Management Decision and Control

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Causes Of The Problem

The current decentralised structure of Lululemon means that decisions made throughout the organisation are dispersed as demonstrated by Exhibit 2. Lululemon’s administrative controls focus on facilitating governance through establishing an independent culture. The administrative controls in place help direct the process of employee behaviours which are desirable in achieving the strategic goals of Lululemon. (Ouchi, W.G 1979) However, due to the high degree of decentralisation this results in individual store managers to have maximum control and make decisions at a local level which may not necessarily reflect the Lululemon culture and objectives. Such example was seen through inappropriate marketing at one of Lululemon’s storefronts. Achieving Lululemon’s objectives also heavily rely on employee behaviour which results in goal congruency and workplace alignment issues as individual employee interests are more inclined to diverge from the objectives of Lululemon.

The flat organisational structure of Lululemon results in less work specialisation creating issues where the specific job functions of employee’s are unclear. The company also works less efficiently as organisations are not able to achieve maximum efficiency through concentrating on their individual skill sets and resources.

Consequences of the Problem

The consequence of decentralisation therefore greatly highlights the non-goal congruent behaviour within employees leading to shirking and inefficiency within Lululemon. The goals of store managers and thus workers misalign with upper management, as there is a wide range of freedom in exerting individuality within the stores. As noted by Tushman et. al (2010) cross-functional barriers circumnavigate the values in Lululemon’s culture. As each area has the ability to make their own decisions, conflicts are inevitable and ultimately lead to goal incongruency and workplace misalignment. Furthermore the decentralised structure of Lululemon has caused a strain on improperly managed infrastructure, an inability of Lululemon to keep up with the demands arising from their rapid growth.

Control Problem 3: Planning Control Problem

Identify & Explain

Old objectives or goals that were defined previously for planning controls, can no longer direct or guide individual and group actions. David Mussafer, Managing Partner from Advent International, states that Lululemon knew the Canadian market very well, but had no knowledge of the U.S market as it was the whole different situation. The company was not able to grow organically. At the current circumstances, it is urgent for Lululemon to set up new goals to keep pace with its expansion speed in overseas. Therefore, this is an indication that the company needs some change to planning control, especially the goals setting of the company.

Causes of The Problem

In the management control package, planning includes setting the work goals for each key functional department and establishing the standards for each goal. It is an ex-ante form of control, as it provides the information necessary to direct or guide individual and group actions (Flamholtz et al., 1985). It is the main tool used to enables congruency by aligning goals across the functional areas of an organization, thereby controlling the activities of groups and individuals (Brown, 2005). The first cause of this problem is that the company failed to identify the specific goals for each functional area related to a new market environment. Due to the decentralization within Lululemon, the company let the staff “bring themselves to work “，causing the development of cross-functional barriers when they were faced with a different market environment such as the United States. Clear and specific goals were found to be more strongly related to performance outcomes than general goals (Ivancevich, 1976, 1977). The company should control the extent of power given to employees, and emphasize specific goals and objectives for each department to overcome these cross-functional barriers. The second cause of the problem is that the company had wrongly established standards of goals, and adopted unsuitable performance levels within the new market environment. As markets vary within every country, there will also be a varying degree of difficulty in the tasks to be completed. Therefore, finding proper goals for new market is necessary for organic growth. Lululemon has to be aware of goals with a higher level of standards, i.e., difficult goals, as they are associated with higher performance levels (Campbell & Ilgen, 1976).

Consequences of the Problem

The company failed to maintain specific goals to each functional and as a consequence observed a failure to overcome cross-functional barriers and therefore eroding all sense of teamwork within the organization. This resulted in an inability to achieve compromise or congruency. The whole organization has slowed down and reached a plateau. This is because of fail to overcome cross-functional barriers, since goals are not specific enough to each functional area. Another consequence is that there is insufficient delivery of organizational value to the new market. This is because the requirements of a higher level of standards of goals need higher performance levels, but Lululemon cannot achieve these ideal results. The breaking down of communication has led to Lululemon making bad decisions such as opening stores in unprofitable areas, adding to other more complex problems at hand.

Conclusion:Ultimately, it is evident that Lululemon faces many challenges. In the external environment, it has the situation of decreasing consumer confidence and growing uncertainties in global markets. Within the organization are three critical control problems based on the understanding of control package.

First is the budget control problem, where Lululemon need to engage in more coordinated operating budgets or better design, particularly the sales and cost budget. Second is the administrative control problem, where the company needs to achieve goal congruency and workplace alignment. Lastly there is a planning control problem, where the company need to identify more specific goals to ensure the ability of organization to serve the new market. Should these problems be alleviated, Lululemon will be on its way to becoming a successful, lasting billion dollar company.

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