H&M Organisation

Lillebaelt Academy of Professional Higher Education MM 226

Organisation Communication Semester I, October 2012

SEMESTER PROJECT – H&M

Stoian Ioan Stefan Soc. Reg. Nr. 300693-3397

Keystrokes: 21.663 Teachers: Casper Christensen Mary.M.I Sønderlund

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Table of Contents

Executive summary ........................................................................................ 3 1.0 Introduction ............................................................................................4 1.1 Problem Statement ..................................................................................4 1.2 Delimitations ...........................................................................................4 1.3 Report structure ......................................................................................4 2.0 Methodology ............................................................................................5 3.0 Analysis ..................................................................................................5 4.0 Discussions .............................................................................................8 5.0 Conclusion ..............................................................................................8 6.0 Bibliography ...........................................................................................9 7.0 Appendices ............................................................................................. 9 7.1 The log ...................................................................................................9 7.2 Social contract ........................................................................................9 7.3 Memos ....................................................................................................9

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Executive summary

Hannes was opened in 1947 in Västerårs, Sweden, it was a women clothing store. In 1968 , Erling Persson bought Mauritz Widforss, a hunting store located in Stockholm. Since 1968, the company was called H&M. In 2012, H&M exists in 47 international markets, it has over 2600 stores all around the world and over 94.000 employees. The company is ranked the second largest global clothing retailer. This report gives an insight into the internal organizational and motivation factors of employees which influence H&M growth. The basis for this report is an analysis of the organizational structure and theoretical factors motivating of H&M. First, H&M is a tall organization, because it has a big number of managers how has a low number of subordinates and the relationship between them is informal. Secondly, H&M`s structure contain the 2 types of organizational design: Mechanistic and Organic. Finally, motivation factors are maybe the biggest part of the interpersonal relationships which influence the company success. H&M encourages employees to try many roles within their organization and provides them new challenges, for example in another department or another country. The company also gives priority to an internal recruitment in that way employees can easily evoluate in the hierarchy. They ensure that work conditions and atmosphere are favorable to motivate employees. This report conclusion is that employees of H&M are very well motivated in their work. For a future development H&M will thank employees with the same motivated factors, but the structure of the company will increase because H&M is in a continue growing. “H&M’s growth target is to increase the number of stores by 10–15 percent per year.”

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1.0 Introduction
In a world of fashion, where t rends change in every day and the image of your own person matters, H&M pleased the needs of every person with their product s and their motto: “low prices and good quality”. Not always H&M was a global company, but like any other company, they started from a lower level. The first store was opened in 1947, in Västerårs, Sweden. This store was a local store with clothes for women and it was called Hennes. In 1952 Hannes was opened in Stockholm and in 1964 was opened the first store outside Sweden, in Norway. In 1968, the founder of this brand, Erling Persson, started to expand in small scale by buying the hunting and fishing equipments store Mauritz W idforss and the name of company was changed to Hannes&Mauritz. From that year the company started the production of men´s and children`s clothing. In 1976 was opened the first store outside Scandinavia, in London, UK, in 1980 was opened in Germany and Netherlands. Expansion continues in Europe with the opening of a first store in France in 1998. Adverts in newspapers and magazines are complemented by billboards using famous models. In 1998 e-commerce begins. In 2000 the first US store was opened on Fifth Avenue in New York. In 2004 H&M was initiated designer collaborations starting with Karl Lagerfeld, Stella McCartney, Viktor&Rolf, Madonna, Roberto Cavalli, Jimmy Choo, Versace, David Beckham and others. In present H&M is present on 47 markets and it has 2.600 stores all over the world. The size of the organization needs a motivate workforce and dedicated management. The high level of the company requires a good organizational structure and the ability to motivate their employees. Therefore the aim of this project is to find a link between organizational design and motivation factors.

1.1 Problem Statement

What organizational strategy H&M adopted in time to motivate the employees in their work?

• How is the company structured to manage in the international markets? • What organizational designs and what motivation factors are in organizational structure of H&M?

1.2 Delimitations
Today, H&M is one of the largest organizations in Europe and therefore, this report is focused on the organizational design of H&M and on the employee motivation affection of H&M. I will analyze the current organizational structure of H&M, I will find the connection between the employee motivation and the organizational design of the company. In order to discover the relations between the employee motivation and organizational design I will use the classical and the contingency approaches. In order to determine the motivational factors, I will apply the basic motivational concept s and I will present the future strategy of a company to analyze if this organizational structure will be productive in the future.

1.3 Report structure
This report was st ructured according to the importance of each topic for a better understanding of the overall project. Introduction talks about the company’s history and their step by step evolution. During this report you will find an analysis based on organizational analysis and communication analysis of the company. In the final part of the report Discussion Section approaches the main points argued during the project leading to Conclusion Section and Appendixes.

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2.0 Methodology
Organizational behavior and analysis:

Burns and Stalker`s theory : helped us to classify the organisational design type Kilmannetal`s theory: according to this theory the culture can influence the company`s performances Herzberg`s 2 factor model of motivation: helped to distinguish different mot ivational issues Maslow’s theory : helped to find the motivating factors Vroom’s theory : helped to explain how and why individuals are able to achieve their goals.

3.0 Analysis
The organization of a company is one of the most important things for the company to be one that has success. Even if its about organization, motivating factors, leadership, all this factors are very important in the organization of a company. Organization structure is the framework, typically hierarchical, within which an organization arranges its lines of authority and communications, and allocates rights and duties. It determines the manner and extent to which roles, power, and responsibilities are delegated, controlled, and coordinated, and how information flows between levels of management. A structure depends entirely on the organization’s objectives and the strategy chosen to achieve them. In a centralized structure, the decision making power is concentrated in the top layer of the management and tight control is exercised over departments and division. In a decentralized structure, the decision making power is distributed and the departments and divisions have varying degrees of autonomy. After the objectives of an organization are established, the functions that must be performed are determined. Personnel requirements are assessed and the physical resources needed to accomplish the objectives determined. These elements must then be coordinated into a structural design that will help achieve the objectives. Finally, appropriate responsibilities are assigned. Determining the functions to be performed involves consideration of division of labor. This is usually accomplished by a process of departmentalization. Departmentalization is grouping related functions into manageable units to achieve the objectives of the enterprise in the most efficient and effective manner. A variety of means can be utilized for this purpose. The primary forms of departmentalization are by function, process, product, market, customer, geographic area, and even matrix (also called project organization). To analyze the organization structure of H&M I will take account of some characteristic: vertical differentiation, horizontal differentiation, span of control and number of levels. I think that H&M is a tall organization because it has many levels of management and supervision. There is a “long chain of command”. At H&M, corporate management is based on a head office in Stockholm, Sweden. Stockholm is also where t he main departments for design and buying, finance, accounts, expansion, interior design and display, advertising, communications, IR, HR, logistics, security, IT and sustainability are located. But H&M has more than 20 country offices that are responsible for the various departments in each sales country. There are also local H&M production offices managing contracts with approximately 700 independent suppliers. H&M has over 94.000 employees and over 2600 stores in 47 international markets.

In a tall organization structure, a manager has to manage only a few subordinates. Therefore, the relationship between them will be informal and because the number of subordinates is low, the coordination is very good, there is a close control and there are less mistake because of close supervision and control. This is a costly because it has many mangers and the decision making is slow. The communication may be distorted and delayed because and there is less pressure on managers.

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Organization design is the process of aligning an organization 's structure with its mission. This means looking at the complex relationship between tasks, workflow, responsibility and authority, and making sure these all support the objectives of the business. Good organizational design helps communications, productivity, and innovation. It creates an environment where people can work effectively. The organizational design is of two types:

Mechanistic Stable and functional based

Coordination is hierarchical Responsibility and obligations attached to the role/job Power and knowledge at the top Vertical interaction Loyalty and obedience expected

Organic Working roles change depending on experience and knowledge in rel. to diff. Tasks Coordination differs Everybody is responsible Mainly horizontal interaction Managed through information and councelling Commitment and involvement is expected

(Manufactured by me)

The largest organizations in the world, like H&M , are designed, or evolve, to have elements of both mechanistic and more flexible, organic structures within. To determine the organization design of H&M , I will take into consideration some affecting factors like: environment, strategy, technology and human resources.

The organization design must support the company 's strategy. If company 's organization intends to be innovative then a hierarchical structure will not work. If however, company’s strategy is based on low cost, high volume delivery then a rigid structure with tight controls may be t he best design. In the organizational structure of H&M I find the 2 types: mechanistic structure and organic structure. When the environment is stable, there is no need for complex decision-making that involves people at lower levels, this is the mechanistic structure. Therefore, decision-making is centralized at the top of the organization, at head office of H&M in Stockholm. If the environment is stable, the tasks will not be differentiated much, because each subtask is relatively stable and easy to control. Due to the stability of tasks, there will be low integration between departments and functional areas, because tasks stay relatively stable, and because the functional areas are not heavily dependent on each other. So, every office of the 20 countries has the form of mechanistic structure, the same is the head office in Stockholm. But, every country office has a subordinate head office in Stockholm, like an organic structure, because the task of each country office are often changing, tasks may need to be differentiated, so specialists, each responsible for one or few tasks, are able to respond quickly. When the environment is dynamic and uncertain, like in different countries office of H&M, there is a need for complex decision-making that involves people at lower levels. Therefore, decision-making power should be distributed to lower ranks, which should get empowered in making decisions.

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H&M’s structure is Matrix Structure – In a matrix structure, people typically have two or more lines of report. For example, a matrix organization may combine both functional and divisional lines of responsibility. In this structure, a marketing manager may report both to the functional marketing director and the country direct or of the division he or she works in. The advantage is that the organization focuses on divisional performance whilst also sharing functional specialist skills and resources. The (often serious) downfall is its complexity – effectively with two hierarchies, and with the added complexity of tensions between the two. Motivation is the key to performance improvement. Some of motivating factors are: ● interesting work ● good wages - physiological factor

● full appreciation of work done – esteem factor ● ● ● job security – safety factor good working conditions promotions and growth in the organization

● feeling of being in on things ● personal loyalty to employees

● tactful discipline ● sympathetic help with personal problems

H&M has over 94.000 employees all around the world. All H&M employees get to take responsibility and everyone’s ideas are important. That all the employees to be appropriately motivated , the company took care for all the motivating factors mentioned above (interesting work, good wages, full appreciation of work done, job security, good working conditions, promotions and growth in the organization, feeling of being in on things, personal loyalty to employees, tactful discipline, sympathetic help with personal problems) and taking care of every aspect of the environment of every employee (country, standard of living, etc).

“Looking after people and our planet is a natural part of our daily work – everyone within the company is working to achieve a more sustainable environment and a more sustainable society. Our values also include teamwork and constantly trying to improve: together we challenge ourselves t o do things better and to always offer the customer an even better H&M.” “Personality is the most important asset that H&M employees have.” For a good motivation of employees, H&M took care of the famous motivation theories (Maslow’s theory, Vroom’s theory, Adam’s theory, Herzberg’s theory).

( Maslow’s theory)

Organizational structure is very important for a company like H&M that is in a continue development, like they say on the official site: “H&M remains positive towards future expansion and new business opportunities“. To accomplish some projects , besides a good organizational structure, the most important factor is communication.

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A project often crosses multiple functional areas, but without communication initiated by the project manager, responsibility for each area can be confusing. The project manager, in collaboration with company leadership, determines which departments or t eams are assigned to each major project task. Several documents are useful for communicating this information throughout the team. For example, a work breakdown structure shows the hierarchical organization of tasks and departments engaged in a project. As well, frequent communication with team members within the organizational structure is essential to maintaining and implementing a successful project. No matter the nature of business project, proper communication is vital to success. Bringing a project in on-time and within budget requires the input and cooperation of every member of the team, and it is essential that every team member maintain clear lines of communication with the project manager throughout all stages of the project. There are a number of tools and techniques managers and project leaders can use to ensure everyone is making progress as the project end date approaches. The current organizational structure of H&M is very complex and efficient, just for that she can be maintained. The growth target of H&M is to increase the number of stores by 10–15 percent per year with continued high profitability and at the same time increase sales in comparable units. “For the 2012 financial year a net addition of 275 new stores is planned, with China, the US and the UK expected to be the largest expansion markets. Good opportunity for growth is also seen in countries such as France, Italy and Germany.” To be maintained this organizational structure, H&M has to open another country office subordinate to the head office from Stockholm, because if the number of stores is growing, then the responsibility of every country office it will grow. “This growth, which is entirely self-financed, will proceed with an emphasis on quality, sustainability and continued high profitability.”

4.0 Discussions
The main points discussed in this report were the motivation factors of H&M’s employees and the organizational structure of H&M. Every company is organized in different ways and H&M specific structure lead them to a great success. Being a tall organization, the rules and hierarchy are very strict between the head office from Stockholm and country office. In a country office, t he employees can communicate easily and be more responsible for their work. For every country office, H&M has to adopt a certain strategy because they came from different environments, and the motivation factors are different. Based on this I managed to find a series of motivating factors for employees that took and will take to a development of the company for the next years.

5.0 Conclusion
In the analisys that I made, I concluded that H&M is a tall organization because it has many levels of management and supervision . The 2nd conclusion that in the organizational structure of H&M I find the 2 types: mechanistic structure and organic structure. The 3rd conclusion from the report is that H&M`s structure is Matrix Structure – In a matrix structure, people typically have two or more lines of report. After the analysis I made I concluded that H&M had some factors in mind, considering some famous motivation theories, like Maslow’s theory, Vroom’s theory, etc. These factors are: interesting work, good wages, full appreciation of work done, job security, good working conditions, promotions and growth in the organization, feeling of being in on things, personal loyalty to employees, tactful discipline, sympathetic help with personal problems. In finally, I think that the employee must be very motivated to work at his maximum capacity. Besides all this motivating factors, the organizational structure is very important. But the most interesting thing is that H&M managed to make some links between motivating factors and organizational structure, this thing is one of the reasons that H&M is in ascension.

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6.0 Bibliography

Books :
● Derek Rollinson, Organizational behavior and analysis, 2008, 4th edition, Financial Times Management ● Gareth Morgan, Images of organization, 2006, updated ed. P. cm., Library of Congress Cataloging-in-Publication Data

Internet :
● http://about.hm.com ● http://groupbrain.wjh.harvard.edu/jrh/pub/JRH1981_1.pdf ● http://blogs.hbr.org/corkindale/2011/02/the_importance_of_organization.html

7.0 Appendices 7.1 The log
I didn’t make a log for this project because I did it on my own from Friday 5 October until Sunday 7 October.

7.2 Social contract
I didn’t make a social contract because it is a single project.

7.3 Memos
Stefan Memo: To: [e-mail] From: Stefan Stoian , MM226 Subject: Personal development

Dear Mrs. Meg, I am writing to you in order to express my point of view about the project. As you know, I`ve been excluded from the team because I couldn`t go one day because I felt bad, I got a flu. And they decided to exclude me. But, from Friday I tried to do the project on my own. I took informations from many sources. I took information from two books , „Images of organization” by Gareth Morgan and „ Organizational behavior” and also from the official sit e of H&M and other sites. Of course I used the informations from the power point presentations. I don`t know if its the best, but I tried to do as much as I could in such a short time. I tried to give my best in this project.

Date : 08.10.2012

Your sincerely, Stefan

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Bibliography: Books : ● Derek Rollinson, Organizational behavior and analysis, 2008, 4th edition, Financial Times Management ● Gareth Morgan, Images of organization, 2006, updated ed