Organizational Design & Management SeminarTMGT 4320

Dr. Oscar Plaza – Spring 2016

Final

Team Members:

Albino Coronado

Isnely Ballesteros

Azalia Barrera,

Pedro Diaz

Name of the Organization to study: Ross Stores Incorporated

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Table of Contents

Background……………………………………………………………………………2

Design Issue……………………………………………………………………………2

Analysis………………………………………………………………………………..7

Innovation and Technology…………………………………………………………..9

Recommendations…………………………………………………………………..14

Data Sources…………………………………………………………………………15

References……………………………………………………………………….…..16

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Background

Ross “Dress for less” is one of the leading off-price retailers in the United States. It

operates a chain of 400 Ross stores in 17 states. Even though Ross operates one of the largest

chains of its kind in the country, it reached this stature late in its corporate life. The chain

originated in 1957 and it was called the Ross junior department store. It stayed like this till 1982

when it was purchased by a group of investors that included Mervin Morris who is the founder of

Mervyn’s chains. During this time it comprised of only six units in the San Francisco Bay area.

During the next decade the chain grew significantly under the leadership of Stuart Moldaw and

Don Rowlett who converted the junior department stores to off-price retail units which were the

first of their kind in California. In the 21st century Ross stores offered brand and designer name

apparel, accessories, and footwear for the entire family and home accessories at 20% to 60%

percent below the prices charged by competing department stores and specialty shops. Of the

400 plus stores in the United States 167 are located in California, 62 in Texas and 53 in Florida.

We have focused on some of the local Ross stores in the Rio Grande Valley and view that many

have an organizational structure and design in their appearance inside the store. Many times

when we have visited some of the local stores there is usually a mess as per appearance and

unorganized structure within the appearance of the store.

Design Issue

We will be looking at the organizational design of the stores and how the correlation

among functionality and structure can be improved. The structure and layout seems disorganized

and even hazardous when you enter a store. Most stores that we have visited are either very

messy or lack direction. This lack of customer service and display disorganization does not seem

to help them generate more business, but if corrected could help bring in more business. The

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customer service issue may have been rectified by looking at the culture and strategic approaches

to fully assess the organizational effectiveness.

According to Ross Store’s websites, we are able to gather that their focus does include

human relations emphasis and rational goal emphasis as you will read below, but may lack in the

information-sharing structure to properly fit the immediate environment and culture. As we can

see from reading below, According to Ross Store’s website, their moral compass is pointing

toward the right direction but why are there still so many unsatisfied customers and negative

feedback from the company structure as a whole? Most of the following paragraphs are from the

Ross Store’s website.

Some of the best assets are the people who work in Ross Stores, distribution centers and

offices. By finding bargains and keeping costs low, their associates play an essential role in

delivering great value to our customers. We work hard to provide an environment where our

associates can grow, succeed and contribute to the communities where they live and work.

Investing in the communities where they operate is an important pillar of their corporate social

responsibility (CSR) program. Ross supports organizations that work in our communities, with

an emphasis on programs that help build academic achievement and life skills in the young

people who need us most. In 2013 Ross founded the Ross Stores Foundation to help us achieve

our philanthropic mission. The Ross Stores Foundation is a signal of our steady commitment to

investing in the communities where we operate.

Ross Stores like invest in brighter futures by supporting programs that unlock the full

potential of the next generation. With a goal of building competence, confidence and character in

the young people who need us most, Ross Stores, Inc. and the Ross Stores Foundation partner

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with organizations that work in our communities to build academic achievement and life skills.

We provide support through the engagement of our Associate-volunteers and charitable

contributions. Read more about our Store-Based Giving Guidelines and our Regional Giving

Guidelines.

With almost 1,300 stores across the country, efforts to be efficient and sustainable help us

reduce our impact on the environment and generate cost savings, which we pass on to our

customers. Our commitment to use less energy and fewer natural resources goes back more than

20 years, and we continue to improve our performance year after year. Our approach to lighting,

heating systems and insulation enables us to conserve energy throughout the Company.

Transporting products is a significant part of our environmental footprint. We work with our

partners to be more sustainable, consolidating shipments where possible and reducing the

number of trips to stores each day. Ross encourages to reduce waste by recycling which will

result in efficiency. Ethical business practices play a critical role in our corporate social

responsibility program. We aim to operate with high standards of integrity and transparency, and

adhere to several policies to ensure we meet these standards. We are dedicated to sourcing goods

and services from a diverse set of suppliers, and are continuously seeking ways to build and

reinforce long-lasting relationships. Our membership with the National Minority Supplier

Development Council (NMSDC) gives us the opportunity to continually increase partnerships

with minority-owned suppliers. Similarly, as a member of the Women’s Business Enterprise

National Council (WBENC), Ross is committed to supporting women-owned businesses.

At Ross Stores, ethical business practices are at the core of their culture and can be seen

every day in the way they treat all of their constituents, from customers and Associates to

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vendors and investors. This focus on ethical business practices is also reflected in Ross’ policy

that they will not knowingly purchase merchandise from any manufacturer involved in the use of

child, slave, prison or forced labor. The majority of the apparel, footwear, accessories and home-

related merchandise sold in their stores are purchased from suppliers after they have been

produced and imported to other retailers’ specifications.

Though Ross does not have direct control over the manufacturing processes for these

products, they will require suppliers to uphold their ethical standards, both contractually and

through enforcement. While Ross orders and imports some products directly through its

international buying agents, they represent the minority of merchandise sold in our stores. For

these items, they have additional requirements in place to monitor and enforce compliance. Ross’

standards and requirements related to sourcing and human rights are incorporated in various

Company documents, including Ross’ Code of Business Conduct and Ethics, Vendor

Compliance Manual, Purchase Orders, Vendor Indemnification Agreements, and Buying Agent

Agreements. Ross communicates its standards and requirements to vendors, buyers and overseas

buying agents during our purchasing processes.

Some of the disorganization stems from not using a strategic constituents approach and the

warehouse data that has to be exchanged and at such a rapid pace in order to keep abreast of

functional floor plans, current trends, and pricings. Some of the challenges Ross faces are:

A) Consolidating consistent & accurate inventory information across over 1,300 stores

B) Lack of visibility to errors in the business (floor plans, management policies, etc.)

C) Higher costs and time being lost to deliver newer merchandise (price discrepancies)

D) Current distribution is complex, it doesn’t scale, and difficult to manage

E) Non-standard approach requires coding paradigm and there is inconsistent error handling

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Some more issues that have arisen again and again can be better visualized by showing only

a few of the hundreds of negative issues that we came across. Here we provide 10 small portions

of some of those lengthy complaints:

1) “Employees are very rude and unprofessional. The store is very unorganized.”

2) “The store managers are so rude and advised me to not shop with them again. Believe me

I will never step foot in this business again. Very unprofessional. Need to reevaluate who

you have running your stores. Awful service.”

3) "Don't expect good customer service out here, you won't get it!"

4) “The waiting line was over 1 hour. What I could not understand, the store had 2 security

by the door just talking not helping customers. Talk to the manager, he said he had few

call offs, he was at the register. My view he should have been on the phone to get some

help. Poor management... poor service... store looked horrible.”

5) “They could do better with their training, and they could be more considerate of their

customer's feelings when they shop here. I foresee issues in their future if they don't

change their loss prevention tactics. I'm glad they're improving, but there is still a long

way to go.”

6) “The security maintained a very close perimeter around us the entire time we were there

which wasn't very long because they made my Wife so uncomfortable that we left

without making a purchase. I've noticed that it doesn't matter the race of their security

whether the security is Black, Caucasian, or Hispanic, they all do it, which tells me

they're trained to Racial Profile.”

7) “You don't disrespect your customer because your store is not run properly.”

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8) “The store is unkempt. The closing crew never completes their task and always leaves it

for the person who opens to do it, and be expected to have it finished by the end of their

shift. I will never work for Ross again.”

9) “The store in 56 St. and 137 Ave. in Miami is new, but is a mess, ugly, badly put

together, and the people that work there are so off and incredibly inexperienced.

Management is awful and customer service pretty bad. SHAME!”

10) “A rude manager. I called corporate headquarters 4 times. Corporate is as dysfunctional

as the store. I shopped there a lot and I'm not going to return.”

Analysis

Our team gathered the following and aforementioned information based off of the

following internal and external factors. The internal factors that affect Ross Stores are the ability

to have good leadership within the store itself. Having good leadership helps make sure that there

is a positive atmosphere and a good level of family friendliness. There should also be positive

communication between the employees in making sure that everyone is being taken care of and

attended to. Ross requires that its employees strive to provide a good work environment where

they can grow, succeed and contribute to the communities where they live and work. They also

have associates within the company that have to train before they start with the company. Other

internal factors are to make sure that the company is operating sustainably to help be responsible

citizens and to lower costs and enhance ability to deliver the value to our customers. They also

have to make sure that they are conducting ethical business practices in there stores to maintain

transparent and effective governance. One particular report we found with Ross was an internal

factor of auditing itself and assessing themselves of the effectiveness of internal control over

financial reporting, included in the accompanying “management’s annual report on internal

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control over financial reporting”. The company’s internal control over financial reports is done

under the supervision of principle executive and principal officers. This audit is submitted to

make sure of the reasonable assurance regarding the reliability of financial reporting and

preparation of financial statements.

The external elements of Ross stores “dress for less” are factors to competitors around

them. We went to a local Ross Store and as you can see above they need to know who their

competitors are and in this case moving to such a busy area they are aware of a high end store

like Beall’s which near them and also a small business stores that does sell the same things like

Ross but is much smaller. To the right of the store there was a Dollar General. In statement

released by the Ross Store Corporation it specified in 2015 that “As of 2015, we continue to face

ongoing uncertainty and volatility in the macro-economic and retail climates”. These are also

some of the external factors that Ross Stores have had to deal and they are cautious in their

outlook. There are other external factors that Ross has to worry about like outlet malls nearby

which can also take away a lot of business.

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Innovation & Technology

Ross Stores like to invest in brighter futures by supporting programs that unlock the full

potential of the next generation. With a goal of building competence, confidence and character in

the young people who need them most. Ross Stores, Inc. and the Ross Stores Foundation partner

with organizations that work in their communities to build academic achievement and life skills.

They provide support through the engagement of their Associate-volunteers and charitable

contributions.

With almost 1,300 stores across the country, efforts to be efficient and sustainable help them

reduce their impact on the environment and generate cost savings, which they pass on to their

customers. Their commitment to use less energy and fewer natural resources goes back more

than 20 years, and they continue to improve their performance year after year. Ross’s approach

to lighting, heating systems and insulation enables them to conserve energy throughout the

Company.

Transporting products is a significant part of Ross’s environmental footprint. They work with

several partners to be more sustainable, consolidating shipments where possible and reducing the

number of trips to stores each day. Ross encourages to reduce waste by recycling which will

result in efficiency. Ethical business practices play a critical role in their corporate social

responsibility program. They aim to operate with high standards of integrity and transparency,

and adhere to several policies to ensure they meet those standards. They are dedicated to

sourcing goods and services from a diverse set of suppliers, and are continuously seeking ways

to build and reinforce long-lasting relationships. Their membership with the National Minority

Supplier Development Council (NMSDC) gives them the opportunity to continually increase

10

partnerships with minority-owned suppliers. Similarly, as a member of the Women’s Business

Enterprise National Council (WBENC), Ross is committed to supporting women-owned

businesses.

At Ross Stores, ethical business practices are at the core of their culture and can be seen

every day in the way they treat all of their constituents, from customers and associates to vendors

and investors. This focus on ethical business practices is also reflected in Ross’ policy that they

will not knowingly purchase merchandise from any manufacturer involved in the use of child,

slave, prison or forced labor. The majority of the apparel, footwear, accessories and home-related

merchandise sold in their stores are purchased from suppliers after they have been produced and

imported to other retailers’ specifications.

One last point of innovative measurements being taken and worth mentioning is that Ross

is interested in developing relationships with interested candidates by training them and offering

them a leadership roles positions to advance within the company. Ross uses this great marketing

strategy by Recruiting candidate by posting true stories on their web page from associates that have

been working at Ross. This method of establishing favorable information helps Ross and helps the

candidates to be more familiar about Ross’s beliefs. This is a traditional way of establishing

favorable advertising and getting Ross’s story out. This strategy is to help Ross plan and forecast

for a stronger and quickly respond in case of sudden changes in an uncertain unforeseen change in

the environment. This marketing approach will definitely bring more excited candidates that will

be highly specialized about Ross because they have already found out about what benefits and

opportunities Ross offers. This approach can be considered as an “open system” because as many

people will get hire the more the internal environment will increase.

Ross runs a “mechanistic” design because not only they have design rules and procedures

but they have clear hierarchy of authority. This Organization is highly formalized and is also

centralized because the employees are expected to volunteer and participate in different

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organizations. The following are a list of a sample on how Ross expects its associates to volunteer

and participate in different organizations.

“Many Associates volunteer with the Boys & Girls Club of America, where they help children with their homework, work on facility restoration projects, and host career readiness workshops.

Associates in the New York Buying Office participate in the annual JPMorgan Chase Corporate Challenge, which raises money for the Central Park Conservancy.

The Buying Offices donate home and clothing samples weekly to support community shelters and local nonprofit organizations.

Hundreds of Ross Associates participate in the annual San Francisco Bay Area Heart Walk with the American Heart Association.

Associates from dd’s DISCOUNTS volunteer with their local First Book programs by reading to children.

Hundreds of Ross Associates participate in the annual San Francisco Bay Area Heart Walk with the American Heart Association.”

Ross does however fall short in a few things. One of them being the brands that are sought

out by many of the upper-class buyers. Let’s face it; Ross does primarily cater to the middle

class. TJ Maxx boasts brands such as: Adidas, Abercrombie & Fitch, American Eagle Outfitters,

Anne Klein, Baby Phat, Bebe, Billabong, Calvin Klein, Dooney & Bourke, Dolce & Gabbana

(Somewhat rare), Lucky Brand, Hollister, Hurley, Jessica Simpson, Jones New York, Juicy, Kate

Spade, Keds, Limited, Marc Jacobs, Michael Kors, MUDD, New York & Co., Nike, Nine West,

North Face, Paris Blues, Pink Rose, Polo by Ralph Lauren, Puma, Reebok, Roxy, Tommy

Hilfiger, Under Armour and Vera Bradley.

In comparison, Ross mostly carries: 7 For All Mankind, Adidas, Adio (Shoes), Air Jordan,

Anne Klein, Betsey Johnson, Born, Callaway, Calvin Klein, Coach Bags, Columbia, Converse,

Doc Marten, Emerica, Free People, Guess, Heritage 1981, Hurley, Jessica Simpson, Juicy

Couture, Kenneth Cole, Levi, Lucky, Michael Kors, Miss Me Belt, Nike, Nine West, O’Neill,

Perry Ellis, Puma, Quiksilver, Ralph Lauren, Roxy, Sketchers, Steve Madden, Tommy

Hilfiger,Vans, Vince Camuto, and Vox (Shoes).

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In addition to name brands, some of the following pictures speak for themselves when

comparing tidiness of a Marshall’s or TJ Maxx (right) to Ross (left). Some would say that some

elements of display innovation are lacking greatly at Ross.

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Ross's closest competitor has been very clear about its plans to improve their online store

platforms and boosting online sales. It is no mystery that in this day and age, sales coming from

online platforms have been aggressively increasing year over year for pretty much all types of

businesses. We have yet to notice much discussion or any clearly outlined plans for e-commerce

strategies coming from Ross management. This could be a bit worrisome considering where we

are headed in the future of retail. One of the reasons Ross does not emphasize e-commerce is

because the company falls in the moderate off-price space. The average retail price of an item at

Ross Stores is $10. There are not many items in the store that are priced above $25 or $30.

Placing such moderately priced merchandise on an e-commerce platform may not be a

very profitable proposition for Ross Stores. With an average price of $10, even if the company is

left with $4 or $5 after removing the cost of goods sold, it would still have to absorb shipping

costs, processing costs, and costs associated with product returns.

When it comes to the knowledge management strategy by Ross is that they implement a

“Tacit” approach over the more “Codified” method. By this we mean that Ross is more

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concerned with a person-to-person approach which develops networks or word-of-mouth if you

will. Many of the competition use a people-to-documents approach which uses a system that

stores, disseminates, and allows quick reuse of knowledge instead. Breaking it down a little

further, comparing on an IT approach, Ross invests moderately in information technology with a

goal of facilitating conversations and the personal exchange that it is a good store to shop at.

Again, the competition usually invests heavier in IT equipment with a goal of connecting

customers with reusable, codified knowledge.

Recommendations

Old-school thinking is that if you trap the shopper and force them to pass by lots of

product facings, you’ll create more sales opportunities.  Still, some retailers persist in creating

canyons of metal shelving and expecting customers to willingly funnel through them.  In fact, the

opposite is true.  Not only do shoppers dread entering long aisles, in their hurry to get through

them they often scurry past products they might otherwise be interested in purchasing.

In general, shoppers equate open space with the freedom to shop.  The best way to

generate traffic is to allow traffic to flow without restrictions.  A shopper at a store with tall,

narrow aisles is less likely to enter the aisle if it has but one other shopper in it, much less

several.  With such aisles, a single shopper with a cart stopped in an aisle can occupy as much as

10 feet of shelf facing, effectively blocking that merchandise from other potential buyers. 

Obviously, this leads to far fewer sales opportunities. Lighting is one of the most important —

yet probably one of the least understood — merchandising techniques in the retail environment. 

Wide, Narrow, Clogged.   When it comes to traffic flow, nothing has greater influence than the

design of your store. Wide aisles encourage your customers to “power walk” to the merchandise

they have come to the store to buy. The best strategy is to establish aisles that are narrow

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enough to force customers to slow down, but wide enough that they’re able to notice the

products displayed.

Data Sources

The innovation in e-commerce seems to be lacking but somehow, amazingly enough…

Ross’s stock performance has not only surpassed the S&P 500 but that of its closest competitor

and other well-known retailers including Macy's (NYSE: M) and JC Penney (NYSE: JCP) as

well according to the graph in this report.

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References:

Nunez Enterprises. (2016, February 02). Ross Stores - The Quiet Storm. Retrieved May 08,

2016, from http://seekingalpha.com/article/3846046-ross-stores-quiet-storm

Bailey, S. (2015, October 23). Welcome to Market Realist. Retrieved May 08, 2016, from

http://marketrealist.com/2015/10/ross-stores-made-mark-off-price-retailing/

Acosta, G. (2015, February 26). Higher traffic drives growth for Ross Stores. Retrieved May 08,

2016, from http://www.retailingtoday.com/article/higher-traffic-drives-growth-ross-stores

Ross Stores, Inc. (2015, February 26). Ross Stores Announces First Quarter 2016 Earnings

Release and Conference Call. Retrieved May 08, 2016, from

http://investors.rossstores.com/mobile.view?c=64847

Ross Stores Inc. 2014 Annual report. (2014). Retrieved from

file:///C:/Users/PC/AppData/Local/Temp/Final%20ROSS_Annual%20Report.pdf

Ross Stores, Inc. Corporate Social Responsibility. (n.d.). Retrieved from

http://corp.rossstores.com/media/51149/ross_csr_overview_2015.pdf

Daft, R. L. (2013, 2010). Organization Theory & Design. Canada: Cengage Learning.

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Ross Stores, I. (2015). Empowering our Associates. Retrieved April 9, 2016, from Volunteering

in the community, training, and development programs:

http://corp.rossstores.com/responsibility/empowering-our-associates/Volunteering-in-the-

community#volunteering