Strategic management in organizations

Innovation

How SPORTS DIRECT can achieve competitive advantage by improving employees’ working condition

EXECUTIVE SUMMARY

On behalf of the Board of Directors at Sports Direct, a London-based sportswear merchandizing outfit, this report was prepared by Irobiko Chimezie Kingsley to verify details of an alleged poor treatment of employees. This study aims at conductive an objective evaluation of the company’s current business situation, identifying its problems and proffer realistic solutions required for productiveness, competitiveness, increased turnover, and a media-favoured brand image.

The Consultant used a SWOT Analysis for a clear presentation of Sports Direct’s current business performance. Other models adopted in the study are: Leader-Member Exchange and Fielder’s Contingency models.

A research on information collated from a total of 18,500 employees of the company spread across Europe and the United Kingdom confirmed mismanagement of human resources as the company’s major problem. Findings, for instance, show that Sports Direct has continually lost 8.7% of potential earnings on each share unit. In addition, the rate of staff turnover has decreased by 22% due low investments in employee development. Profit before tax is currently down by 8.4%.

Despite the financial losses and below-par staff contributions to organizational growth, results from the SWOT analysis uncovered that Sports Direct has a huge capital base as well as a team of qualified staff that can transform its business if properly utilized. The organizational threats and opportunities include: increasing competition, unfavourable foreign tax regulations, unstable exchange rate, credit; increased demand for products within and outside the UK, investor-friendly markets, cost-cutting manufacturing technologies and improved digital marketing outlets, respectively.

Similarly, results from Fielder’s Contingency model highlighted the company’s corporate culture, red-tapism, low task structure and poor relationship management as management problems that require urgent attention. The Consultant found that Sports Direct ranks high on the LPC scale, an indication that the company is in dire need of a leader with proven skills on staff motivation and relationship management.

The Leader-Member Exchange Model shows Sports Direct is experiencing turbulence in its management processes, having lost about 76% (Out-group) and 24% (In-group) employees on yearly basis in the past five years. Staff from the Out-group cited unharmonized working relationships, distrust between management and staff, inadequate work guidelines, lack of opportunities for growth, communication gap and less contributions in management as their reasons for quitting their jobs whereas most members from the In-group acknowledged the existence of trust from management, adequate instructions on delegated tasks, involvement in decision-making activities and job security.

Considering these analyses, the Consultant therefore suggests that Sports Direct should:

  • Review and adjust its current salary scale with improved incentives
  • Review performance of existing contracts with recruitment agencies
  • Partner with a reputable recruitment agency for qualified, productive, and highly motivated staff
  • Increase investment in personnel development
  • Provide a safe and favourable working condition
  • Prioritise the welfare of all employees with the In-group and Out-group
  • Establish and encourage use of staff feedback channels for productivity and organizational growth
  • Engage with Workers’ Unions to understand needs and adopt adequate business strategies to benefit all stakeholders
  • Adhere strictly to regulations on corporate governance as well as review and adopt changes where necessary.

Sports Direct has the potentials to be an industry-leader if its Board of Directors adopt the strategic business solutions provided in this study. However, disregarding the proposals will most likely present huge threats to its survival in the volatile business environment.