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Q: Growing Operational Management Structure for Growing Retail Organisation ( Answered,   0 Comments )
Subject: Growing Operational Management Structure for Growing Retail Organisation
Category: Business and Money > Consulting
Asked by: zylon-ga
List Price: $100.00
Posted: 15 Jun 2006 13:51 PDT
Expires: 15 Jul 2006 13:51 PDT
Question ID: 738499
Hello there
We are a national retailer in the UK hoping to grow from 25 Stores to
75 over a period of 3 years.
Currently we have Store Managers that report to Zone Managers, that
report the the board through an Operations Director. We dont want to
recruit externally and want to recruit through promotion from within.
What are the perfect amount of people to manage. And what is the best
structure to persue to achieve our objectives whilst keeping to a
minimum amount of management layers. And at the same time taking into
considerations that promotions to Zone Managers or Zone Managers to
above happen geographically randomly around the company with little or
no mobility availabile after the promotion. Hence the terriroys
growingly stubbornly unstructuredly often.
Thank you
Subject: Re: Growing Operational Management Structure for Growing Retail Organisation
Answered By: wonko-ga on 04 Jul 2006 10:24 PDT
My answer is based on my research into Wal-Mart's store operations
management structure and my personal experiences working in store
operations management for a regional grocery retailer that was about
the size that you hope to become (67 stores) covering an area about
the size of England.  By looking at both Wal-Mart's and Big Bear's
structures, it is clear that for the number of stores you are
considering, you are unlikely to need to add any additional layers of
management.  The question is more likely to be how many Zones and Zone
Managers are needed in order to provide adequate supervision of the

It is apparent from my research and my own experiences that two
factors essentially determine "the perfect amount of people to manage"
when it comes to store operations management.  There is no generically
applicable "perfect number."  The number is specific to each
situation.  In my view, it is determined by how centralized the firm
wants to be in its operational philosophy and how geographically dense
its store locations are.  If store managers are permitted a great deal
of autonomy, then less managerial oversight is needed.  Furthermore,
it is clearly more desirable to have operations management personnel
in stores than it is to have them driving in their cars between

At Big Bear Stores, we had a very flat organizational structure.  67
store managers were each assigned to one of four Districts headed by a
District Manager.  The four District Managers reported to a Vice
President of Store Operations.  The structure was entirely dictated by
geographical concerns.  The District Managers simply could not have
visited all the stores at reasonable intervals have there been fewer
District Managers.  The company had a dense presence in Columbus,
Ohio, and stores extended throughout Central Ohio and West Virginia. 
The stores in Columbus were divided into four quadrants, each attached
to a District.  The remaining stores closest to each quadrant were
assigned to that district as well.

Approximately 17 stores were assigned to each District Manager.  This
worked acceptably for two reasons.  First, the company had opted for a
decentralized store operations model.  Store managers were given
considerable discretion regarding how their stores were run.  This was
possible in part because the stores were not unionized, which allowed
store management personnel a great deal of flexibility to run their
stores since there were no union-imposed work rules to be followed. 
The geographic concentration in and around Columbus also permitted
District Managers to be reasonably efficient in terms of the amount of
time spent in stores versus traveling between stores.  However, there
were some far-flung locations in some of the Districts, which did
require a great deal of time to reach.  This was particularly true for
the District Manager who oversaw stores in West Virginia as well as
Ohio.  After I spent a week with him on his rounds, I was convinced we
would have to split his territory in two if he ever retired because I
could not imagine anyone else who would want to drive as much as he

Information I located regarding Wal-Mart store operations management
structure suggests they have been struggling to reach a balance
between a highly centralized store operations model and a more
decentralized one.  As Sam Walton himself noted, as Wal-Mart got
larger, there was a tendency for a highly centralized structure to
become more appealing.  As of 2003, it appears that Wal-Mart had
established a highly centralized model.  35 Wal-Mart regions were each
overseen by a Regional Vice President who was based at the corporate
headquarters and spent three weeks per month in his or her region. 
Each region was divided into 11 districts, each run by a District
Manager living in the field.  Each district had six to eight stores. 
Given the large number of stores Wal-Mart has, though, this is still a
pretty flat structure.

A Wal-Mart employee indicated that beginning in February 2006,
District Managers would be replaced by Market Managers overseeing
12-20 stores instead of the 5-8 previously overseen by District
Managers.  Regional Vice Presidents would be moved from the
Bentonville headquarters into the field.  Finally, regions were to be
reorganized around more geographically logical boundaries, such as
entire states.  The previous model split states between multiple
regions.  Two reasons cited for this reorganization is to enable
greater customization of stores to match their communities and to
allow the operations management personnel in the field to devote more
time to store operations issues.

My personal view is provided that one is not operating in a highly
regulated environment, such as exists with a unionized workforce,
store managers will tend to be more successful if they are given a
large degree of control over their stores.  This suggests that the
next level of operations management personnel can effectively oversee
more like 12 to 20 stores instead of being limited to 5 to 8. 
However, consideration must be given to how long it will take the
operations management personnel to travel between the stores.  The
more travel required, the more difficult it will be to find good
people for the position.  In my experience, unless the individual
really enjoys driving long distances, it is the toughest part of the
job when the territory is large.  Travel time also consumes time that
could otherwise be spent in the stores.  Having adequate time to spend
in the stores, as well as those of competitors, is essential.

I admire your desire to promote from within as you expand.  I view the
ability to cultivate managers from within to be one of the critical
characteristics of successful enterprises, especially retailers.  A
firm that has to rely upon external hires for senior management
positions is failing in a significant area and is a demoralizing place
to work in my opinion.

Big Bear Stores had historically promoted from within almost to a
fault: most of the senior managers had risen from a start as low-level
store employees over lengthy careers with the company.  The downside
to this was that many were hostile to outside ideas and lacked college
educations that would have been beneficial as technology began to play
a bigger role in the business and new competitors, such as Wal-Mart,
entered the grocery business.  However, they knew their customers and
their business incredibly well because of their lifelong experience.

Your existing store managers are the obvious candidates to become Zone
Managers.  You may find it less disruptive to them to promote them to
a Zone that is not too distant from their current store.  However,
typically in retail management, one simply must get used to being
uprooted and moved in order to be promoted.  I know a District Manager
for Wal-Mart who has been moved all over the United States as he has
risen through the ranks.  The other issue with promoting people to the
same Zone where their store was located or to a nearby Zone is that it
can make it more difficult for everyone.  The successor has to deal
with his predecessor, and other store managers who were peers are now
subordinates to the new Zone Manager.  Although, existing
relationships can also be valuable, I think that moving people around
to different Zones when they are promoted makes it more likely that
the company will remain innovative because ideas can be transferred.

It is important that personnel who are identified as having potential
for advancement receive appropriate preparation as well.  This could
include formal education opportunities, but also the opportunity to
spend time with peers in other Zones and more senior personnel to
become acquainted with the issues facing the company that extend
beyond the four walls of their stores.  Big Bear implemented a
management training program consisting of rotations to all of the
company's functional areas that was highly effective.

Although sadly Big Bear is no more, I do not believe the company's
store operations organizational structure and its decentralized focus
were to blame.  It was acquired by a financier with no retail
background who engaged in highly questionable accounting practices
that resulted in irrational procurement and merchandising decisions,
loaded the company with debt, and who attempted to install a highly
centralized model which hurt the company's customer service image and
angered store managers.

I hope my perspective has been useful to you.  I wish you the best of
luck in your expansion plans.




"Wal-Mart Structure" by Bobby Gerry, Wal-Mart Space (October 29, 2005)

"Organizational Structure and Firm Innovation in a Retail Chain" by
Chang & Harrington, Jr., Computational & Mathematical Organization
Theory (1998)

"Big Bear gone within 8 weeks, company decides"
Business First of Columbus (December 11, 2003)
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