Uploaded by H fluss

Lululemon Leadership, Culture & Transition Presentation Notes

advertisement
Leadership, Culture,
and
Transition
at
Lululemon
Presentation Notes
Academic Year 2018-2019
Leading Organizations - Pr. Frédéric Godart
This study source was downloaded by 100000895633152 from CourseHero.com on 01-21-2025 14:56:44 GMT -06:00
https://www.coursehero.com/file/78519260/Lululemon-Reportdocx/
Introduction & Background
The case examines leadership and organizational change within a strong
culture context through a multimedia study of lululemon, a specialty retailer
of high-end athletic apparel. Video segments trace the company's history
from its founding in 1998 as a single retail store in Vancouver, Canada,
through its IPO and expansion across Canada and the United States. The
case is set at a crossroads for the company, as incoming CEO Christine Day
prepares to take the helm in mid 2008. At that time, lululemon was publicly
traded $350 million company with close to 100 stores, including 56 in the
United States, and nearly 3,000 employees. the mission from the board was
to continue the company's growth trajectory by opening more stores and,
ultimately, increasing sales to $1 billion. Among the challenges that Day
would inherit were outperforming stores. According to Day, mismanagement
of the real estate strategy had resulted in high-cost locations in many new
U.S. markets with little to no demand. Lululemon was struggling to
implement new inventory systems to keep pace with the demands of its
expanding marketplace. Day also observed that cross-functional barriers had
eroded the sense of teamwork within what was originally a strong values-led
organization, resulting in an inability to achieve compromise. "The whole
organization slowed down." said Day, "because people weren't aligned.
"Leadership,
Culture,
and
Transition
at
Lululemon"
highlights
the
fundamental tensions that entrepreneurial companies and their leaders face
when going to scale: balancing rapid growth and the need to leverage their
organization architecture (and associated cultures) as the firm evolves.
This study source was downloaded by 100000895633152 from CourseHero.com on 01-21-2025 14:56:44 GMT -06:00
https://www.coursehero.com/file/78519260/Lululemon-Reportdocx/
1
Lululemon’s Leardership:
1. How well does Lululemon’s organizational structure support its
business strategy? What mechanisms of horizontal linkage and
alignment are in place at Lululemon?
Lululemon organization structure:
In terms of organizational structure, Lululemon is highly vertically integrated.
In the case, a vertical integration process means that, from the development
of fabrics, the production of the garments, the distribution, the display of the
shops, to the education of guests on the technical feathers, Lululemon
integrates all the processes into its own organization. Such structure offers
the following unique advantages. First of all, Lululemon has strong control
over the entire process from development to retail. Secondly, it cultivates
deep knowledge into the products and strong expertise into training the
sales people on how to educate guests about their products. Furthermore,
company culture and values are more united under a vertical structure.
Lululemon Business Strategy:
Lululemon has a premium and unique brand positioning. Compared to
hardcore sportswear brands such as Nike or Underarmour, Lululemon has
more local adaptability and emotional connections with clients. Compared to
soft brands such Victoria’s secret or J-crew, Lululemon has deeper product
knowledge
and
more
technical
strength.
Lululemon has a unique sales approach. The staff training is skilled-based.
The salespeople only educate the guests on the technical features of the
products. After that, the salespeople leave the guests without further
pushing
clients
to
make
purchases.
Lululemon has strong emphasis on the feedback loop. They cooperate with
professional yoga coaches to be their brand ambassadors and enhance
This study source was downloaded by 100000895633152 from CourseHero.com on 01-21-2025 14:56:44 GMT -06:00
https://www.coursehero.com/file/78519260/Lululemon-Reportdocx/
2
reputation
by
word
of
mouth.
Lululemon has strong focus on the quality and function of products. In
addition to that, they also care about femininity and fashion of the design.
Lululemon has great expansion during 2007 and 2008. They opened 31 new
shops
in
2007
and
37
new
shops
in
2008.
They hire local people to adapt the business into the local preferences. Each
manager
has
autonomy
to
manage
the
shop
in
the
local
way.
Lululemon manifesto communicates its cultures and values to the team and
external
parties.
Lululemon’s organization structure well supports the business strategy. But
there was a drastic shift when Bob Meers took into power as he recruited 6-7
people into upper management. Bob’s team was very efficient in improving
supply chain infrastructure but they were not able to fit in the Lululemon
culture.
Horizontal linkage:
In terms of the information linking, it is horizontal among different functions
of Lululemon. Every team member works on the floor at one time per week.
They arrange weekly meeting and operations meetings where they say what
they learn this week. The designers travel to different shops and directly got
feedback from sales/educators. They organize monthly cross-function calls
to talk about what is working and what is not working.
Alignment:
Lululemon has strong emphasis in staff training. In 2008, lululemon invested
$3.76 million in training employees. New hires at lululemon participate in
training programs ranging from 40 hours to a full month. While skills-based
training is an essential part of the program, the emphasis falls on teaching
personal accountability, helping employees set goals, and inculcating them
in
the
company
culture.
When employees reach one year of service, lululemon sponsors their
attendance at a three-day session offered by Landmark Education, a
personal training and development company connected to Werner Erhard,
who founded the est phenomenon in the 1970’s. After three years of service,
This study source was downloaded by 100000895633152 from CourseHero.com on 01-21-2025 14:56:44 GMT -06:00
https://www.coursehero.com/file/78519260/Lululemon-Reportdocx/
3
employees are given the opportunity to attend an advanced Landmark
program.
Store managers’ compensation includes 20% payment at risk to encourage
store managers to manage their sales, expenses and labor. There is no cap
on
the
bonus
above
the
target
sales
volume.
Managers have high autonomy to manage their shops to adapt the business
to the local market.
2. How do you describe Lululemon’s culture in terms of its
artifacts, espoused values, and underlying assumptions? How
well is Lululemon able to maintain its unique culture while
growing rapidly?
3. How centralized is the leadership at Lululemon? What power
struggles among the top leadership team do you anticipate?
Lululemon’s leadership witnessed many changes over the years. When Chip,
the founder was CEO, he promoted the culture of the company emphasizing
the personal lifestyle over the growth and finance.
highly
decentralized
communicated
and
managers
through
and
an
The organization was
lower
informal
level
employees
network.
However, as pressure was put on Lululemon to scale up, it has been
considered that a CEO with more experience would help the company to
follow that direction. That is why, in 2005, Bob Meers, former CEO of Reebok,
has
been
appointed
recommendation.
Bob
by
had
the
board
therefore
of
directors
strong
power
following
Chip’s
throughout
the
organization thanks to his charisma convincing the board he was a good fit
for Lululemon (even though his incentives were clearly questionable: “never
reached high level of revenues”, “power as a driver”), his status and
reputation as a great initiator with plans in mind and promises for which he
will do everything to keep and his former position at Reebok. Additionally, he
created around him a network where he could become the unique
information broker of the company through the recrutement of 6-7
experienced people directly to the upper management and implementing
new layers of infrastructure and control. As a result, the organization became
highly centralized around Bob (seen as “one person with all answers”) and all
upper management reported directly (and only) to him making difficult cross-
This study source was downloaded by 100000895633152 from CourseHero.com on 01-21-2025 14:56:44 GMT -06:00
https://www.coursehero.com/file/78519260/Lululemon-Reportdocx/
4
functional work and finally, increasing tensions. From the point of view of
lower level managers, the decision power was taken away from them by
“outsiders” and a feeling of disempowerment and uselessness was growing.
Such sentiments as well as the questioning of the suitability of such a
hierarchy
led
to
the
designation
of
a
new
CEO:
Christine
Day.
Christine promoted a come back to the culture of Lululemon thus appointing
former
managers
in
the
upper
management
of
the
company.
The
organization became much flatter with a few levels of hierarchy. The
decision-making authority was given to the store managers who are the
interface with the customers. Such a strategic position gave them the
knowledge of their own market and thus they were considered as “knowing
better what is best”. They role became then more entrepreneurial
(“entrepreneurial store manager”) managing their own marketing, budget
and local ambassadors. However, such autonomy was given with the
underlying responsibilities and accountability reflected in the compensation
structure and leading to an escalation of commitment. Such a management
system was highly appreciated by the employees and Christine gained their
trust quickly. As a woman, mother and athlete, she was even seen as a role
model for some. Further, her reputation and knowledge as a former manager
at Starbucks
provided her great status and legitimacy in Lululemon’s
organization.
Even though everything seem to be rosy at this time, some power struggles
could arise due to many factors. First, Chip, as the founder of Lululemon,
could see his position as a cultural leader (and the power that comes with it)
taken away by Christine. Indeed, Christine seem to be appreciated by
everyone (employees and board of directors) and integrates perfectly the
authentic culture of Lululemon. As a new beloved leader entered the place,
Chip’s position could be perceived as obsolete and jealousy might arise.
Further, Chip’s recommendation on appointing Bob Meers as a CEO could be
badly perceived: Bob indeed failed as a Reebok’s CEO (which was strangely
valued by Chip) and had the wrong incentives. As a result, Chip’s credibility
and usefulness could be questioned by the board of directors. Second, even
though Christine seem to be appreciated, managers still see her as
outsiders? Wallstreet stuff by Eric
This study source was downloaded by 100000895633152 from CourseHero.com on 01-21-2025 14:56:44 GMT -06:00
https://www.coursehero.com/file/78519260/Lululemon-Reportdocx/
5
2) At the beginning of 2014, the company’s stock price plummeted
dramatically. Several events contributed to this outcome, including
an earlier product recall, a misguided campaign to contain the
fallout
from
the
crisis,
and
turnover
in
the
company
top
management team. Do a brief online inquiry to find out exactly what
happened.
This started with the company making a massive recall of its black yoga
pants, which became see-through during certain workouts. The recall
affected almost one in five pairs of its pants, and the debacle triggered a
shareholder lawsuit. After multiple missteps in handling the problem led to
the resignation of former CEO Christine Day and landed founder Chip Wilson
in hot water for blaming the problem on the body shapes of some of its
customers, Lululemon sought to restore its name, with new CEO working to
refocus the company on creating innovative products again.
a.
Based on what you know about Lululemon's structure, culture,
and power dynamics from the multimedia case, how well would you
say the company was prepared to deal with that crisis? What were
its main strengths and weaknesses when confronted with such
events?
Structure:
Unfortunately, the yoga pant which was recalled (made up of fabric Luon)
was one of the major differentiating factors of Lululemon’s products and was
supplied by a single manufacturer in Taiwan. Lululemon was aware of this
risk of just one source for the raw material. It was also mentioned in the
2012 annual statement of Lululemon. The supply chain dynamics led to an
unprepared event and safety stock. After the recall in 2013, the company
had to face the problem of a large lead time for inventory replenishment,
thus incurring loss in sales. Despite this major crisis, the CEO Christine Day
focused positively on improving the organizational hierarchy to improve the
already existing feedback mechanism from multiple stores to come up with a
new product which would solve the existing problems.
Culture:
This study source was downloaded by 100000895633152 from CourseHero.com on 01-21-2025 14:56:44 GMT -06:00
https://www.coursehero.com/file/78519260/Lululemon-Reportdocx/
6
Lululemon was a very strong brand and it had loyal retentive customers. The
value which they had created for their ‘guest’ was the primary reason that
the company could make a smooth transition from the crisis situation. Their
past habits of ‘educating the customers’, ‘mandatory shop floor experience
for all employees’, and ‘huge focus on training employees’ enabled them to
cope up with future challenges and thus they could use their strong culture
to come out of the crisis. This kind of culture was inculcated in everyone by
Christine Day. The company used to consider her a role model, a leader, and
a game (culture) changer. Hence, after her departure and the appointment of
Laurent Potdevin, there is little uncertainty about the compatibility between
the company and management.
Power:
The power of the founder played an important role here. Even after the
senior management decided to remove Chip Wilson, the founder, from the
Board in 2013, he still held more than one-fourth of the company’s shares.
This gave him the power to interfere in few decisions, making the strategy
execution part of the board difficult. This was evident when the CEO Christine
Day finally took the decision to resign in June 2013. She still had the back-up
support of the board and a chance to remain the CEO. Chip Wilson doesn’t
consider Lululemon as a billion-dollar brand and continues to operate/take
decisions considering the company a start-up. His presence risks a continued
tarnishing of Lululemon’s corporate identity.
Key Strengths:
·
Unique patented fabrics
·
Salespeople with strong technical understanding of the cloth material
·
Support from yoga/athletics community – Yoga teachers as brand
ambassadors
·
Insist on quality rather than low price
·
Strong brand identity and value
Weaknesses:
·
Raw material supply chain department
·
Less control over marketing strategies
·
Public relations of the founder
·
Cultural dilution
This study source was downloaded by 100000895633152 from CourseHero.com on 01-21-2025 14:56:44 GMT -06:00
https://www.coursehero.com/file/78519260/Lululemon-Reportdocx/
7
Project Description
Recommendations
This study source was downloaded by 100000895633152 from CourseHero.com on 01-21-2025 14:56:44 GMT -06:00
https://www.coursehero.com/file/78519260/Lululemon-Reportdocx/
Powered by TCPDF (www.tcpdf.org)
8
Download