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H&M: Challenges Adapting to New Business Trends

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ABSTRACT

Hennes & Mauritz (H&M) is a Swedish multinational clothing-retail company that provides fashion clothing for men, women, teenagers and children. The H&M group reaches fashion fans across the globe and has come a long way since the first Hennes store opened in the Sweden in the year 1947 with its first expansion to a worldwide business started in 1960’s. In the 1980s, Hennes & Mauritz shook up the traditional clothes retailers. But now the company itself is being disrupted from cheaper products offered by other brands and other online shops like Amazon and Asos. This effect led to a decrease in the company’s revenue.

In this paper, I will be analyzing the H&M challenges that it is facing and how the 7 rules of leadership can help the business to solve this problem. While new technologies and globalization has increased uncertainty in current times, it is important to have leaders with diverse strength that can help to improve the company growth. The 7 rules of leadership: define your leadership style, summon the right people, build up trust, ensure clarity, create support and motivation, get feedback and finally, be alert for changes, can help leaders to create successful organizations.

INTRODUCTION

H&M parent Hennes & Mauritz AB, whose fast-fashion business strategy led to the disrupt of most fashion company years back. It started as a one stop store for women’s clothing in 1947 and later expanded to a global fashion and design group. The organization runs 4,500 physical outlets in 69 markets and intends to open 390 stores more. The organization makes most of its sales in Europe with Germany being its largest market. The business also has a strong online presence of all nine clearly defined brands which are H&M, COS, Monki, Weekday, & Other Stories, Cheap Monday, H&M Home, ARKET and Afound.

Each brand is headed by a manager and has local sales organizations. Centrally, there are a number of joint group functions that support each brand in order to enjoy the advantages of these common areas, so that each brand and country works purposefully according to central policies and guidelines. The board of directors appoints the chief executive officer. The CEO is responsible for day-to-day management of the H&M group and appoints the members of the executive management team, which is made up of the CEO and 10 other members.

The executive management team consists of the individuals responsible for different joint functions including finance, production, sustainability, expansion, communications, human resources, business development and logistics, as well as the person responsible for the H&M brand and the person responsible for new business ventures like the other brands COS, & Other Stories, Monki, Weekday, Cheap Monday, H&M Home and ARKET. Those responsible for other joint group functions are appointed by the chief financial officer.

Currently, the business itself its being disrupt by other competitors like Amazon and other online stores leading to a 13% drop in stock price in 2017. Most of the challenge comes from a decline in sales in its brick and mortar shops. Brick and mortar is a term use to refer to an organization having a physical presence or physical shops where they transact to customers face to face instead of online or virtual world. Most of the declined has been attributed to the migration of clothing sales to online and other brands surpassing them in the fast-fashion strategy at an affordable price.

Leadership of the organization

Leadership is the art of influence, it’s how to influence various people to work together to achieve the business vision, mission and strategic goals. For an organization to be successful, it relies mainly on the leadership because leadership defines the vision and mission than an organization hopes to achieve. A leader can create a successful organization by following the 7 golden rules of leadership. In this article we are going to evaluate how H&M has applied these rules to its business.

1. Define Your Leadership Style

Karl-Johan Persson is the current CEO of the H&M Group, where his leadership style is transactional leadership style. This leadership style is value oriented, whereby they live according to the values and guidelines that emit the H&M way which incorporates doing business ethically, honestly and responsibly. H&M follow a transactional leadership style whereby employees follow the guidelines and expectations set out by the organization’s leadership and the benefit of this is that it creates synergy within the H&M brand. It also encourages a very inclusive workplace that incorporates teamwork and growth for their employees which forms part of their organizational culture, it is evident that they focus on creating an organizational culture from the inside out, the downside to this is that they may not benefit from having innovative employees and can miss out of growth opportunities.

One of the problems with this style of leadership is that it is too rigid. Transactional leadership is defined by a strict set of rules and regulations and does not give room to bend or break these rules for any reason. With the world today being unpredictable and dynamic, this style of leadership is not advisable. To meet up with constant change in the business world, leaders need to be able to adjust and change the management style to suit the situation. Situation leadership approach allows leaders with different style of leadership to adjust and adapt to different situations.

2. Summon the Right People

An organization can not be successful without having competent people for the right position. To summon the right people, you first need to have the right people in your organization, to have the right people you need to hire the right persons and finally to hire the right people, you need to attract qualified candidates. Recruitment plays a major role in hiring the right person for the right job that provides the organization with a pool of qualified job candidates from which to choose. Before companies recruit, they must implement proper staffing plans and forecasting to determine how many people they will need. H&M recruitment process starts with job openings posted on its website, posting banners ad, the organization accepts applications at any time and at any of their locations or using their online portal. After initial screening, the shortlisted candidates are called for an interview for the final selection.

The problem with this type of recruitment is that it is not over seen by an expert. The leadership needs to invest in a proper HR agency that can handle all their recruitment processes. Managers are likely to hire based on pressure or hiring people who they feel please, have acquaintances with. This results to having a workforce with similar mindset. This style of recruitment does not encourage having a divergent workforce.

3. Build Up Trust

The company focuses on being ethical is about doing the right thing. This means respecting human rights, taking a clear stance against corruption and embracing diversity and inclusion. It also means, of course, to respect laws and regulations wherever we operate and to pay taxes accordingly. The organization leadership encourages mutual respect, integrity, transparency and honesty as the core of its’ corporate values. Transparency is key to building trust and credibility. Transparency means knowing who, how and where decisions are made. As such, it creates greater accountability for amongst employees, allowing them to pinpoint priorities, set better goals, take smarter actions and communicate confidently. These attribute makes employee trust their leaders because they know who is responsible for what and the leaders are honest and clear in their decision-making process.

H&M is committed to following all applicable labor and employment laws wherever they operate. The leaders lead by example, teamwork is essential at H&M and is part of the culture. The leaders act as role models and set a good example in everything they do.

4. Ensure the Clarity of Direction

Leaders must ensure clarity of direction and eliminate doubts that may hinder them from keeping their followers on track. How does H&M achieve this? The organization achieve this by setting a clear and concise goals and creating concrete benchmark. These goals are set by using a science-based approach.

A mission statement is a short statement of an organization’s purpose, identifying the goal of its operations: what kind of product or service it provides, its primary customers or market, and its geographical region of operation. The mission statement shows the employees where the organization stand and what it wants to achieve. The organization vision is to lead the change towards a circular and renewable fashion industry, while being a fair and equal company. This vision is applied to every brand within H&M group. It visions statement is centered around promote and scale innovation, driven transparency and rewarding of sustainable actions.

5. Create Support and Motivation

Motivation is a reason or reasons for acting or behaving in a particular way. Study has shown that even competent employees can underperform without the right and proper motivation. H&M as an organization is constantly evolving and is growing fast, thus providing more opportunities to its employees. H&M is a flat organization, that may give the impression that it is impossible to climb up the ladder. However, this is not true as one of the major ways through which H&M motivates its employees is through its provision of training and the fact that they promote from within. Through this, they are making use of the Expectancy Theory, where employees are motivated to exert a high level of effort since this will lead to development. This development is done through regular performance review sessions. From the employees’ point of view, it’s one of the things to look forward to. The awareness and possibilities that they can develop and earn any position they desire is a way the employees are encouraged by the Management team.

Also, employees are motivated by providing new challenges; in another department, another role or, another country. H&M encourages employees to try many different roles within their organization. H&M recruitment advertisements indicate possibilities like: working abroad, furthering education and learning new things. Their websites promote that many in management today, actually started on the shop floor. H&M also provides a comprehensive benefits package. H&M fulfills employee aspirations by providing opportunities to take more responsibilities. To quote the Head of HRM at H&M, “By the same token, if titles and pay structures are what motivates the employee, then we’re most definitely not the ideal company for you. As we said at the beginning: a perfect relationship is all about balance and mutual understanding” (AR1 2008, p.34).

6. Get Feedback and Monitor Result

H&M has an open-door policy granting all employees the right and the opportunity to discuss any work-related issue directly with management. They also support their employees’ right and ability to organize and to decide who should represent them in the workplace. These ideas are collected and reviewed by their internal controlling team. H&M creates workplaces in which open and honest communications among all colleagues are valued and respected. One of its core values is “being straightforward”. They use an Open-Door Policy which enables colleagues the opportunity to openly discuss any work-related issue directly with their managers

From my point of view, this is not effective. Yes, the organization encourages employees to come forward with their ideas and opinions, but in reality, most people do not say what they really want to say either because they fear their opinion will be out of the context or not be welcomed. H&M should look for a way to provide its employees with anonymity. Anonymity provides a way for employees to express themselves effectively without any fear or pressure thereby reducing bias.

7. Be Alert for Changes

One of the keys to be aware of change is to be market conscious. Market consciousness is being able to monitor trends, shift in market and developing new strategies to adopt into these changes. The main problem H&M is facing is adopting to change. They face challenges from other companies offers clothing at a cheaper price and from other online stores. The organization is trying to adopt to these new trends by using digital marketing, incorporating IT into its system and opening digital stores.

The reason H&M could not totally adjust was that it was too slow to incorporate digital forms of trading into its business. Despite the move of globalization, H&M’s still kept its strategy heavily focused on its store outlets. H&M only started selling online in 2010, a decade after ASOS appeared which means they missed the opportunity to spearhead a dive into ecommerce. When it eventually started making use of ecommerce, it still fails to make use to the opportunities and advantage that ecommerce provides. Some of the problems included the site not being properly designed, poor site navigation and very slow delivery compared to other brands.

Another reason is that the organization responds slowly to customers. Main source of revenue for all business are the customers. Hence it is important for organization to listen to customers complains and suggestion in other to satisfy them.

Conclusion

In conclusion, H&M have from their foundation in 1947 grown from a small Swedish clothing company to a big multinational company. H&M have been able to develop a strong and sustainable brand where the product is well adapted to the needs and wants of the customers. They have showed the market that fashionable is not overly expensive. This strategy attracts people from all fields of life.

In my opinion, H&M has successfully communicated their vision to their employees and created a strong workforce and gain the trust of employees, giving employee rewards and bonuses, all of which is very important in having a successful organization. H&M has balanced the needs of coordination, control and autonomy and maintained the appropriate balance between them. However, the leadership still have some improvements to do. They need to start listening to customers, incorporate IT in their business, learn to take risk and need to adjust their style of leadership in order to adjust timely to the ever-changing business environment and trends. Also, the leadership has to provide employees with anonymity which will enable employees to voice out their opinions without bias and invest in human resource management in order to have a divergent workforce and reduce recruitment bias and corruption.

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