Abstract
Sweeping demographic shifts, technological advances, competition, geopolitical realignments and other related pressures are combining with concerns for security, changing customer preferences, expansion urges and organizational governance to generate momentous pressure for organizational change. This report is concerned with evaluating how one of the leading companies in the fashion industry – Zara Fashion Retailer – has continued to be affected by the above challenges and how it could introduce change to maintain profitability and competitiveness. The report heavily relies on secondary sources of data collection.
Although this report has mentioned many areas within Zara’s operational and human resource strategies that need redirection as a direct consequence of the ever-shifting business environment, it lays its focus on how the fashion retailer can formulate an HR plan that will effectively manage its large pool of personnel based in different locations around the world, and to bring them to align with, and advocate for, the company’s values, culture and operational strategies in the face of intense competition and shifting workforce demographics.
To achieve this objective, the report has borrowed extensively from various human resource models and approaches, including Bamberger & Meshoulam Model, Maslow’s Hierarchy of Needs Model, McGregor’s Theory X and Theory Y, Human Capital Model, and Universalistic Theoretical Framework. More importantly, these models have been used to provide frameworks through which the company can effectively be able to know the needs, values and expectations of its employees, how much needs affect employee alignment behaviour, and ways through which employees’ knowledge, expertise, abilities, empowerment and motivation can be further enhanced for proper alignment.
Introduction
Implementing strategic change is viewed by academics and practitioners as one of the most important undertakings of an organization. Successful implementation of strategic change within an organization can bolster performance and competitive advantage, but failure to implement change initiatives can lead to ruinous ramifications, including the organization’s death (Sonenshen, 2010). In his study on organizational readiness for change, Susanto (2008) observes that the ever-changing business environment generates a compelling demand for an organization to continually change and modify its strategies, structures, processes and culture.
In this perspective, change can be described as the process through which organizations continually adapt to the ever-changing business environment (Christopher, 2007). It is against this background that this report seeks to evaluate how Zara Fashion Retailer can affect an organizational change intended to strategically align its large pool of employees to the company’s values, culture and operational strategies. This change is informed by the need to develop new ways of coping with shifting business demands, changing customer expectations, shifts in workforce demographics and intense competition.
Background
Headquartered in Corona, Spain, Zara Fashion Retailer’s key interests revolves around the manufacturing, distribution and retailing of various fashion goods, which include clothes, footwear, bags, kids’ clothes, and other fashion and beauty accessories. With an estimated 1,500 fashion retail outlets in 68 countries and € 6.26 billion in 2007 annual sales, Zara is not only one of the leading fashion retailers globally, but it has also become one of the most respected apparel brands worldwide, in part, due to its impressive growth in recent years (Caro et al., 2010).
Latest statistics reveal that the company employs more than 92, 000 employees, and 5 per cent of this workforce is based outside Spain (Zara, 2011). 80.4 per cent of Zara’s employees are female. However, the disparity in gender disparity is in line with findings of a current study, which demonstrated that female employees’ perform exemplary well in the fashion industry as they easily identify with the latest trends and can foresee changes in customer preferences, especially in the fashion industry (Bhardwaj & Fairhurst, 2010).
A review of the literature demonstrates that Zara’s has so far remained a market leader in the fashion industry due to several factors, which includes: on-the-job training; employee flexibility to work in different positions depending on the capacity to achieve set objectives; conducive working environments; fair wages; and capacity to offer other bonuses, such as freedom to form unions, recognition of employees’ rights, health insurance, and routine promotions (Zara, 2011). Businesswise, “…the success [of Zara] is widely attributed to its fast-fashion business model, which involves frequent in-season assortment changes and ever-trendy items offered in appealing environments and at competitive prices” (Caro et al., 2010 p. 71).
Even though Zara is committed to remaining a global leader in fashion, the ever-shifting business environment of the 21st century coupled with the presence of its fashion outlets in multiple locations around the world calls for a reformulation of the company’s human resource strategies to effectively align the dispersed employees to the core values, culture and practices of the company. Judge et al (2009) observe that employees working in global organizations are faced with multiple challenges which are unique to the political, economic and social realities of the foster country. This challenge informs the impetus for change.
Research Method
This report utilizes secondary research as the main research method aimed at eliciting information on Zara’s human resource challenges, factors that are fuelling the challenges, the company’s approach to strategic human resource management, and the HR methods and approaches that could be used to ameliorate the challenges and initiate the desired outcomes. Data for this report, therefore, was collected by reviewing the company’s official website, annual financial reports, and journal articles interested in espousing change literature.
The employment of secondary data sources in undertaking this research is justified because the information contained in some of the secondary sources, especially the journal articles, enhanced the capacity to gain initial insight into some of the human resource challenges facing Zara. This information would have taken a lot of time and financial resources to extract if primary methods of data collection had been used (Stewart & Kamins, 1993).
Second, secondary data sources avail a framework through which the researcher can compare different views and perspectives into the research problem, hence enhancing the formulation of solutions that are rich in context, theory and practice (Stewarts & Kamins, 1993). Third, it is important to note that the relevancy of secondary sources to the phenomenon under study enables the researcher to come up with accurate and practical solutions to these challenges (Stewarts & Kamins, 1993). Lastly, the capacity to obtain the needed information from the databases with much ease justified the use of secondary research.
Key Drivers for Change
The impetus for change arises from certain key drivers that originate from the external (social, legal, economic and technological) as well as the internal business environment (Sonenshen, 2010). External drivers originate from outside the organization to initiate a change process while internal drivers originate from within (Malik, 2009). This section aims to briefly evaluate both the external and internal drivers for change in Zara.
External Drivers
Among the social factors, Zara is substantially influenced by the ever-changing public tastes and preferences, implying that the company must also continually change their marketing strategies, image, and the way they do business (Judge et al., 2009). More importantly, Zara employs workers from diverse backgrounds to operate global outlets, thus the workers are often influenced by the social-cultural factors prevalent in foster countries.
This observation certainly drives the need for Zara to come up with approaches that will ensure employees operating in foster countries can effectively align themselves with the business objectives, culture, and values of the company. The alignment is necessary when considered against the Behaviour Theory of Change, which espouses that, the actions of workers form the critical “…link between the change strategy and the performance of the organization” (Wright & McMahan, 1999 p. 13).
Among the legal factors, Zara needs to note that some of the drivers may arise from inter-country wage rates, employee rights and ethical standards which, if violated, may lead to legal penalties and/or cancellation of operating licences (Tyson, 2006). Since most legal requirements are country-specific, it is the function of Zara’s HR department to develop acceptable guidelines that should be followed by employees during times of change.
Economically, intense competition in the fashion industry has forced many companies to embrace change to sustain competitiveness (Bhardwaj & Fairhust, 2010). Zara, therefore, should be attuned to the fact that the current economic environment is characterized by competition, shifts and uncertainties, thus the need to develop newer approaches within the company’s human resource domain to deal with these exigencies.
Today, more than ever, the convergence of technology today continues to compel organizations to change. Zara has invested heavily in technology (Zara, 2011), but the speed with which more efficient technologies are finding their way into the market obliges the company to introduce new techniques to fasten its complex production, distribution, sales and marketing networks as well as enhance information sharing among employees (Caro et al., 2010).
Internal Drivers
Zara still maintains a strong market presence, but the ongoing shifts in workforce demand that the company concentrate more on employees, especially in enhancing their business and technology skills, attitudes, motivation and behaviour. Currently, most organizations are coming to terms with the importance of considering the needs and expectations of employees (Alfers et al., 2010).
From one of the mechanisms described in the resource-based theory of organizational development, it is clear that Zara should value its employees as a reservoir of resources and potential that can be strategically exploited to achieve competitiveness (Perdomo-Ortiz et al., 2009). More importantly, it is clear that employees are now leaning less towards financial inducements and more towards the quality of life options (Soneshen, 2010), hence the need to include work-life benefits in Zara’s human resource practices.
Zara’s Approach to Strategic Human Resource Management
From the review of the literature (Caro et al., 2010; Zara, 2011; Bhardwaj & Fairhurst, 2010), it is clear that Zara utilizes a one-way vertical fit to strategic human resource management (SHRM). This strategy, which is also known as the contingency approach, revolves around aligning human resource management systems or practices to the core business strategies of the organization (Krishnan & Singh, n.d.). Zara is undoubtedly one of the highly successful fashion retailers globally, implying that the company has been successful in linking its human resource practices to its core business strategies (Sull & Turconi, 2008).
Zara’s corporate strategy is pinned on the need to remain a global leader in the fashion industry by increasing its consecutive annual sales in fashion accessories by at least 20 per cent (Caro et al., 2010), thus its one-way vertical fit SHRM seeks to facilitate how precisely to manage human resources to achieve its set business objectives and growth levels. Consequently, Zara’s specific HRM functions, such as employee recruitment and selection, on-the-job training, reward/recognition, employee orientation, and learning and development policies, are intrinsically tailor-made to achieve and sustain the set company objectives (Caro et al., 2010; Bhardwaj & Fairhurst, 2010).
Bamberger and Meshoulam’s integrative model can be used to demonstrate how Zara’s one-way fit to SHRM works. Arguing that neither a control-based model nor a resource-based model can include the ebb and flow of the intensity and bearing of HR strategy, the two organizational theorists developed a model that typifies the two core elements of HR strategy as involving ‘acquisition and development’ and the ‘locus of control’ (Bratton & Gold, 2001). Under ‘acquisition and development,’ it is indeed true that Zara develops its human capital through internal mechanisms, which include on-the-job training for employees and high investment in training for managers (Zara, 2011).
Zara, however, utilizes the external labour market to ‘buy’ new employees, particularly those in lower cadres. Under the ‘locus of control,’ Zara’s HR strategy stresses the establishment of a psychological contract that cultivates corroboration, teamwork, mutual trust and respect, not mentioning the fact that this strategy controls the focus on the company’s set objectives (Bratton & Gold, 2001). Consequently, it can be argued that Zara utilizes the high commitment HR strategy which intrinsically focuses on the internal development of the workers’ competencies in the fashion industry and outcome control.
From the above observation, it is evident that Zara’s one-way vertical fit to SHRM borrows heavily from the commitment typology of human resource management, whereby the main objective is to maximize employee effort as opposed to maximizing individual performance (Perdomo-Ortiz et al., 2009). According to Moshulder et al (2011), commitment systems to HRM places value on “…employee well-being and employees are assumed capable and intrinsically motivated…
Psychological links are forged between the organization and employees, minimizing the need for extensive control mechanisms and giving employees discretion to act in ways favourable to the collective” (p. 2010). At Zara, the hiring and selection process is done based on employee talents and adaptability to the various retail outlets, while performance assessment is oriented towards control and development. Also, training for Zara employees is geared towards achieving technical, cultural and inter-functional competencies, while a delegation of duties is broad-based and participative (Moshulder et al., 2011).
Zara also borrows from several strategies to sustain and progress its one-way vertical fit to SHRM. First, Zara’s management has chosen a competitive business strategy of differentiation through fashion innovation (Sull & Turconi, 2008), implying that the company’s human resources must be highly creative and can nurture cooperative behaviour. Purcell (2005) observes that in theory, Zara’s human resource approach “…would, therefore, need to emphasize highly skilled individuals, giving employees more discretion, using minimal controls, making a greater investment in human resources, providing more resources for experimentation and appraising performance for its long-run implication” (p. 3).
Second, Zara actively attempts to align its HRM practices to selected corporate competitive strategies, which includes innovation, creativity, quality improvement, and effective cost reduction approaches (Krishnan & Singh, n.d.). Here, the Resource-Based View (RBV) is used to lay focus on Zara’s internal resources (human capital) and how best they could be utilized to contribute to the company’s competitiveness. Consequently, the impetus is given for hard work, free-thinking, employee benefits, and long-term performance appraisal system.
Third, it is clear that Zara’s one-way vertical fit approach borrows heavily from Deming’s model of work integration and people development. One of the renowned gurus of total quality management, Deming argued that any human resource approach must revolve around the precincts of training, teamwork and motivation. In Training, an effective approach to strategic HRM must not only establish on-the-job training for employees but must also establish programs for education and self-development. In teamwork, the HRM approach must be effective in eliminating barriers between departments and also between individual employees. In motivation, the HRM approach must banish fear of responsibility as well as foster pride in work (Perdomo-Ortiz et al., 2009).
The case for Introducing Change at Zara: Employees’ Alignment
Although Zara remains a global market leader in the fashion industry, it has been facing declining employee engagement and motivation, not mentioning the fact that retention of key talent has of late proved a difficult objective to attain for Zara, especially in its international retail outlets (Caro et al, 2010). The company has been undertaking continuous changes as it continues to adapt its activities to the ever-changing business environment.
The fast rate at which these shifts are being experienced by the company, however, has continuously altered employee responsibilities and disillusioned them from knowing or understanding the company’s objectives, values and culture, and their role in achieving them. After careful analysis, the change agent realized that the current techniques used by the company to align employees to the values, culture and business strategies of the company are no longer effective due to various factors, including changing economic realities, shifting employee demands, technology advancements, and shifts in workforce demographics. Change of the strategies used to align employees to business strategies, value and culture is therefore needed to curtail the noted decline in employee engagement and motivation, and also curtail the loss of key talent.
Academics and practitioners have often suggested that HR departments should function as agents of organizational change and transformation (Alfers et al., 2010). As such, it should be the function of Zara’s HR department to develop a comprehensive HR implementation plan that will effectively deal with issues of employee alignment and identification with the company’s values, culture and operational strategies. Stakeholders in the change process are at liberty to employ change management tools to make the whole process more effective and assess the implications of the planned change (Bratton & Gold, 2001).
This particular HR plan uses the TROPICS Test as “…an early warning device to assess both the impact and magnitude of the impending change” (Paton & McCalman, 2000 p. 23). More importantly, this tool can determine the optimal route forward for engaging the change process, not mentioning that it requires a minimum expenditure of management time and resources. It is imperative to note that the TROPICS Test takes into consideration several factors, which include time scales, resources, objectives, perceptions, interest, control, and source (Paton & McCalman, 2000).
Under the TROPIC Test framework, the time-scale needed to implement the stated change will require a mechanistic solution since the key objectives (enhancement of employee alignment with organizational strategies, values and culture to curtail continuous alterations of employee responsibilities, stem declining employee engagement and motivation, and promote retention of key talent) are clearly defined and achievable in the range of short to medium term. Time scales should be decided upon after establishing the main challenges that are affecting employees and preventing them from effectively aligning with the company’s culture and broader objectives (Purcell, 2005). Because Zara operates in multiple countries, such challenges may emanate from language and cultural barriers as well as information coordination challenges
Moving on with the TROPICS Test, the resources needed to implement the needed change are clearly defined and reasonably fixed, thus the change process should utilize a hard solution methodology (Paton & McCalman, 2000). Here, financial resources, time, and knowledge will be needed to retrain Zara’s employees, particularly on the challenges within the micro and macro environment, and the values and culture espoused by the company in the light of recent developments such as intense competition and shifting workforce trends.
The set objective of the change process is rather subjective and visionary since it deals with altering the behaviours of employees to achieve alignment, thus it requires a soft solution methodology according to the framework of the TROPICS Test (Paton & McCalman, 2000). Although the interests of the stakeholders in the change process may be limited and well-defined, thus requiring a hard solution methodology under the TROPICS Test scope, the perceptions by employees and some managers of Zara Fashion Retailer may be widespread and ill-defined, especially after the realization that the intended change target employee behaviours. This certainly requires a soft solution methodology.
To elicit the needed change in behaviours, therefore, Zara’s human resource department, in conjunction with the management, should explicitly define required work behaviours, values and attitudes, evaluate the industry’s best practices, and develop supporting HRM practices. Here, various behavioural theories used in HRM, including Maslow’s hierarchy of needs and McGregor’s Theory X and Theory Y, should be used to evaluate how the employees perceive their needs, how the needs affect alignment behaviour and the modalities that the company can employ to satisfactorily ensure that it meets employee needs according to current trends (Purcell, 2005). Such modalities may include the introduction of flexitimes, compressed workweeks, and remote working. According to Benn & Baker (2009), work-life balance perks have been positively correlated to improved employee performance and enhanced alignment with the company’s business objectives.
In drawing the needed theoretical strength needed to elicit the required alignment, the HR plan will borrow from the human capital model as well as Delery & Doty (1996) universalistic theoretical perspective (Kaufman & Miller, 2011). The two perspectives should be harmonized with the commitment model to HRM that is already in use at Zara. Through the human capital model, the plan should aim to introduce HR practices and business strategies that aim to not only enhance employees’ knowledge, expertise and abilities, but also empower and motivate them to act through decentralized decision-making platforms (Kaufman & Miller, 2011).
This, therefore, implies that Zara has to do away with its centralized decision-making process for a more distributed system of sharing information. According to the universalistic model of HRM, “…there are certain best practices that are always a profitable choice because they universally improve organizational performance” (Kaufman & Miller, 2011 p. 531). In this regard, Zara needs to introduce the stated work-life balance perks to its human resource strategy to ensure that employees become more aligned with the values and the business strategy of the company.
Having done that, the last step in the plan would be to implement the plan to initiate the change process. Here it is important to note that resistance to the change process may be experienced either from the senior management, who may feel that a decentralized decision-making system will take away some of their powers or the change process will drain away critical financial resources in-terms of employee retraining and strategy shifts or from employees, who may develop cold feet in changing the ‘status quo.’ Under the TROPIC Test paradigm, the control process should be within the managing group to better deal with such challenges. According to Purcell (2005), such hurdles may be controlled effectively by maintaining an open-door policy throughout the change process to disseminate information where it might be needed, and by involving employees in the change process.
Conclusion
From the discussion, it is clear that Zara Fashion Retailer is currently at the top of its game, but change for the fashion retailer is ultimately inevitable due to current shifts in the micro as well as macro environments. The company has indeed done well in linking its business strategies to core human resource practices through the use of such models as a competitive business strategy of differentiation through fashion innovation, integrative model, Deming’s model of work integration and people development, and commitment model to HRM, the drivers of change arising from the internal as well as the internal factors demand a rethinking and reformulation of the business strategy and HR practices to effectively align its members of staff to the company’s culture, business objectives, and values in addition to ensuring that employees remain motivated and committed to the company’s objectives across all of its retail outlets.
A quick review of the external and internal drivers that are currently informing the case for Zara to initiate a new change process reveals that inter-country socio-cultural factors are increasingly affecting the productivity of workers, while countries continue to establish new legal frameworks that may in the long-term be counterproductive for Zara. These challenges are further complicated by the continuously shifting economic trends, ever-changing workforce composition as well as the emergence of newer and more efficient technologies.
Although this report has exposed many areas within Zara’s business and human resource strategies that needs redirection and reformulation to maintain profitability and competitive advantage, it has specifically dealt with how the fashion retailer can formulate an HR plan that will effectively manage its large pool of personnel based in different locations around the world, and to bring them to understand and spearhead the company’s values, culture and operational strategies in the face of intense competition and shifting workforce demographics.
In a spirited effort to come up with a viable human resource implementation plan aimed at achieving the above change initiative, this report uses the TROPICS Test, and also borrows concepts from the Maslow’s hierarchy of needs model, McGregor’s Theory X and Theory Y, Human Capital Model, and the Universalistic Theoretical framework. These models have been used to provide frameworks through which the company can effectively be able to know the needs, values and expectations of its employees, and how these needs affect employee alignment behaviour. It is also imperative to note that both the Human Capital Model and the Universalistic Theoretical Model have been used to expand on ways through which employees’ knowledge, expertise, abilities, empowerment and motivation can be further enhanced for proper alignment. The HR plan certainly represents a new frontier of growth and prosperity for Zara if it is implemented effectively.
Recommendations
The current human resource methodologies used by Zara has enabled the company to remain competitive from both the business standpoint and the human resource function. The shifting business environment, however, calls for a new approach to strategic human resource management for the future. One of the weak links for the company has always been to strategize on how to effectively manage its personnel based in diverse locations around the world as well as aligning the personnel to the company’s values, culture and business objectives to maintain profitability and competitive advantage.
This report, therefore, recommends an HR approach that will avail bi-annual training for employees in the various work stations to instil in them the company’s values, culture and expectations. The company can either engage internationally renowned human resource consultants or train hand-picked internal human resource managers to train employees on a continued basis apart from overly relying on the training offered to employees during the initial orientation week. The success of this recommendation will be measured against employee performance and level of alignment and identification to the company’s values after undergoing training to evaluate the impact.
Second, this report recommends that employees be given more say in decision-making processes by decentralizing the process and providing a framework through which a distributed system of sharing information is availed to employees. According to Purcell (2005), empowered employees are more likely to identify and align with an organization’s values, culture and expectations despite limitations of physical proximity or financial incentives. The human resource department in conjunction with senior administration management should take charge of the decentralization process, and outcomes should be measured against how fast employees can get important company information as well as their level of alignment.
Lastly, the company should consider introducing some work-life programs such as flexitime and compressed week to enhance employee alignment. Again, HR managers and senior management should take charge of the process, and outcomes should be measured against such variables as employee motivation and commitment to the company.
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