H-E-B Central Market Management Theory Analysis
Introduction of the Organization In 1994, the current President of H-E-B grocery- Charles Butt- opened the first Central Market. The store was located in Austin. Mr. Butt reached out to John Campbell an employee who had been with the company for over thirty years.
Campbell started out at H-E-B as a cashier and moved up the ranks to become an Innovation Officer at HEB. Central market is a division under HEB Grocery which operates independently. The store remains privately owned by the Butt family and is not traded openly on the stock market. The store was called an “amusement park for food lovers”.The store took concepts from European food markets and brought them to Central Market.
The store became very popular in Austin, Texas, and an each year about 2 million people visit the store. Following the Austin Central Market’s success H-E-B grocery opened eight new locations starting in the year 2001 with stores in San Antonio, Houston, Plano, Dallas, Southlake, Fort Worth, and a second location in Austin respectively. Central Market offers its customers an atmosphere where they can experiment and try new different foreign foods. They have a very strict product quality checklist.Every item that goes into their store must pass inspection at the store. Unlike H-E-B grocery stores all products that are shipped to Central Market go directly to the store.
There is no stop over at the distribution warehouse. During an interview with the Manager in Charge at Central Market in San Antonio product quality was discussed. One instance of product quality rejection at the store involved cherries that were shipped from California. The cherries were driven from California by means of an eighteen-wheeler truck. When they arrived at the store they were not up to par with the quality the store had asked for.
The perishable manager at the store rejected the cherries and they were not bought. Organizational Environments External forces that affect Central Market include things outside of their reach. The uncontrollable variables that every organization faces in the business world. These driving forces include the industry the organization does business in. In this case Central Market is in the grocery business.
Other driving forces include competition, the economy, and political influences. Central Market is in a very stable industry and has almost no competition. The only serious competitors of Central Market would be Wal-Mart or Target.These two large corporations however do not sell the same type of product. Central Market caters to those looking for high end exotic types of food, beers, wines, and etc.
The economy isn’t exactly stable, but people must consume food so the grocery business is stable. Central Market’s internal driving forces include it’s organizational culture, management of its finances, and employee morale. This forces can make or break a company Central Market’s organizational culture is best described as a place where employees are skilled in what they do. Each employee has a certain skill depending on what department he/she is in.Partners that start off working for the store usually stay with the store.
These partners stay with the store because Central Market creates a stable work place where there is opportunity for promotion. Most partners that work for the store start off from the bottom and move up the ladder into upper level positions. Central Market does a great job of treating it’s employees with respect. Partners are offered excellent benefits which include healthcare and pension plans. Leadership The end goal of a successful leader is to influence others to achieve group or organizational goals.The difference between a leader and a manager is leaders focus on the long term growth of the company.
Managers are just focused on the day to day procedures at the store, on the immediate problems or issues. Leaders focus on long term goals and objectives set and implement them into the Central Market stores. The difference between Central Market and other corporations is the corporate hierarchy. In other corporations an objective is issued down from the top and implemented at the grassroots level. At Central Market leaders encourage creativity by building a fun work environment.
When the word job comes to mind thoughts of obligation and meaningless tasks might come to mind. At Central Market employees or “Partners” are working in an environment that allows for innovation and space to grow. This is all because at Central Market the corporate structure is different from that of other major corporations. Corporate plans are not passed down the corporate structure. Plans are created in store by managers of the different departments. This corporate strategy gives managers at the store plenty of room to research and develop new successful plans on their own.
Managers at Central Market take pride in their work, because it is something they have created. Central Market leaders inspire Partners to find their own solutions through the training that is provided in the company. The training will be discussed later on in depth, but simply put it is extensive and educates Partners on the day to day operations of the company. Also at Central Market research and development is acceptable which allows space to innovate. Leadership takes place throughout the corporate structure at Central Market.
The department managers are allowed to create their own plans.The managers at the store are responsible for the success or failure of their plans. This provides managers at the store with more leeway to do things in their own way without having to report up to corporate. Organizational Structure Organizational structure is the vertical and horizontal configuration of departments, authority, and jobs within a company. The headquarters of Central Market is in Dallas and there are a president and a vice president.
Underneath the vice president, both a chief director of merchant and that of store operation are working.The chief merchant administers whole job activities such as purchasing and promotional activities except store operation. The other chief receive reports related to store operation from general manager of each store. In each store, there are three perishable, non-perishable, and food director; each divisions divided by working places like selling grocery, deli, bakery, and wine, teaching cooking and providing service are underneath the three directors. From this, we can see that Central Market establishes the organizational structure and decides who to report to whom clearly.
In terms of the departmentalization, we know that Central Market uses matrix method, which is a hybrid organizational structure in which two or more forms of departmentalization are together. As we can see from the structure, it can be separated to geographic and functional part. In geographic part, each store in Dallas, Houston, Austin, and San Antonio individually provides its distinct service and food to customer; on the other hand, in functional part, some departments such as purchasing and marketing conduct their business for entire company.Central Market combines these two characteristic parts to organize the structure. How to allocate a Job is closely related to how happy and fulfilled an employee feels doing it.
Employees in Central Market are basically allocated specialized jobs unless a scarcity of labor occurred in other divisions. For example, employee hired as cashier is trained specifically to conduct the job. Although sometimes assigned to work in other divisions when there is no enough worker or quite busy season, employee is allocated specialized job.One of disadvantages of job specialize is that employees easily know the work and feel bored to work. It leads low job satisfaction and high employee turnover.
In order to avoid it, they are gave some benefits such as buying products in store at discount price and increase their motivation. Organizational culture Organizational culture is the values, beliefs, and attitudes shared by members of the organization. It is usually established by the company founder and involves both visible and invisible parts. Sometimes it is changed because of changing internal and external environment of the company.However, it always can become the characteristic of the company.
In the case of Central Market, the concept of establishing the company is to provide finest cooked foods and a wide array of foods from all over the world which had never been offered in Texas before. From 1994 when H-E-B opened the first store in Austin to now, the organizational culture has been recognized and Central Market developed its business so much that nearly 10 stores are now operating in Texas. As I mentioned above, organizational culture is sometimes changed because company need to adapt to changing environment of a company.Central Market has made another organizational culture while its business spread to around Texas. To contribute community becomes its new organizational culture. For example, the store in San Antonio provide remained foods at free charge to facilities for social welfare in the downtown; moreover, along with H-E-B donate five percent of pre-tax earnings annually to charitable organizations in Texas.
Like this, as has become a famous company in Texas, Central Market set it up as the new part of the organizational culture. In addition, the dress code of Central Market is quite clear one of the visible organizational culture.As we can see in the store, every employee working in division of producing food wear net cap so that they can avoid dropping their hair into food. It makes customer feel that cooked food is clean and safety. Because customer can directly see employee who are cooking, the store pays much attention to the dress code. TEAMS Work team is defined as a small number of people with complementary skills who hold themselves mutually accountable for pursuing a common purpose, achieving performance goals, and improving interdependent work process.
Central Market also uses teams in service divisions; number of employee in the teams is decided by job situation. When job content is complex or wide, team is used to struggle with. Motivation and Planning It’s easy to get higher level from basic in short time if you work in central market, for example, if you are a bagger in central market but you work hard than others or you can replenishment faster than others, then you can get the higher level soon. Their working times are very flexible, you can choose your own schedule as you can and it’s not necessary to work every day in week.They have a gift card to reward employees when they do well on the job or get customer’s praises.
The little gift card is like a scratch card, you can win either money, foods or some articles for daily use. They also have a card called “partner perk card”, it’s 25% off for food in the store for employees. During the special holidays like Thanksgiving and Christmas, every employee will get free turkey or 100 dollars. Under the HEB big family they have lots of benefits and the owner of company takes seriously of responsibility for everything.Central Market is the top level market in all stores under HEB.
Central Market won’t aloud others who are trying to sell products to them easy, they select the finest for customers. They will never be the cheapest in town, but they will always serving the best as they can, that’s the reason why they are more expensive than other stores. Decision Making Decision-making in a traditional manufacturing facility is based on hierarchy. Information flows from the supervisor to workers who receive different bits of news about what is going on in the company.Little, if any, two-way communication occurs, resulting in minimal reaction from employees. A team environment provides members the opportunity to identify and solve problems, improve communication, develop leadership, increase ownership, resolve conflicts, set goals, and improve productivity.
Central Market perishables retail support center leader. Every team has a 30-minute meeting before the start of their shift. This is an opportunity for the team to review their results from the previous day, formulate a plan of action for the shift, and decide how to use their resources to achieve the desired results.Team members also discuss information on division and company policies to improve group productivity. Decision-making at Central Market plants is a three-part process.
A request for input communicates a desire by management to know the opinions of partners. A request for recommendations carries with it a commitment that the recommendation will have a significant impact on the final decision. A request for a decision is a delegation of authority, which conveys a commitment by management to abide by the decision. This results in more employee involvement.As they continue to ask for input, recommendations, and decisions, partner involvement has increased and ultimately more day-to-day decisions are being made by partners at our manufacturing plants. They begin to focus on more comprehensive issues.
For quality, they concentrate on process and sanitation audits. For service, they are concerned about order fill rates, percentage of stock items, and on-time releases and deliveries. They also understand how productivity, shrink control, and other efficiencies affect the profitability of the company.Entitlement, seniority, tenure, job title, and work assignments are elements of a traditional reward and recognition system. Individual awards in the team structure are based on personal contributions and peer evaluation. All individuals have equal access to rewards in the system.
At the Central Market distribution center in San Antonio, productivity results for all teams are posted prominently. Results are measured on a daily, weekly, and other periodic basis. Teams try to beat their own results as well as those of other teams to receive a team reward.A sign displaying a competitor’s product reminds team members that they also work together as one company. People Management Under the traditional system, supervisors spent more time on management tasks such as organizing, directing, and controlling others, including writing work schedules, directing floor activities, and filling out lots of reports.
Less time was devoted to leading employees with coaching and training. The focus of the Central Market team leader is on coaching others to develop technical and social skills as part of the team design.This change in core leadership represents the single greatest challenge to the success of our efforts. The leader sets the tone for team members in how they view the company, the department, and the team. It requires leaders to look at leadership as a process, not a position — leading rather than being the boss.
This view supports shared leadership. They’ve accomplished that by creating rotating, part-time hourly roles in the form of team coordinators, each with an emphasis on a different team result — safety, production, administration, quality, and technology.Hourly employees also participate in the hiring and retention processes. Management shares information with team members on the cost of employee turnover and the importance of mentoring new hires. To do this, hourly employees need additional technical and interpersonal skills. To be flexible and adaptable to change in the workplace, team members must be multi- and cross-skilled.
The combination of skills is different for each member of the team. Skills are based on practical factors, including productivity goals of the team, the number of verlap combinations required by functional area, and holiday, vacation, and sick days that need to be covered. Team members also have technical skills in areas of operation, maintenance, process improvement, and project management. A typical team working in the milk plant is composed of members with different technical, process, and interpersonal skills. Work skills could include raw milk receiving, pasteurizing, case filling, blow mold maintenance, safety coordination, and administration. When a team member is absent, other team members take over those responsibilities.
Typically, the 30-minute team meeting before the work shift is the venue for this decision-making. This process creates an environment where learning new technologies and applying new skills is encouraged. Because everyone works the same schedules on a rotating basis, there is no shift bidding to interfere with new skill acquisition. Under the old system, disincentives were built into the process of acquiring new skills. After moving to a new skill area or job, previous seniority was lost along with the ability to bid for a more preferred shift schedule because the shift bidding process was weighted for seniority.Team training In the area of interpersonal and team training, Central Market provides training and leadership workshops and skill certification.
A team basics course gives team leaders, new team members, and new teams instruction regarding the values and beliefs of teams. Instructors explain the team scorecard, where results are tracked against team goals. A class for team members explains tools for conducting effective team meetings. Another course emphasizes the importance of one-to-one communication using case studies and role playing with real Central market examples, and the why and how-to of documentation.A five-day workshop places employees on teams and challenges them with specific work assignments in a competitive environment. This increases their understanding of the overall process and the need for change in their behavior.
More than 200 leaders at hourly and management levels are graduates of the workshop. Central Market team leaders have experienced plenty of pressure while adapting to the new system. Productivity at every plant and facility initially decreased after teams were put into operation — an anticipated temporary change in performance. However, as time increases, performance increases. Fear, anger, and ncertainty are replaced with confidence, validation, and enthusiasm. One of our most significant lessons has been the gap in understanding in our company regarding the normal drop in performance following the beginning of a major change, Collier said.
There was very little patience in other areas of our company for this drop in performance. Because of the highly visible role of retailing in our business, manufacturing represents a more invisible behind-the-scenes role in delivering high-quality private label products. This isolation or decentralization works in our favor in making organizational changes.But it also works against us when productivity suffers. Support from senior company management is critical, especially when you’re on the downward slope of performance.
Another hurdle in the transition has been design changes for employee rewards. Most traditional pay systems are simple with well-defined ranges of pay by position. Six-month and annual pay raises are typical. Team-based pay systems are more discriminating because they are based on individual and team performance. They had to redefine what the company meant by performance and contribution.
Contribution is inherently complex.It involves a person’s knowledge, skills, talents, and their results. The new pay system requires a much more sophisticated measurement and accounting system to accurately judge team results. Organizational Strategy The company’s web site states, “At Central Market, our pledge to you is simple. We promise to provide you with the best products available, the best service possible and enough information about food to satisfy your appetite for knowledge. ” The vision of the company is to create a new shopping experience for customers, one that exceeds average expectations.
In our stores, shopping isn’t a chore- it’s a joy. ” Central Market is by no means an average grocery store. It wows customers with its displays and outstanding customer service. But what mostly differentiates the stores is the vast array of high quality and unique products that perhaps cannot be found anywhere else in Texas. Central Market has not only a wide selection of domestic products but also features international goods from nearly every country in the world.
Its stores boast more than seven hundred hand cut cheeses and hundreds of meat and seafood products.Numerous procurement teams travel the country and the earth to make this possible, working directly with the producers of products- such as farmers, wineries, dairies, fishermen, or ranchers- in order to ensure the quality of the products. Central Market recently started business with a producer of Honeycrisp Apples in Minnesota. This producer focuses on quality rather than quantity and refuses to ship any apples that are not ripe and ready. As such, that producer makes some of best-tasting and freshest apples in the country and their brand has become the best selling apple in Central Market’s Broadway store.
The goods are imported straight from the source directly to the actual stores in which they will be sold- rather than to a temporary storing facility. This ensures not only a lower cost but more importantly a fresher product. Moreover, Central Market can refuse shipped items at the door if they do not meet quality or freshness specifications- even if they were just shipped from across the country. The first Central Market that opened in Austin in 1994 was dubbed “an amusement park for food lovers. ” In fact, “food lovers” really is an apt description for Central Market’s core market.
The products at their stores are the best from around the world and this can make them quite expensive. As such, only those that are truly passionate about food are consistent buyers at the stores. However, during the holidays Central Market sees a peak in business. During these special occasions families are often willing to pay more and spend the extra money for the high quality foods at the Central Market stores. Consequently, Central Market provides more products during the holidays to maximize their revenue.
Each Central Market is also largely managed independently.Every store has its own management and merchandising plan or system to suit its area of business. This has the effect not only of giving employees incentive to work hard and succeed but also of allowing each store to connect with its community. The original concept for Central Market began as a research and development process for the HEB organization. It was intended to make new items and to experiment with products and displays.
What worked in the Central Market would then be incorporated into the rest of the company.Sometimes the store would fail in their ideas and take losses but they were still encouraged to experiment and to be innovative. Today, as a successful chain of stores throughout Texas, Central Market has maintained that innovative spirit in its overarching organizational strategy. Social Responsibility A manager at the Central Market on Broadway described the company as being an “unbelievable corporate citizen. ” The organization undertakes a wide range of efforts towards helping local communities and the environment, donating five percent of its pretax earnings every year to charitable organizations.
Its main concerns have been education, hunger relief, health, disaster relief, diversity, and volunteerism. The HEB Company, Central Market’s parent company, is actually one of the largest donators to food banks in the whole of America. At the store on Broadway, it is common practice to send all of the store’s leftover bread from the week to the San Antonio Food Bank. Additionally, the company recently hosted an event called Feast of Sharing in Dallas, TX during which there was a free holiday feast, a kid’s zone, live entertainment, and several health and family services.The company also has two eighteen-wheeler trucks on hand to serve as kitchens when and if disaster relief is needed. These were actually sent down to the Texas Valley after the recent hurricanes struck.
Lastly, the organization is also quite socially responsible towards its employees. They are given good benefits and bonuses and are even allowed to take home a free turkey every year for the holidays. This past year, President Butt actually gave every employee a new one hundred dollar bill. Organizational ProblemCentral Market is an outstanding organization and its successes have proven that there are few if any problems within the company. However, there is one practice that could potentially be a problem for the company in the future.
As stated earlier, Central Market can refuse any shipped items at the door of its store without any obligation. Since the company ships products from all over the world it can be a terrible grievance for a company to pay for the shipment and handling of products only to have them sent back without the slightest compensation.As such, Central Markets’ practice of refusing goods at the door could cause considerable strain with its suppliers. Granted, the company does have a whole world market to search for other suppliers, but the practice could give the company a bad reputation- which in turn could have innumerable consequences. One such consequence could be the refusal of suppliers to conduct business with Central Market for fear that their products will not be accepted.
Suppliers may not want to risk losing money on an uncertain deal.