Sears the Nadler Tushman Congruence Model \"Is

Sears

The Nadler Tushman Congruence Model "is based on the principle that performance is derived from four elements: tasks, people, structure and culture" (MindTools.com, 2011). The company's performance can be explained by analyzing these different elements of the organization. At Sears, the performance in recent years has been disappointing. Under heavy pressure from discounters like Wal-Mart and Target, warehouse stores like Costco and category killers like Home Depot and Lowe's, Sears has struggled to maintain its customer base. The company has seen its revenues and profits decline steadily over the past five years (MSN Moneycentral, 2011). The company's balance sheet, while not unhealthy, is also weakening, with debt becoming an increasingly high percentage of the firm's capital structure.

The Nadler Tushman Congruence Model implies that the reasons for this poor performance can be explained by the internal phenomenon at Sears. Essentially, if the work, strategy, people and structure are not congruent then the firm's performance will suffer. The underlying rationale is that external environmental challenges will always be present; it is the firm's response in these four areas that will dictate its success or failure.

The generic strategy at Sears is a differentiated provider. Sears serves the mass market, and its Kmart division is attempting to compete as a cost leader, but the company simply has been unable to compete as a cost leader and therefore must rely on differentiation. The main points of differentiation are the Sears brand, service levels and product mix. According to Nadler Tushman, each element of the company's four elements should reflect and support this strategy. The work does to at least some extent. The basic Sears model has inputs of labor and goods, the transformation process of sales and service, all leading to outputs such as revenues and profits.

There is a relative lack of congruence with the people. Although Sears was once an industry leader and still has a high level of sales, the company has had trouble maintaining good people. Some losses have come as the result of cost-cutting actions, but others have come as the result of defections. The company has a new CEO this year and is in general rebuilding its management team (Sears Holdings 2010 Annual Report). In addition, the layoffs at the company and its declining fortunes are likely to make for defections at lower ranks of management as well, as leaders abandon the sinking ship.

As a long-established company, the culture faces a high level of inertia. In an external environment where dynamism is required, Sears is staid. The company's employees are not drive to pursue a low cost strategy in the way that Wal-Mart or Costco employees are. Conversely, they are not driven to pursue a high level of service. Decades of being able to succeed on size, reputation and good own-brand products (Kenmore, Craftsman) have left Sears with a culture that is not necessarily ideal to compete in the modern marketplace. A former CEO in 2006 sought to change the company's culture to a "performance-based" one (Anderson, 2006), but such an effort takes time in an organization with 280,000 employees, especially when the CEO who championed the effort is no longer with the company. At the same time Sears was attempting to change its culture, it was also trying to integrate Kmart and that company's culture as well.

Part of rebuilding the culture was to reorganize the company at lower levels, to get employees more focused on teamwork. The compensation of employees throughout the company was intended to be tied to profitability. This plan is congruent with the desire to improve customer service as a means of differentiation. The company's own-brand products like Kenmore and Craftsman have their own Vice-President as well, highlighting the importance of those products to the company's differentiation effort. For the most part, the structure of Sears supports its strategy. The structure of Kmart does not appear to do so in any meaningful way, yet Kmart is profitable while Sears Domestic is not (2010 Sears Annual Report).

Sears has made some moves to better align its people, culture, work and structure. Certainly, the company is moving towards a culture and structure that will help it to achieve its strategic objectives. There is some doubt as to whether or not the culture can be changed, at least quickly. The process has been ongoing for five years at this point. The people are not the industry's leaders, and this is a challenge for Sears because it needs the best people. The company a lot of assets that it can use to gain some competitive advantage as a differentiated retailer, but it needs strong hands at the helm. In this case, leadership may be the biggest weakness that Sears faces right now.