men's wearhouse

Upload: mickey-du

Post on 17-Oct-2015

74 views

Category:

Documents


1 download

TRANSCRIPT

  • CASE: HR-5

    DATE: JULY 1997 (REVD. 11/08/04)

    Professor Jeffrey Pfeffer prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright 1997 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, e-mail the Case Writing Office at: [email protected] or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise without the permission of the Stanford Graduate School of Business.

    THE MENS WEARHOUSE: SUCCESS IN A DECLINING INDUSTRY

    Were in the people business, not the suit business.

    George Zimmer, Chairman, May 1997 Our distinguishing feature is how we treat our employees. You cant tell them to treat your customers like kings and not treat your employees like kings.1

    Richard Goldman, Executive Vice President, August 1996 George Zimmer, the 48-year-old founder and chairman of the Mens Wearhouse, a leading off-price specialty retailer of mens tailored business clothing, was thinking about how to respond to the question he was always asked by securities analysts and others: What had made this company so successful in a difficult competitive environment, and what ensured that this high level of success would continue? There was no doubt the industry environment facing the Mens Wearhouse had been and continued to be difficult. In a report dated June 1995, Needham and Company noted:

    The mens tailored clothing market has been consolidating. Men have been spending less on tailored clothing . . . The decline in the mens tailored clothing market has squeezed independent operators and has caused department stores to shrink the space dedicated to this merchandise category.2

    Paine Webber, in a November 1995 report, stated:

    Consolidation and weak performance among department and specialty store players in the menswear market has accelerated of late.3

    1 Michael Hartnett, Mens Wearhouse Tailors Employee Support Programs, Stores, August 1996, p. 48. 2 Needham & Company, The Mens Wearhouse, Inc. (SUIT), June 1995, p. 21. 3 Paine Webber, The Mens Wearhouse, November 15, 1995, p. 21.

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 2

    In April 1996, Robertson Stephens & Company published a report that included a table listing some of the chains that have closed or consolidated their stores or are in financial distress:

    Industry Consolidation and Financial Distress: The List Grows4 Todays Man Gentrys Barneys K&G C&R NBO Kuppenheimers Hastings Anderson Little BFO Hart, Shaffner & Marx COMPANY AND INDUSTRY BACKGROUND

    George Zimmers father was in the retailing business, at one point working for Robert Hall Clothes, and then ran his own raincoat manufacturing business. George Zimmer opened his first store in Houston in 1973 when he was 24 years old on an initial investment of $7,000. In the summer of 1997, Zimmers 3.2 million shares of Mens Wearhouse stock was worth about $100 million. At the time Zimmer began the business, he was living in Dallas and representing his fathers raincoats in several southwestern states. Zimmer was an economics major at Washington University in St. Louis in the late 1960s during the height of the protests against the Vietnam War. He maintained that growing up at that time affected his philosophy and perspective on life. Charlie Bresler, an old friend with a PhD in psychology who was senior vice president for human development at the Mens Wearhouse agreed:

    Hed grown up in the mid-sixties to early seventies, had been involved in the anti-war movement and was definitely interested in alternative forms of social organization. He brought that with him when he opened the Mens Wearhouse. He brought an unorthodox personalityhes very iconoclasticas well as an unorthodox management point of view.

    In the early 1980s, Zimmer opened his first stores in the San Francisco Bay Area. Initially, the firms offices were in his house. Because those first stores were in the South Bay, the company eventually developed a headquarters in Fremont. In 1997, the company had part of its corporate headquarters in Houston (mostly finance and information systems as well as warehousing and distribution) and part in Fremont, California, focusing on store operations, merchandising and advertising, purchasing, training, and employee relations. The company initially grew slowly, mostly in Texas and California. At the time the company went public, it had about 85 stores. Since going public in 1991, the pace of expansion had increased considerably, with the company opening around 40 to 50 stores per year. By the end of the companys 1995 fiscal year, it was operating 278 stores in 71 cities in 28 states. It had 315 stores open at the end of the third quarter in November 1996, and 345 stores in operation by the end of the 1996 fiscal year. The companys strategy was premised on the idea that men do not like to shop. Consequently, it offered its merchandise at prices that were typically 20 to 30 percent below department store prices using an everyday low price policy and eschewing special

    4 Robertson Stephens & Company, The Mens Wearhouse, Inc., April 30, 1996, p. 3.

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 3

    sales and promotionsmen did not want to watch for sales. The stores were relatively small, typically about 4,500 to 5,000 square feet, and not located in major, large malls that the shopper would have to walk through in order to get to the store. In its 1995 annual report, the company noted that those who invested in the firms initial public offering had seen their investment grow in value by almost 400 percent in the subsequent four years. The 1996 annual report stated that in the preceding five years, the company had enjoyed a compounded annual growth rate of nearly 30 percent in sales and over 38 percent in net earnings. Exhibit 1 presents some data on the size, profitability, and scope of the Mens Wearhouse operations. The company was continuing its rapid pace of expansion, developing additional store concepts and adding new categories of merchandise such as shoes, as well as taking the original concept throughout the U.S. The companys goal was to have about 20 to 25 percent of the mens clothing market in another decade or so and to be the dominant retailer of mens apparel. It was already well on its way. A Paine Webber analysts report on the company in August 1995 estimated that the firm was already among the top five in market share in the mens tailored clothing market. There was an incredible loyalty in the company to George Zimmer. Four members of the senior management team had been with the company since its inception and a number of others had been with the firm between 10 and 15 years. As Bresler noted, the loyalty extended throughout the organization from wardrobe consultants to managers. Until recently, he knew every manager in the country and most assistant managers, if not all. In part this was because Zimmer (and the rest of the senior management team) traveled to the stores regularly. For instance, over seven weeks during the 1996 holiday season, Zimmer attended 26 Christmas parties in various store locations. Bresler noted, with respect to being in the stores, the district and regional managers live in the stores. District managers are expected to go to every store every week, and regional managers, every store every month. Zimmer was a very charismatic person, and capitalized on his personal style in the companys marketing. He appeared in many of the companys radio and television advertisements, and his trademark phrase, I guarantee it, was well known. This media presence made him all the more significant to Mens Wearhouse people. George Zimmers Perspective on Management and the Company

    George Zimmer strongly believed in the idea of tapping untapped human potential as a key to success, not only for the Mens Wearhouse but for business in general, and saw the difficulty of quantifying this human potential as a barrier to adopting the idea in many companies:

    As we look forward in the business world, I see a lot of very big companies that arent going to be around too much longer . . . what creates longevity in a company . . . is whether you look at the assets of your company as the untapped human potential that is dormant within thousands of employees, or is it the plant and equipment? Or the trademarks? And Ill tell you the last thing most MBAs probably think of as value is the untapped human potential . . . the culture says, Its got to be quantifiable . . . dont talk about human potential. How do I measure human potential? You know, if you ask me how I measure the results

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 4

    of my training program, I cant. I have to do it on blind faith and trust in the value of human potential.

    Zimmer believed in the concept of servant leadership. He said:

    The idea of servant leadership is really just an extension of left-wing student politics . . . Because all it really suggests is that in order to make a capitalistic system work, there has to be a democratization of everythingof effort and the fruits of those efforts . . . were always looking for ways here to share the wealth and really make it win-win-win . . . Thats the thing that Western people dont really fully understand. I can get mine and you can get yours at the same time.

    As defined in the companys training materials:

    Servant Leadership forces a change of perspective from the traditional Boss/Employee relationship to the Service Provider/Customer relationship. Servant Leadership says that as Mens Wearhouse Managers, your customers are: Sales Associates, Wardrobe Consultants, Tailors, Store manager/assistant manager. The people you manage and work with are YOUR customers, as well as Clients of the Store.5

    Zimmer went on to state:

    We put in one of the first employee stock ownership plans before they became fashionable. Im probably still the person in the company that is the most interested in the ESOP even though twice over the 15 years weve had it we have lowered the salary thresholds that count in your calculation, so that is now just $50,000 per year.

    Training, or more properly, mentorship and touch, had been emphasized since the company began. Zimmer noted, Ive always looked at the key to the success of the company as being in mentoring. Training is just mentoring when the company gets too big to do it more informally and personally. When the company was small, George went to the stores and personally coached people in how to sell as well as trying to give people a sense of being connected to something with a higher purpose. Zimmer believed in the importance of touch and many people described the organization, even though it was quite large and geographically dispersed, as a high touch organization. That was the reason for the meetings and the training sessionsto try and maintain the personal contact and connection. He stated:

    We all believe that part of touching people, training people, interacting with people in a meaningful way creates energy in the recipient . . . when you get down to what really happens in the retail world, its a customer who wanders into a store and theres an employee there . . . and as they walk up to greet the customer, the question is: what type of energy, what type of feeling, does that employee have as

    5 The Mens Wearhouse, Suits University: Human Development, 1997, p. 7.

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 5

    they begin to engage the customer? When they stick out their hand to introduce themselves and look at the customer and smile at the customer, is it a genuine feeling or is it something that has been hammered into them through fear and intimidation? And the customer . . . is unconsciously understanding the difference.

    Zimmer talked about the Mens Wearhouse having five stakeholder groups:

    I rank them in order of importance. The employees come first, and our customer comes second. We create a quality relationship with our people, and since were in the retail business, hopefully they will create a quality relationship with the customer. And then we include as our third group the vendors. Weve always had a unique relationship with our suppliers. Twenty years ago I said to designers and manufacturers, Id like to buy your products at a significant discount, and I will guarantee you with my handshake that I wont advertise your name to the public, and only the customer that comes into my store will see it. And the fourth group is the communities. And then the last stakeholder group is the shareholder group. The best way to maximize shareholder value is to put that at the bottom of this hierarchy. By taking care of your employees, your customers, your vendors, and your communities, you will maximize long-term shareholder value. And Im only interested in long-term shareholder value.

    Another part of Zimmers philosophy was his emphasis on store operations. In most other retail chains, all the glory was in merchandising and marketing. People who were put in the stores were those who were not good enough to make it in the other parts of the business. Eric Lane, a senior executive who came to the company from Macys in the late 1980s, commented on the difference between the Mens Wearhouse and other retailers:

    If you look at department stores and I think also the chain retailers, the emphasis isnt on the stores or on the people. Its more on the merchandising and the marketing. Its all merchandise driven and display driven. They try to merchandise so it can sell really without people helping anyone, which is the opposite of what we do. At Macys, it seemed like anybody who was good gravitated to the merchandising side, and the schlubs were put out to pasture to run the stores and everything underneath took the same level of priority.

    The Mens Wearhouse believed that working in a retail store was not simply being a clerk and taking someones order. Charlie Bresler commented:

    We talk about a clerk, a consultant, and a slammer. A clerk is somebody who will meet your initial request but doesnt expand off your initial request. A slammer is somebody wholl sell anything they can get you into or sell you regardless of what your interests are, for their benefit. And a consultant is like a physician or an attorney, a professional.

    The company saw the wardrobe consultant as a sales position and viewed store operations as critical to the success of the business. Eric Lane stated, Most retailers are not really

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 6

    considering, first of all, the employees. But I dont think they consider the customers that well, either. If they considered the customers more, theyd pay more attention to their employees. The companys emphasis on customer satisfaction and the I guarantee it pledge came from Zimmers working in the stores:

    When you start a company yourself, I worked on the floor, waited on the customers. I always had this natural desire to, through my service, win their loyalty. Because who was I when I started?

    Mens Clothing Industry

    As noted already, the mens clothing industry was fiercely competitive, with many of the major players facing financial stress and exiting the industry. In a report dated November 15, 1995, Paine Webber reported:

    . . . we have seen the following menswear company announcements over recent months:

    November 9: Baskin Co., parent of Chicago-based, Mark Shale stores, files Chapter 11 and announces plans to close 5 of its 13 stores. November 9: Todays Man reports a $0.38 per share loss for the third quarter and indefinitely delays store opening plans for 1996.

    November 7: Marks & Spencer reveals its Brooks Brothers subsidiary recorded a $4 million loss for the first half of 1995 (ended September 30). November 3: Edison Brothers declares Chapter 11 and plans to close 500 stores. October 23: Chicago-based Hastings Group, with 50 stores in 19 states, declares Chapter 11. August 31: BFO, based in New York, announces it will close three of its five stores . . . June 28: CML Group announces that its 114 store Britches of Georgetown is for sale . . . January 5: NBO Stores files for bankruptcy protection.6

    In this tough retail environment, George Zimmer commented: The mens suit business is a stagnant industry. When we go into a market, were not going to be able to raise the aggregate amount of business. What we do is take from others.7

    6 Paine Webber, The Mens Wearhouse, November 15, 1995, pp. 1-2. 7 Gavin Power, Building a Retail Empire, San Francisco Chronicle, November 26, 1993.

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 7

    As documented by a study conducted at Columbia University, the retailing industry was the largest single industry in the United States. At any given point in time, one out of six Americans works in retailing, and the industry had become equivalent to the factories that provided entry-level jobs for less educated and minority segments of the population in the past.8 Work in the industry was characterized by low wages, few benefits, and a lot of contingent employment. Real wages for retail trade declined from 91 percent to 62 percent of the national average between 1948 and 1992. Turnover is endemic and the percent of part-time workers is extremely high. In fact, much of the economy-wide growth in part-time work occurred in these industries, and in recent years, the bulk of it has been involuntary. Health care coverage tends to be minimal and the ratio of skilled to non-skilled workers dismal.9 Although some firms experimented with flexible, high commitment management practices, for the most part high performance management had made few inroads in retailing. MENS WEARHOUSE MANAGEMENT PRACTICES

    The Mens Wearhouse management practices and philosophy evolved over time. Originally, it was largely intuitive with Zimmer. By 1997, as the company grew, there was more emphasis on articulating both the values and the processes that constituted the core of the companys management system. Compensation and Staffing

    Wardrobe consultants, the people who directly waited on customers, were paid with a combination of base salary and commission. The base salary was about $5.00 per hour. The commission system was two-tiered. Wardrobe consultants received about 3 percent for sales under $500 and 7 percent for sales over $500. In total, wardrobe consultants received between 8 and 9 percent of the business they wrote, if you include both base salary and commission. If a consultant wrote $300,000 in sales per year, the person would make between $24,000 and $27,000. Most consultants earned between $25,000 and $30,000 per year. To put that in perspective, Charlie Bresler said that in a typical small store in a mall, the assistant manager probably made about $18,000 per year. Because commissions were based solely on individual performance, there was occasionally a problem of stealing customers. Consequently, one thing the management watched was the number of transactions and the average size of those transactions. If someone did many more transactions than his or her colleagues with a lower average volume, this would indicate that the person was overly aggressive in picking off customers and was not doing a good job of selling to those customers. They would fire that person if the behavior did not change. Bresler noted that although there were no team incentives, we have a lot of focus on team selling. The team incentive is that if I help you, then you will help me. A typical store of about 4,500 square feet would do about $1.6 million in business and would have two tailors, two managers (a manager and an assistant manager), three wardrobe consultants, and two and one-half to three sales associates. More than 50 percent of the

    8 Thomas Bailey and Annette Bernhardt, The Reorganization of the Workplace in Service Industries: Effects on Job

    Quality and Organizational Performance, Working Paper #7. Berkeley, CA: National Center for the Workplace, October 1996, p. 3.

    9 Ibid., p. 12.

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 8

    wardrobe consultants salary was based on commission for legal reasonsto avoid having to pay time and a half for overtime and to avoid issues of working off the clock (the problem Nordstrom faced when sales people, who provided customer service such as writing notes or making calls on their own time, were deemed to have not been compensated properly, in violation of Federal labor law). Sales associates served as cashiers and also helped people accessorize. They earned about $12,000 to $14,000 per year and had a pooled commission. Some sales associates did move up to become wardrobe consultants. About one-third of the sales associates worked part-time. Turnover in this position was quite high, the only job in the company for which this was true. The proportion of part-time wardrobe consultants was much smaller. Overall, including tailors, only about 12 percent of the total positions in the company were part-time. Store managers received a base salary and a commission on their own sales plus bonuses based on the sales volume and shrink volume in their store. About 15 to 20 percent of a typical managers compensation would be based on store performance, with the rest of the persons salary based on individual performance (sales). Because of the companys rapid expansion and need for management talent, store managers who had great leadership and sales training skills had the opportunity to move up the corporate ladder to the position of district manager and then to regional manager. A bonus plan for people in more senior management positions was extended to people throughout the company. About 100 percent of the people owned stock in the company because there was an employee stock ownership plan. The company actively sold participation in the 401(k) retirement program, encouraging people to prepare for their retirement by beginning to save when they were young. The company instituted a new bonus program for people in the stores. Each person except the managers received $20 if a store met its good sales goals for the month, and $40 if it met its excellent level of sales targets. Managers received a $1,500 bonus if the stores shrink (loss due to theft or inventory errors) was less than 1 percent, and a bonus of $3,000 if the shrink was less than 0.5 percent. Overall, the companys shrink was about 0.5 percent, which was much lower than usual in retailing. The firms salary costs, at about 9 percent, were a little higher than the industry average, which was 6.5 percent to 7 percent. The Mens Wearhouse paid slightly better than average for the industry and used somewhat more staff in its stores. Senior executive salaries were relatively modest given the size and success of the company. According to the 1996 Proxy Statement, Zimmers salary for the previous three years was $420,000 per year, with a bonus in 1996 of $50,000. David Edwab, the 42-year-old president of the company, earned $612,000 in salary and bonus. In discussing management compensation, the Proxy Statement and Notice of Annual Shareholders Meeting stated:

    Mr. Zimmer has advised the [Compensation] Committee that he is satisfied with his current base salary and therefore no change has been approved for fiscal 1997 . . . It is the opinion of the Compensation Committee that the total compensation program for 1996 for executive officers relative to the Companys performance

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 9

    was reasonable and that the compensation to George Zimmer remains modest in light of managements achievements and the total compensation packages provided to chief executive officers by other publicly held clothing retailers.10

    Promotion and Career Development

    At the Mens Wearhouse, promotion was almost totally from within. The senior vice president of store operations, Ted Biele, started as a sales person. Julie Aguirre, the director of employee relations, was about 27 years old and started in the company as a cashier. The vice president of stores began as the companys only stock room boyeverin the early 1980s. He was only about 17 years old at the time, so he was still quite young. They hired a few people for management positions from outside, including Charlie Bresler who joined the company around 1992. But the culture of the company was very much promotion from within. The company did not send people to outside management coursesthe comment was, no one has the time. Management development was mostly accomplished by observing others and being coached by George or Charlie. There was not a lot of management training as distinguished from sales training in the company. As Bresler explained it:

    One of the reasons that our management training program isnt better, and it has a long way to go, is because every time any of us, including me, are forced to choose between a management presentation and a selling presentation, we always choose the selling presentation. In other retail companies it is exactly the opposite. People know every regulation and all of that, and how to make sure they dont bounce a check. But theres no emphasis on customer service and selling. We try not to dichotomize customer service and sellingwe treat them as an integrated package.

    Hiring and Firing

    Except for the sales associates, who were hired by the store manager, hiring was centralizedthe regional manager was the recruiter. Charlie Bresler stated:

    A lot of the regional managers responsibility is recruiting. If the district manager has a regional manager who doesnt have time to help him, or is good at it himself, hell be out looking to build what we call a bullpen of people who are interested in joining the company. So that when we have an openingand remember, our turnover isnt that hightheyll be able to fill the position quickly.

    We train people how to interview. But we know what were looking for. Were looking for people who are potentially consultants, not clerks. Were looking for people who have energy, have a sense of excitement, seem like they care about people, and we dont care about how much clothing background they have. If youre the right person, in three months you can be taught to sell extremely well. I can sell. And I didnt know anything about selling. And thats part of the

    10 The Mens Wearhouse, Inc., Proxy Statement for Annual Meeting of Shareholders, May 21, 1997, p. 14.

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 10

    culture, too. When Im in a store, I sell. When youre an executive in the store you dont just kind of hang out. If theres a customer to be waited on, or team selling, you find some way to help out.

    In spite of the companys avowed emphasis on hiring for basic personality and skills rather than for experience, this policy was not always followed. In part that was because the regional and district managers did not really get it in a fundamental way. Under pressure to fill positions quickly, particularly as the company expanded, and being deluged with applications from sales people from other retailers, there was a tendency to hire from that more experienced pool. Both Zimmer and Bresler saw this as a problem:

    There are a lot of people youre talking to wherever youre talking in our company who emotionally have a sort of clerking kind of mentality because they grew up in retail, theyre not necessarily assertive, and they dont like to get into peoples closets, or minds, or whatever. Thats a weakness in our company.

    To try and avoid legal problems and unfair treatment, firing was centralized at headquarters. Before firing someone, the company would often move that person to another store to see if that would help. If the person was a manager, sometimes they would demote him. The company would fire even someone who was an exceptional producer if the person was not doing a good job in mentoring others or was not a team player. The company fired one of its top producing salesmen, someone selling about $550,000 of merchandise a year, because the district manager said: Weve got to get rid of Jim. He steals peoples sales. He doesnt follow the program. Hes always saying that the company is ridiculous, the training programs are ridiculous. It turns out that after they fired this person, sales in the store overall went up. Although no one individual sold as much as Jim did, collectively the store did better because there was no one in the store bringing other people down. Being a good role model and being a servant leader were taken very seriously by the company. A number of people in the senior management team and on the board of directors were either boyhood friends or relatives of George Zimmer (Georges father and brother served on the board of directors, for instance). There was a family feeling to the company and nepotism was not discouraged. Performance Appraisal

    The Mens Wearhouse placed great emphasis on providing feedback as part of a coaching and development effort to enhance the sales skills and thus the performance of the people in its stores. The goal was to have everyone, but particularly people in managerial positions, provide feedback that was straightforward, honest, and most importantly, behaviorally-specific; feedback that told people specifically what they did and why it was important. The firm emphasized providing positive reinforcement and feedback as well as critiques of selling behavior so that learning could occur. Around 1997, the company introduced new performance appraisal forms for wardrobe consultants and assistant and store managers. Abbreviated versions of the forms are shown in Exhibit 2a and Exhibit 2b. These forms indicate what the company valued and how it measured the performance of its people.

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 11

    Communication

    The company published a monthly newsletter, called Clotheslines. In addition to company news and news about new markets and employees, typical issues also contained pointers or tips on selling and becoming a more successful salesperson. Under a section called Contributors, outstanding sales achievements were described and the best sales people were listed. There was particular focus on the largest single sales, emphasizing the companys goal of increasing the amount of merchandise sold to each customer. The company also sent a video to its stores about six times a year. The videos were produced in-house and were a combination of information and inspiration. The goal was to create entertaining, educational training illustrating benchmark selling behaviors and emphasizing the companys operating goals and results. As a retailer, the company measured everything, and these data were shared with the people in the stores regularlyinformation such as total sales, sales by wardrobe consultant, the number of transactions a person had, the average size of the transactions, the number of items sold per transaction (to measure whether or not the person was using the opportunity of customer contact to sell related items), and so forth. The company encouraged its people to socialize with each other. Eric Lane noted:

    We pay for a lot of things. Baseball teams, bowling teams, softball teams; we have an ice hockey team. We do lots of different sports. We own season tickets to probably every sport . . . But in fact I think the whole relationship thing really starts at the most basic level, which is, the people in the stores can be friends with their manager. The managers can be friends with the district manager. They go golfing together and they socialize together. If the manager wanted to have a meeting at his house, or a district manager . . . we would pay for that. We pay for doughnuts and coffee.

    TRAINING AT THE MENS WEARHOUSE

    George Zimmer believed that training was in large part cultural transmission, as much as or more than a transmission of information. In 1997, the Mens Wearhouse was expected to spend about $2 million on training, approximately 1.6 percent of the companys payroll. The training was done almost exclusively by line managers and senior executivesthere was relatively little specialized training staff. The model was very much one of training cascading down the hierarchy, where the most senior managers trained the multi-unit managers, who were expected to train the store managers who, to some degree, were responsible for coaching and mentoring the people in their stores on an ongoing basis. A large part of every managers job was sales training and renewing and maintaining the companys culture. The company had a number of formal meetings throughout the year in which training and development occurred. In February, the key centralized meeting of the year occurredthe multi-unit managers meeting. The meeting brought in all of the multi-unit managers (regional and district managers) in store operations, regional managers in tailoring, the managers of the

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 12

    sales associates, all of the management people in merchandising, and all of the buyers, as well as the senior executives in store operations. Charlie Bresler explained, We have a three day combination of training, spiritual renewal, parties, lots of sports, lots of drinking, lots of dancing. Its kind of a wild three days with a lot of training thrown in. He went on to describe the other components of the training and meeting schedule:

    Shortly after February, our Suits University calendar starts up and we bring wardrobe consultants from all over the country to Fremont. The primary emphasis is on sales training and a socialization experience into our culture. A lot of key executives from this building address that group, including George.

    Then, in the markets, we have two other meetings that go on throughout the year. One is called Suits High, which is preparation to come to Fremont and Suits University. It is an introduction to selling. And the other is called Sales Associate University, which is basically a training session for our cashiers. They get training in the store but they also get training in this group meeting.

    And then every summer we have manager meetings. These are meetings that take place in the markets. This coming year well have five different locations. And we fly people in to the nearest location. About two years ago, George came up with the idea of adding all the wardrobe consultants to the meetings. So we now have every manager, every assistant manager, and every wardrobe consultant in the company going to a summer meeting.

    We have the meetings in resorts. Theyre nice places.

    So that takes us through the summer. In September, we have another multi-unit manager meeting where all of our district and regional managers and store operations executives get together again at Pajaro Dunes. Most of our meetings are at Pajaro Dunes, which is because George pushes it as the spiritual center of the company. And we have another meeting to get ready for the fourth quarter, with more training. And then once the fourth quarter starts, all of our training programs stop and we focus on writing 40 percent of our volume, which we do in the last 25 percent of the year. A major part of our training program takes place with our district managers who are the primary sales trainers. These people have between six to 12 stores. Their primary responsibility is to get in and make sure everybodys doing the benchmark selling behaviors.

    Exhibit 3 presents a catalog and overview of the companys various training activities. Because of the structure of the training, it was difficult to get a precise estimate of the amount spent. Do you include the travel expense? The cost of the time of the senior executives? The cost of the time of the people being trained? It was pretty clear that there was no precise training budget for the company, but that they held meetings and encouraged training as particularly

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 13

    George Zimmer and Charlie Bresler deemed necessary to develop selling skills and to keep the culture vibrant. Suits University

    On Monday morning, May 5, 1997, another session of Suits University was beginning. Twenty-five to 30 people were sitting in a large room behind tables arranged in a U-shape in corporate headquarters in Fremont, California. Around three sides of the room were displays with the products sold by the Mens Wearhousesuits, sport coats, slacks, dress shirts, casual shirts, overcoats, casual jackets, and so forth. The other side had refreshments and pictures of previous classes of Suits U. There were Suits University signs all around. Shlomo Maor, a former Israeli tank commander and now associate vice president for training, was telling the people what to expect in terms of the schedule:

    Were going to start Monday, Tuesday, and Wednesday at nine oclock. Were going to go from 9 until 12:30 and break for one hour of recreation and lunch. We resume at 1:30 Monday and Tuesday and go until 6 oclock. Wednesday, were going to stop earlier at 4:30, and youll be taken to San Francisco for an evening out on the town. Thursday, were going to spend the entire day at Pajaro Dunesrecreation, 40 percent; training, 60 percent. Well conclude Suits University Thursday together at dinner at a restaurant, and Friday morning, back to your stores. Any questions?

    Mens Wearhouse wardrobe consultants (a term chosen with great care) were going to spend four days in Fremont at the companys expense. They would get spending money on the trip to San Francisco (so-called Zimmer bucks, named after George Zimmer). They were flown to the San Francisco area from all over the country, put up in a nice hotel, would be taken to Pajaro Dunes (a condominium resort on the Pacific ocean, south of San Francisco between Santa Cruz and Monterey), and would spend time getting to know each other and the company and learning how to sell mens clothing. Some of the people in the room already had extensive sales experience. One spent five years at Nordstrom. Some came from C & R Clothiers and Kuppenheimer, two mens discount clothing chains that had closed down. One spent 30 years in retail, and most had at least some sales experience. During the four days of the program, the wardrobe consultants heard from virtually every department in Fremont except information systems. They learned about the company, its vision and values, and they learned how to more effectively sell mens clothing. On the opening morning, after they went around the room and introduced themselves and watched an uplifting video, Charlie Bresler talked to them about his job, the companys mission and vision (see Exhibit 4), and the covenant between the company and its people:

    I think what separates our vision from other retailers is that we understand that selling mens clothing is a lot broader than just understanding how to sell or even understanding the merchandising. It involves understanding people, both your teammates as well as your customers . . . What I would like to leave you with . . . is a sense of excitement about reaching your potential as a person. And when I say reaching your potential as a person, I dont simply mean selling more mens clothing. . . . I mean becoming a better spouse or significant other, becoming a

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 14

    better parent, becoming a better friend, becoming a better person for yourself. . . .

    My most important job is really maintaining an environment in our stores which is a positive work environment, and in that capacity, my most important job is to take phone calls . . . from anybody in this room, anybody from any of our stores . . . my primary responsibility . . . is to make sure that Im responsive to your concerns and that the people who I work with are responsive to your concerns. . . .

    A covenant is an informal, extremely important agreement that has a higher quality to it than a legal contract. . . . Whats expected of you in this informal agreement? . . . as a wardrobe consultant, you are expected to define your success in part as only achieved when your teammates, the sales associates, the tailors, and other wardrobe consultants and management people in the store are also successful . . . and that you will, over time, define your success not only in terms of your own goals, but also the goals and aspirations of the other people in your store. And that you will come to really care about them as human beings and as people who finally realize their potential, too. That is what we mean when we talk about being a soulful or high quality teammate in the store. . . .

    The other thing we expect is that you will engage in the Mens Wearhouse sales philosophy . . . that you will immerse yourself, that you will challenge yourself, that you will strive to live up to this sales philosophy, and that you will be open to the feedback of the people . . . who are helping you to become more and more skillful at implementing the sales philosophy thats defined here on page 3 (see Exhibit 5).

    If the employees part of the covenant was to define success in terms of the accomplishments of their teammates as well as themselves and to not be a clerk, what did the company owe the employee? According to Bresler, it owed the employee servant leadership:

    The specifics of servant leadership at the Mens Wearhouse are three key management principles. Number onemaximize the individuals self-esteem. Its . . . something you should be expecting from management. There are two primary ways that I want to highlight . . . to maximize an individuals self-esteem. Number one is to catch them in the act of doing something right or partially right . . . theres one other way to build up peoples self-esteem . . . to give them a lot of constructive criticism. You know why constructive criticism is one of the best ways to build up self-esteem? Its because ultimately the single best way to feel good about yourself is to do a better job. And the best way to do a better job is to get good coaching and criticism so that you know not only what not to do, but also what to do.

    The second principle of servant leadership is to listen carefully and to demonstrate understanding . . . Maybe one day, one time during the day, youre going to have a conversation. Youll say, This is it. This is when Im actually going to be here for this conversation, and youll actually pay attention to what the person is telling you. There is a world to be captured out there through increased attentiveness to the moment . . . One of the nice things, once youve heard what somebody said, is you can reflect it back to them. . . .

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 15

    And finally, the last key management principle is to ask for help in solving the problem. We want our servant leaders to recognize that there are more solutions to problems among the people that they work with than they have in their own heads. . . .

    Three key management principles and one overriding management goal, a way of being in the world: servant leadership. Two ways of being in this store: one is consultant, not a clerk, and as a human being, identifying your success as not only individual success, but also the growth and success of your peers. If you can get on that path at the Mens Wearhouse, theres no stopping you as an individual, and theres no stopping us as a company.

    Another important part of Suits University involved explaining the companys policies with respect to equal employment opportunity and sexual harassment. As part of that process, the function and role of the employee relations department was described. People came to understand that the company had an open door policy and encouraged problems and complaints being surfaced. The result of this policy was that even though the organization was quite geographically dispersed, between the work of the employee relations department and the constant travel by senior management, people in management were quite well-informed about what was going on in the stores and where there were problems. A major part of the wardrobe consultant training was learning how to more effectively sell mens clothinghow to move from being a clerk through being a sales consultant to the ultimate, becoming an artist as a salesperson. In addition to many technical details, such as understanding the features of various fabrics and styles and types of clothing, there was also an important component of attitude involved. The company called it selling with soul. In the afternoon of the first day of Suits University, Shlomo Maor returned to provide training in how to sell with soul:

    At the Mens Wearhouse, we like you to stay on the floor when you have a customer. At the Mens Wearhouse, we like you to greet that customer and try to make an emotional connection. And consistency of service is the name of the game. Dont be one personality when the customer comes to purchase, and change that personality when he comes for an alteration or pick-up or complaint . . . And you stand in front of the door and you greet your customer with a smile and a handshake, and you welcome him to the store . . . If you and your teammates know and suggest the best dry cleaner in the neighborhood, that is providing soul . . . Lets take the first scenario and see the evolution and the progression of the clerk to the artist. A customer comes in and says, I am just looking. Ive never been to the Mens Wearhouse, and I do not wear suits. You have that customer in your store. And the guy to the left, the guy who writes $250,000 and is a clerk, stands in the store, looks at the guy, and wonders: What the hell is this guy doing in the store? Now let me ask you: he doesnt wear suits, never been to the Mens

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 16

    Wearhouse, and hes here to look! Hes coming here for one reason, and one reason only . . . to waste my time! . . . You take a customer, and since you cannot tell him verbally that hes a loser, hes a non-buying customer, you tell him non-verbally . . . And then the customer will walk out and not buy anything, and youll say, I told you so. And you told him as well . . .

    The guy to the left, the clerk, viewed that customer as a problem. I dont view that customer as a problem. For me, its an opportunity! You know, Im sick and tired of showing that navy blue pinstripe suit to every customer and what do they tell you? I have one. Im going to show that beautiful navy blue pinstripe suit to the new customer, and what is he going to say? He doesnt have a suit! Im sick and tired of showing that beautiful new herringbone jacket to every customer and they say, I have one like it. This guy Im going to show the jacket and what is he going to say? I have one? No, he doesnt have one. He doesnt have anything! But guess what, did he come to your store naked? How many naked customers have you had in your store? This customerdoes he have shoes? Does he have socks? Slacks? Shirts? Does he have a family? Does he celebrate holidays? Does he go to weddings? Quite an opportunity. Im going to show him some casual wear to formal wear. He doesnt have anything and Im going to make a friend. Im going to tell him that we have clothes, casual wearMens Wearhouse is not a suit store only. Shoes, socks, formal wear, tuxedos, casual wear, leather jackets. . . . Which one are you? Do you stereotype customers? Do you determine customers, whether they are buyers or not, before they get into your store based on the car they drive, the way they dress, the color of their skin? Or do you sell with soul and treat everyone equally?

    CONCLUSION

    George Zimmer and Charlie Bresler sat outside on the patio of the headquarters building in Fremont, reflecting on the success of the company in a very cut-throat business. In the mens clothing business, there were essentially no entry barriers and the competition ranged from chains such as J. C. Penney, the largest retailer of mens formal dress wear, to the department stores, to the specialized chains that were always sprouting up. The systems, policies, and culture that characterized the Mens Wearhouse had produced a $500 million business that continued to enjoy rapid growth in excess of 20 percent per year. How did it all fit together and work? Could the systems and culture surmount the strains inevitable as the company grew and personal contact with the senior leadership inevitably diminished? Were there any problems lurking in what the company was doing? What could and should the senior management team do to ensure that the firms past success continued?

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 17

    Exhibit 1 Selected Financial Information for The Mens Wearhouse

    1991 1992 1993 1994 1995 1996

    Net Sales (in millions)

    Net Earnings (in millions)

    Total Assets (in millions)

    Shareholders Equity (in

    millions)

    Earnings per share

    Number of stores open

    Sales per square foot

    $133.4

    $ 4.18

    $ 54.7

    $ 18.3

    $ .29

    113

    $375

    $170.0

    $ 5.87

    $ 78.7

    $ 38.4

    $ .35

    143

    $381

    $240.3

    $ 8.74

    $112.2

    $ 57.9

    $ .48

    183

    $409

    $317.1

    $ 12.11

    $160.5

    $ 84.9

    $ .63

    231

    $419

    $406.3

    $ 16.51

    $204.1

    $137.0

    $ .82

    278

    $425

    $483.5

    $ 21.1

    $295.5

    $159.1

    1.00

    345

    $420

    Source: Mens Wearhouse Annual Reports.

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 18

    Exhibit 2a Performance Review Form for the Wardrobe Consultant

    Sales Stats Personal Store Dist. Goal Grade Sales volume % Multiple sales # of shoe sales % Clothing with accessories % Slacks with clothing % $500 sales Average ticket

    Promoting Volume Greets, interviews, and tapes all customers properly. Grade____ Uses multiple selling techniquesback-end selling, suit stacking and shirt stackingwhenever possible. Grade____ Is familiar with merchandise carried at local competitors. Grade____ Participates in team selling. Grade____ Understands how to move up and down in size by adjusting model and manufacturer. Grade____

    Decreasing Shrink Understands company policies and procedures regarding layaways, returns, exchanges, register operations, checks, and charges. Grade____ Maintains floor awareness. Grade____ Ensures proper alteration revenue collection. Grade____

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 19

    Exhibit 2a (continued) Performance Review Form for the Wardrobe Consultant

    Excellent Customer Service Involves management in all customer problems. Grade____ Treats customers in a warm and caring manner. Grade____ Utilizes tailoring staff for fittings whenever possible. Grade____ Strives to always sell the correct merchandise, size, and price point. Grade____ Waits on all customers, without prejudging based on attire, age, or gender. Grade____ Participates in making two week follow-up calls to all clothing customers on a daily basis. Grade____

    High Quality Work Environment Works effectively as a member of the team. Supports and helps coworkers. Grade____ Is open to constructive criticism. Makes changes when necessary. Grade____ Arrives at work at the appointed time and is ready to begin immediately. Grade____ Dresses and grooms to the standards set by TMW. Grade____ Contributes to store maintenance and stock work. Grade____ Note: Grades are above standard, meets standard, below standard, and unsatisfactory.

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 20

    Exhibit 2b Performance Review Form for Manager and Assistant Manager Positions

    Store volume: Actual:_____ Good:_______Excellent: _________ Store Shrink Percentage:______________ Sales Stats Personal Store Dist. Goal Grade Sales volume % Multiple sales # of shoe sales % Clothing with accessories % Slacks with clothing % $500 sales Average ticket

    Promoting Volume Greets, interviews, and tapes all customers properly. Grade____ Is familiar with merchandise carried at local competitors. Encourages and participates in team selling. Grade____ Uses multiple selling techniques. Grade____ Appropriately communicates all aspects of the merchandise carried at TMW, including make, model, fit, features and benefits, and comparative retail. Grade____ Engages in quality sales coaching. Grade____ Effectively utilizes . . . tools to communicate to the merchandise team the best and poorest selling goods and special concerns. Grade____

    Decreasing Shrink

    Maintains and coaches floor awareness. Grade____ Ensures proper alteration revenue collection. Audits alteration tickets. Grade____

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 21

    Exhibit 2b (continued) Performance Review Form for Manager and Assistant Manager Positions

    Excellent Customer Service Greets and welcomes customers. Grade____ Treats customers in a warm and caring manner. Grade____ Resolves customer problems effectively. Grade____ Participates in 15-day customer service calls. Grade____ Ensures compliance with 15-day customer service calls. Grade____ Ensures that Customer policies relative to pressings, fittings, realterations, alteration appointments, charges, and specials are communicated consistently. Grade____ Ensures that consultants utilize tailors for fittings on a consistent basis. Grade____ Conducts exit interviews. Grade____

    High Quality Work Environment

    Provides timely and effective feedback concerning performance. Grade____ Responds to employee concerns on a timely basis. Grade____ Effectively utilizes the 3 Key Principles. Grade____ Conducts weekly Saturday morning meetings that have positive formats. Grade____ Communicates clear expectations to staff. Helps each individual set, monitor, and achieve their personal behavioral goals. Grade____ Helps resolve personnel problems. Grade____ Is open to constructive criticism. Grade____

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 22

    Exhibit 3 Partial Listing of Mens Wearhouse Training Activities

    Suits High A two-day program held between seven and eight times a year for wardrobe consultants. It occured locally within every market, and was a prerequisite training class for attending Suits University. The goals were intensive sales training, product training, and training in tailoring and fitting. Sales Associate University A one- to two-day program held seven to eight times a year locally within every market for sales associates. The goals were operations training, product introduction, team selling, and stacking. Suits University A four-day program held at corporate headquarters in Fremont, California and at Pajaro Dunes, with the goal of creating and maintaining the culture, providing advanced sales training, exposure to major corporate groups such as advertising, merchandising, human development, and tailoring. The program was held as often as 22 times a year. Advanced Suits University A two-day program held at headquarters in Fremont to provide management sales training for newly promoted assistant managers. The program was held four to six times a year. As-Needed Training The firm offered numerous programs locally on an as-needed basis, including: 1) a one- to two-day new hire orientation for wardrobe consultants to fill in new hire paperwork, provide a general introduction to the company, describe general information on the product, and introduce the concept of benchmark selling behaviors as well as information on tailoring and basic operations. 2) a two-day sales associate new hire orientation to describe basic store operations, register training, and provide a general introduction to the company. 3) newly promoted manager training, a one-day program to provide management sales training to newly promoted assistant managers.

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 23

    Exhibit 3 (continued) Partial Listing of Mens Wearhouse Training Activities

    4) newly promoted district manager training, a three-day program held one time per year in

    Fremont, California. The focus was on the district manager position and its importance in promoting employee development through sales training.

    Informal Training The company encouraged numerous other in-store training activities, including:

    1) Saturday morning meetings, to instruct the store team in a group setting, with the use of guest speakers (multi-unit managers) and in-store training tools such as videos, discussions, and role plays encouraged. 2) One-on-one training, described as the most personal way to teach and learn. It involved coaching by anyone who had expert knowledge or skills.

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 24

    Exhibit 4 Mens Wearhouse Mission Statement

    Our mission at the Mens Wearhouse is to maximize sales, provide value to our customers, and give quality customer service while still having fun and maintaining our values. These values include nurturing creativity, growing together, admitting to our mistakes, promoting a happy, healthy lifestyle, enhancing a sense of community and striving to become self-actualized people. Company Goals The Mens Wearhouse has thesetargetsThey are:

    Increase volume Minimize shrink Provide outstanding customer service Provide a high-quality work environment

    The company seeks to hit these targets by nurturing a Win-Win-Win relationship, as depicted below:

    Customer WIN

    WIN Consultants

    WIN The Mens Wearhouse

  • The Mens Wearhouse: Success in a Declining Industry HR-5

    p. 25

    Exhibit 5 Mens Wearhouse Sales Philosophy

    The Mens Wearhouse sales philosophy is consistent with the Companys goal of creating Win-Win-Win situations for our customers, wardrobe consultants, and the Company. . . . The customer wins because we have consultants. As team-oriented, professional consultants, we seek to create a quality relationship with the customer through understanding his clothing needs (what does he wear to work and for recreation, what is in his existing wardrobe and what is its condition and fit, and where has he previously shopped), and raising his awareness to those needs. Unlike other stores with clerks, The Mens Wearhouse is able to show and assist a gentleman with an entire wardrobe concept. This helps him to look and feel better, while saving time and money. Since you have met the customers clothing needs well beyond those he initially identified, you have made a great sale and a customer for life, whom you can call when new product arrives that fits well with his wardrobe and lifestyle. You, the Wardrobe Consultant, win as you maximize your professional potentialand $$$ incomeby consulting. The Mens Wearhouse wins with every customer that is delighted by the quality of service, the value of the clothing and the unique shopping experience. These customers return to shop with usand with you! Thats a Win-Win-Win relationship!