to start up the virtual department for e-business. We installed processes, which would allow effective measuring of success and failure, and used these measurements to gage our business proceedings. This has been useful and effective as Arron's is up and running and better than ever.

References
Gareth R. Jones, “The Shape of Things to Come,” in Organizational Theory: Text and Cases (Massachusetts: Addison Wesley Longman Publishing Company, Inc. 1998) pp. 389-390.
Paul Tharp. Montgomery Wards’ Last Chapter. Online available: http://www.visualstore.com/rn/nod/nod101220001311.html Paul Tharp. (Dec 29, 2000). Montgomery Ward’s Last Chapter. Online available: http://www.nypostonline.com/business/2399.htm Wards Ends 128 Years Operation. Online available: http://www.wards.com OpenText Home Page Online available:
http://www.opentext.com/livelink/index.html