9. huge damage for the entire company, so it is important to make sure that employees are satisfied and motivated to work efficiently.11 Firm Infrastructure Zara developed business model where speed and decentralized decision making was essential. This business practice, in turn, led to shorter lead times and introduction of more fashion styles. The implementation of the information and communications technology helped augment the business processes at Zara. At the heart of infrastructure is the IT technology. The organizational structure supports IT technology. The company’s CEO is Isla A.de T., the “head” of the company. Next to the CEO there are headquarters, which are responsible for coordinating the brands, HR, IT, transportation and real estate. Below the headquarters are “commercials”, which are organized into teams to analyze and interpret the sales figures for around 40 stores in a geographical area. Next to “commercials” are HR directors who are supporting the stores on all HR issues that were not linked to operations and who are organized by geographical area. Each Inditex brand has regional networks of DT, equivalent to regional managers and known internally as DTs, who are responsible for the operations and performance of 15 stores and have to evaluate how those stores are performing. Country managers are also expected to be proactive in social issues. Beside the central management above, each Inditex brand is managing independently, with its own network of stores, logistic centers and production facilities. 1211 Zara: managing stores for fast fashion12 Zara: managing stores for fast fashion 9
10. From Agency Theory view, describe the incentives structure for the store managersIn today’s world each company is trying to attract the best employees from the market that willgive their best to achieve a company’s goals. The most common problem that can occur is thepossibility that your employees can have lack of motivation to contribute enough. Whereemployer’s goals reach employees incentives? How the employer can motivate his employees inorder to achieve best results? There are plenty of methods that people invented to monitor thework of others and constantly control the process. It could be by direct supervision, cameras or itcould be also by reports regarding financial performance. Is it the best way to monitor the workof your employees all the time to insure yourself that the job is done? Many managers todaydecide that besides the salary, the workers should receive also a percentage of the sales or thewhole salary could be depending on their contribution in the company. Each individual hasdifferent way to measure his own contribution and the contribution of the people around him. Ifwe look at Zara’s store managers what will be their motive to work hard instead of shrinking?For Zara’s shareholders, CEO and etc, their goal is to increase the sales and profits. Workinghard raises the probability of making more sales, but the increased effort cost the store managersor salesperson from the other side. In order to provide that effort they have to receive somethingfor return which can be some kind of reward. Zara puts a lot of emphasize on its employees.Approximately 87% of them are at the stores and thanks to great communication they areinterrelated with the company’s headquarters, commercials and DT’s. Interesting thing is thatpeople from bottom (sales associates) can be promoted to store managers, and we can see alsothis on other levels as well.Let first start with the role of store managers. At each store, three product lines are managed bythree independent section managers, each with a team of sales people and cashiers. Eachmanager is in charge for women’s, men’s and children’s section. Woman’s manager is also theoverall manager of the store. Main characteristic that these managers have is autonomy. Theyfeel like entrepreneurs of the store as they have impact on orders for the store and this helps Zarato deal with different culture issues in various countries as they know local values. Thisautonomy is in fact a bonding, as store managers can govern the store. Zara’s philosophy isn’tjust monitoring employees to perform well, but also to have them satisfied with their job. So,sometimes we can see the situations when employees aren’t satisfied with the atmosphere andthen they have the possibility to be transferred to another store (bonding). In our case we treatedstore managers as agents and commercials and DT’s as principals due to the fact that storemanagers should meet the principal’s goals. To increase the productivity of the store and 10
11. increase sales the store manager has to increase the productivity of the all employees working atthe store. To manage all this responsibilities, the manger has to develop specific skills that willmeet the requirements. Store managers receive competitive salary and a bonus based on howwell they meet target sales. In order to perform well they need also to coordinate sales associates.As they are organized in teams there is an opportunity for shrinking, because of huge number ofemployees in an average store. One of the sale manager’s task is to monitor sales associates andensure work efficiency. In one way we see that incentives are aligned because of monitoringwhich occurs at each level: sales associates are monitored by store managers, store managers byDT’s and commercial and DT’s and commercials by headquarters. All their bonuses are affectedby overall sales, so all of them should have an incentive to put more effort. Another interestingfactor that we found is the risk that store managers face when they are ordering replenishments.They need to use their previous experience together with their ability to forecast new orders. Wesee the risk due to the fact that store managers aren’t aware how many units will be sold, whatwill be the bestseller and how many units are available in warehouse. For this reason Zaracreated incentive-intense payment model for store managers to motivate them to seek betterresults in their performance.
9. huge damage for the entire company, so it is important to make sure that employees are satisfied and motivated to work efficiently.11 Firm Infrastructure Zara developed business model where speed and decentralized decision making was essential. This business practice, in turn, led to shorter lead times and introduction of more fashion styles. The implementation of the information and communications technology helped augment the business processes at Zara. At the heart of infrastructure is the IT technology. The organizational structure supports IT technology. The company’s CEO is Isla A.de T., the “head” of the company. Next to the CEO there are headquarters, which are responsible for coordinating the brands, HR, IT, transportation and real estate. Below the headquarters are “commercials”, which are organized into teams to analyze and interpret the sales figures for around 40 stores in a geographical area. Next to “commercials” are HR directors who are supporting the stores on all HR issues that were not linked to operations and who are organized by geographical area. Each Inditex brand has regional networks of DT, equivalent to regional managers and known internally as DTs, who are responsible for the operations and performance of 15 stores and have to evaluate how those stores are performing. Country managers are also expected to be proactive in social issues. Beside the central management above, each Inditex brand is managing independently, with its own network of stores, logistic centers and production facilities. 1211 Zara: managing stores for fast fashion12 Zara: managing stores for fast fashion 910. From Agency Theory view, describe the incentives structure for the store managersIn today’s world each company is trying to attract the best employees from the market that willgive their best to achieve a company’s goals. The most common problem that can occur is thepossibility that your employees can have lack of motivation to contribute enough. Whereemployer’s goals reach employees incentives? How the employer can motivate his employees inorder to achieve best results? There are plenty of methods that people invented to monitor thework of others and constantly control the process. It could be by direct supervision, cameras or itcould be also by reports regarding financial performance. Is it the best way to monitor the workof your employees all the time to insure yourself that the job is done? Many managers todaydecide that besides the salary, the workers should receive also a percentage of the sales or thewhole salary could be depending on their contribution in the company. Each individual hasdifferent way to measure his own contribution and the contribution of the people around him. Ifwe look at Zara’s store managers what will be their motive to work hard instead of shrinking?For Zara’s shareholders, CEO and etc, their goal is to increase the sales and profits. Workinghard raises the probability of making more sales, but the increased effort cost the store managersor salesperson from the other side. In order to provide that effort they have to receive somethingfor return which can be some kind of reward. Zara puts a lot of emphasize on its employees.Approximately 87% of them are at the stores and thanks to great communication they areinterrelated with the company’s headquarters, commercials and DT’s. Interesting thing is thatpeople from bottom (sales associates) can be promoted to store managers, and we can see alsothis on other levels as well.Let first start with the role of store managers. At each store, three product lines are managed bythree independent section managers, each with a team of sales people and cashiers. Eachmanager is in charge for women’s, men’s and children’s section. Woman’s manager is also theoverall manager of the store. Main characteristic that these managers have is autonomy. Theyfeel like entrepreneurs of the store as they have impact on orders for the store and this helps Zarato deal with different culture issues in various countries as they know local values. Thisautonomy is in fact a bonding, as store managers can govern the store. Zara’s philosophy isn’tjust monitoring employees to perform well, but also to have them satisfied with their job. So,sometimes we can see the situations when employees aren’t satisfied with the atmosphere andthen they have the possibility to be transferred to another store (bonding). In our case we treatedstore managers as agents and commercials and DT’s as principals due to the fact that storemanagers should meet the principal’s goals. To increase the productivity of the store and 1011. increase sales the store manager has to increase the productivity of the all employees working atthe store. To manage all this responsibilities, the manger has to develop specific skills that willmeet the requirements. Store managers receive competitive salary and a bonus based on howwell they meet target sales. In order to perform well they need also to coordinate sales associates.As they are organized in teams there is an opportunity for shrinking, because of huge number ofemployees in an average store. One of the sale manager’s task is to monitor sales associates andensure work efficiency. In one way we see that incentives are aligned because of monitoringwhich occurs at each level: sales associates are monitored by store managers, store managers byDT’s and commercial and DT’s and commercials by headquarters. All their bonuses are affectedby overall sales, so all of them should have an incentive to put more effort. Another interestingfactor that we found is the risk that store managers face when they are ordering replenishments.They need to use their previous experience together with their ability to forecast new orders. Wesee the risk due to the fact that store managers aren’t aware how many units will be sold, whatwill be the bestseller and how many units are available in warehouse. For this reason Zaracreated incentive-intense payment model for store managers to motivate them to seek betterresults in their performance.
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9. huge damage for the entire company, so it is important to make sure that employees are satisfied and motivated to work efficiently.11 Firm Infrastructure Zara developed business model where speed and decentralized decision making was essential. This business practice, in turn, led to shorter lead times and introduction of more fashion styles. The implementation of the information and communications technology helped augment the business processes at Zara. At the heart of infrastructure is the IT technology. The organizational structure supports IT technology. The company’s CEO is Isla A.de T., the “head” of the company. Next to the CEO there are headquarters, which are responsible for coordinating the brands, HR, IT, transportation and real estate. Below the headquarters are “commercials”, which are organized into teams to analyze and interpret the sales figures for around 40 stores in a geographical area. Next to “commercials” are HR directors who are supporting the stores on all HR issues that were not linked to operations and who are organized by geographical area. Each Inditex brand has regional networks of DT, equivalent to regional managers and known internally as DTs, who are responsible for the operations and performance of 15 stores and have to evaluate how those stores are performing. Country managers are also expected to be proactive in social issues. Beside the central management above, each Inditex brand is managing independently, with its own network of stores, logistic centers and production facilities. 1211 Zara: managing stores for fast fashion12 Zara: managing stores for fast fashion 9
10. From Agency Theory view, describe the incentives structure for the store managersIn today’s world each company is trying to attract the best employees from the market that willgive their best to achieve a company’s goals. The most common problem that can occur is thepossibility that your employees can have lack of motivation to contribute enough. Whereemployer’s goals reach employees incentives? How the employer can motivate his employees inorder to achieve best results? There are plenty of methods that people invented to monitor thework of others and constantly control the process. It could be by direct supervision, cameras or itcould be also by reports regarding financial performance. Is it the best way to monitor the workof your employees all the time to insure yourself that the job is done? Many managers todaydecide that besides the salary, the workers should receive also a percentage of the sales or thewhole salary could be depending on their contribution in the company. Each individual hasdifferent way to measure his own contribution and the contribution of the people around him. Ifwe look at Zara’s store managers what will be their motive to work hard instead of shrinking?For Zara’s shareholders, CEO and etc, their goal is to increase the sales and profits. Workinghard raises the probability of making more sales, but the increased effort cost the store managersor salesperson from the other side. In order to provide that effort they have to receive somethingfor return which can be some kind of reward. Zara puts a lot of emphasize on its employees.Approximately 87% of them are at the stores and thanks to great communication they areinterrelated with the company’s headquarters, commercials and DT’s. Interesting thing is thatpeople from bottom (sales associates) can be promoted to store managers, and we can see alsothis on other levels as well.Let first start with the role of store managers. At each store, three product lines are managed bythree independent section managers, each with a team of sales people and cashiers. Eachmanager is in charge for women’s, men’s and children’s section. Woman’s manager is also theoverall manager of the store. Main characteristic that these managers have is autonomy. Theyfeel like entrepreneurs of the store as they have impact on orders for the store and this helps Zarato deal with different culture issues in various countries as they know local values. Thisautonomy is in fact a bonding, as store managers can govern the store. Zara’s philosophy isn’tjust monitoring employees to perform well, but also to have them satisfied with their job. So,sometimes we can see the situations when employees aren’t satisfied with the atmosphere andthen they have the possibility to be transferred to another store (bonding). In our case we treatedstore managers as agents and commercials and DT’s as principals due to the fact that storemanagers should meet the principal’s goals. To increase the productivity of the store and 10
11. increase sales the store manager has to increase the productivity of the all employees working atthe store. To manage all this responsibilities, the manger has to develop specific skills that willmeet the requirements. Store managers receive competitive salary and a bonus based on howwell they meet target sales. In order to perform well they need also to coordinate sales associates.As they are organized in teams there is an opportunity for shrinking, because of huge number ofemployees in an average store. One of the sale manager’s task is to monitor sales associates andensure work efficiency. In one way we see that incentives are aligned because of monitoringwhich occurs at each level: sales associates are monitored by store managers, store managers byDT’s and commercial and DT’s and commercials by headquarters. All their bonuses are affectedby overall sales, so all of them should have an incentive to put more effort. Another interestingfactor that we found is the risk that store managers face when they are ordering replenishments.They need to use their previous experience together with their ability to forecast new orders. Wesee the risk due to the fact that store managers aren’t aware how many units will be sold, whatwill be the bestseller and how many units are available in warehouse. For this reason Zaracreated incentive-intense payment model for store managers to motivate them to seek betterresults in their performance.
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