Essay on Organizational Diagnostic Models
Managing a business requires an integral approach based on the analysis and synthesis of relevant facts. Organizational management requires systems thinking which involves considering the organization in the context with its internal and external factors, inputs and outputs, etc. In order to identify a viable business strategy, it is reasonable to utilize a matching organization diagnosis model. The organization considered in this paper is Whole Foods Market, and the organization diagnosis model which most effectively matches the factors important for Whole Foods Market strategic development is the Nadler-Tushman congruence model. The purpose of this paper is to analyze the chosen company and its operations using is the Nadler-Tushman congruence model, to identify outputs of Whole Foods Market at three levels – individual, group and organizational, and to assess the congruence of the outputs.
- Congruence model and outputs
Nadler-Tushman congruence model belongs to the class of organizational diagnosis models which consider the organization in relationship to its environment. Congruence model views the organization as an open system which has its inputs and outputs, and is driven by the relevant external factors and internal factors. Congruence model takes into account the history of the organization, its current strategy and the influence of the environment. This model allows to assess the position of the organization and the processes taking place in the organization in the proper context.
One of the core advantages of congruence model is the fact that it can be applied for analyzing transformations and change in the organization. Nadler and Tushman identified three types of outputs: individual, group and organizational (Nadler & Tushman, 1980). At the organizational level, the company’s outputs are its products and services, the company’s performance and the extent to which the company manages to implement its goals. At the group level, the performance and the match between goals and achievements of different organizational groups can be considered (Nadler & Tushman, 1980). Groups are often divisions or branches of the organization. At the individual level, it is possible to consider different characteristics; in the context of this paper, the key jobs and the approaches to measuring the performance of these jobs will be considered.
- Whole Foods outputs
- Outputs at the organizational level
Whole Foods Market sells organic and natural products, so the company’s main outputs are the products offered at the stores as well as the sales of these products. The major products sold by Whole Foods Market are perishable goods. According to the company’s annual report, the selection of products at Whole Foods Market “includes, but is not limited to: produce and floral, grocery, meat, seafood, bakery, prepared foods and catering, coffee, tea, beer, wine, cheese, nutritional supplements, vitamins, body care, and lifestyle products including books, pet products, and household products” (Whole Foods Market, 2014a). The number of SKUs sold in the stores of Whole Foods Market is almost 21,000 (Whole Foods Market, 2014a). In 2013, the sales of perishable products constituted 66.2% of total sales, and the sales of non-perishable products accounted for the remaining 33.8% of sales (Whole Foods Market, 2014a). In particular, Whole Foods Market has a number of exclusive organic brands; the sales of these brands constituted 12% of total sales, and 16% of non-perishable sales (Whole Foods Market, 2014a).
The company’s sales in 2013 constituted almost $13 billion (Whole Foods Market, 2014a). Overall increase of sales in 2013 was 7%, which is in line with company’s growth during 2010-2013 period (Whole Foods Market, 2014a). In 2013, Whole Foods Market opened 26 new stores, acquired 6 stores and relocated 5 stores. The company expanded into 10 new areas in 2013. The company’s net income increased by 18.24% (Whole Foods Market, 2014a). The company’s dividends increased by 43%; however, stock prices of Whole Foods Market in 2013 were very volatile and this volatility might have a negative effect on the company’s performance (Whole Foods Market, 2014a).
As for the current financial performance of Whole Foods Market, it is also very beneficial: the company’s current ratio is 1.7, which means that Whole Foods Market has plenty of cash available (Yahoo Finance, 2014). The company’s profit margin is 4.14% and operating profit margin is 6.75% (Yahoo Finance, 2014). At the same time, the company’s debt to equity ratio is 1.54 (Yahoo Finance, 2014), which indicates that Whole Foods Market is pursuing an aggressive expansion strategy.
- Outputs at the group level
At the group level, Whole Foods Market is organized into National Offices and Regional Offices, which oversee the functioning of the store groups at state level and at country level for international locations. Functionally, the major group units in the structure of Whole Foods Market are stores. Most decisions which directly influence performance are performed at the store level: hiring, managing supplies, managing sales, etc. The teams (store teams in particular) are independent units in Whole Foods Market. Therefore, it is reasonable to consider the outputs at the store level.
The goals of stores are expressed in sales and sales growth and store size dynamics. In 2013, average weekly sales of stores reached $711,000; this value was by 6.9% higher compared to average store performance in 2012 (Whole Foods Market, 2014a). Average size of a Whole Foods Market store in 2013 was 38,000 sq. ft., which is the same as in previous years (Whole Foods Market, 2014a). Taking into account that Whole Foods Market is currently focusing on increasing sales and reducing costs (which means reducing store sizes, in particular), it is possible to state that in 2013 the performance at store level in Whole Foods Market was reasonably high.
- Outputs at the individual level
Individual outputs of Whole Foods Market will be considered from the point of view of an employee. There are various types of jobs at Whole Foods Market, which belong to the following directions: delivery of store products, team leadership, facility operations, facility leadership (Whole Foods Market, 2014b). In the individual context, the following five jobs might be considered: healthy eating specialist, produce team member working with sign maintenance, bakery team leader, prepared foods service team member and customer service specialist.
The responsibilities of healthy eating specialist include educating customers about healthy food, providing guest service, acting as a spokesperson, demonstrating healthy cooking examples at special events organized by the company, performing ordering of products for the store, stocking and merchandising them (Whole Foods Market, 2014b). Performance characteristics associated with this job are order delivery time, fulfillment of department time and supply margins, inventory level dynamics, inventory turnover and inventory balance.
Produce team members in Whole Foods Market have to perform signage of produce and floral products, taking care of sale signs, maintaining inventory of relevant equipment and supplies, operating produce equipment, auditing signs, assisting customers, etc (Whole Foods Market, 2014b). The most appropriate performance measures for this job are customer satisfaction pertaining to signs, signs accuracy and signs comprehensibility.
The responsibilities of a bakery team leader include setting team standards, scheduling and assigning duties for team members, supervising, participating in hiring and training of team members, managing inventory and labor, developing and maintaining store layout (Whole Foods Market, 2014b). In this case, key performance values are job satisfaction of team members, team turnover, scheduling efficiency, life-work balance of team members and customer satisfaction.
Team members of prepared foods service team have to maintain attractive displays of prepared foods, supporting the customers, packaging and weighing customer selections, making prepared foods (e.g. salads), tracking products and spoilage (Whole Foods Market, 2014b). In this context, key performance measures are speed of service, customer satisfaction, attractiveness of food layout, availability of goods and percentage of spoilage.
Customer service associates are responsible for assisting customers, maintaining customer responses, product recalls and customer communications, providing information to the customers, etc (Whole Foods Market, 2014b). The major performance measure for this job is customer satisfaction; speed of customer service and the level of customer awareness can also be considered as performance measures.
In general, Whole Foods Market added more than 5,600 new jobs in 2013 (Whole Foods Market, 2014a). The turnover within the company is estimated at 10%, which is considered quite low for a retailer (Whole Foods Market, 2014a). Furthermore, Whole Foods Market continues entering the list of 100 best companies to work for during the recent 16 years (Whole Foods Market, 2014a).
- Congruence of the outputs
The results of the analysis of organizational outputs show that Whole Foods Market is quickly expanding, both at due to organic growth and due to acquisitions. The company is actively investing into growing its store chain. At the same time, Whole Foods Market aims to optimize the costs by reducing store size, reducing losses due to product spoilage, etc. The company’s sales have increased at approximately the same rate as during the previous years. It is possible to state that Whole Foods Market effectively reaches its goals at the organizational level.
At the group level, the performance of Whole Foods Market is also high: store revenues continue increasing and new stores were opened at a record rate in 2013. Store sizes remained the same, so Whole Foods Market has yet to strive for the reduction in store size. At the individual level, Whole Foods Market offers a variety of jobs with different job responsibilities and performance characteristics. However, the turnover in the company is low and new job openings are being created. Hence, it is possible to state that Whole Foods Market manages to reach its goals at individual level, too.
The company manages to utilize its resources in an efficient way. However, Whole Foods Market is too focused on horizontal expansion: the company has a high level of debt despite its strong financial position. The level of adaptability within the company is moderate as Whole Foods Market is pursuing a direct model of growth through increasing its store network. Such business model is vulnerable to market changes, market saturation and the change of customer preferences. Hence, it is possible to recommend to Whole Foods Market to work on the optimization of its internal resources and to consider opportunities of vertical integration.
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