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5 Changing for Good: The Case of Hanna Andersson Corporation

5 Changing for Good: The Case of Hanna Andersson Corporation

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The considerable growth and development the business experienced did not come without its challenges and
necessary organizational change. In the 1990s and early 2000s, increased competition from other retailers
and the introduction of online commerce posed some challenges for Hanna Andersson. The Denharts found
themselves without a solid growth plan for the future. They worried that they might have lost sight of market
forces. Change was necessary if Hanna Andersson was to remain viable.
Realizing the need for help and direction, the Denharts promoted from within the company to help initiate
change and strategic growth, and in 1995, Phil Iosca took the strategic lead as CEO. Hanna Andersson was
then sold to a private equity firm in 2001 and has since changed ownership several times, leading to a new
business direction for the company. After selling the business, Gun remained on the Hanna board of directors until 2007. She also served as chair of the Hanna Andersson Children’s Foundation from 2001 to 2006.
She still partners with the company from time to time on charitable events in the community.
Under Iosca’s steady leadership, the company opened several retail stores throughout the country in 2002
and established online commerce. In 2009, Hanna Andersson began distributing merchandise wholesale
through retail partners such as Nordstrom and Costco. The implementation of each of these new distribution
avenues required a great deal of change within the company. HR Vice President Gretchen Peterson explains,
“The growth of the retail business required the greatest shift in our internal processes from both technical
systems, to inventory planning and buying to distribution processes to our organizational communication
and HR processes (recruitment, compensation, etc.), as well as our marketing communication programs.”
Tenured employees throughout the company found themselves in unfamiliar territory, unsure of the company’s future as the board and owners debated the risks and rewards of retail expansion. Fortunately, the
changes were mostly offset by a consistent leadership team. Petersen, who has been with the company since
1994, explains, “From 1995 to 2010, we retained the same CEO (Iosca) and therefore, the face of the company and the management style did not fluctuate greatly.”
When Iosca retired in early 2010, chief operating officer Adam Stone took over as CEO. He helped his company weather yet another transition with a calm push for changes within the company. To help understand
different points of view at Hanna Andersson, Stone often sat in on inventory and operational planning meetings. Step by step, Stone was able to break down work initiatives so the continuing changes were not so
overwhelming to the company and its valued employees. Over time, his and other company leaders’ presence has helped employees make better, more strategic decisions. Rather than resisting change, they now
feel heard and understood.
The decision to sell wholesale turned out to be a good one, as it has enabled the company to weather the
recession’s negative effect on retail and online purchases. Accounting for approximately 10% of total sales,
the company’s wholesale business is expected to boost yearly revenue by 5%. With more conscientious
inventory purchases and strategic distribution initiatives, Hanna Andersson has realized a higher sales volume, lower inventory at year-end, and less liquidation. Through it all, company management has done an
effective job at interpreting the desired growth goals of its owners while inspiring change within the company. With continued clear communication, direction, and willingness to try new techniques, Hanna Andersson is poised for growth and success in the future while not forgetting to take care of its employees.
Based on information from Bollier, D. (1996). Aiming higher: 25 stories of how companies prosper by combining sound management and social vision (pp. 23–35). New York: The Business Enterprise Trust; Boulé,
M. (2009, July 16). Hanna Andersson employee can’t say enough of a thank-you to co-workers who helped
her through cancer. Oregonian. Retrieved March 4, 2010, from http://www.oregonlive.com/news/oregonian/


margie_boule/index.ssf/2009/07/hanna_andersson_employee_cant.html; Information retrieved February 28,
2010, from the Hanna Andersson Web site: http://www.hannaandersson.com; Muoio, A. (1998, November
30). Giving back. Fast Company. Retrieved March 1, 2010, from http://www.fastcompany.com/magazine/
20/one.html?page=0%2C1; Goldfield, R. (2002, June 14). Hanna sees bricks-and-mortar future. Portland
Business Journal; Peterson, G. (2010, March 5 and April 5). Personal communication; Information retrieved
March 1, 2010, from http://www.answers.com/topic/hanna-andersson; Raphel, M., & Raphel, N. (1995). Up
the loyalty ladder (pp. 83–90). New York: HarperCollins.

Discussion Questions
1. How did company leaders like Iosca, Petersen, and Stone help facilitate change within the
company? Did they follow the steps to successful change?
2. What were the reasons for organizational change within Hanna Andersson, both internally and
3. How can a company anticipate change? How can the company effectively prepare for it?
4. What unique challenges do family-owned and -operated businesses face?

14.6 Conclusion

Organizations can function within a number of different structures, each possessing distinct advantages and disadvantages. Although any structure that is not properly managed will be plagued with issues, some organizational
models are better equipped for particular environments and tasks. A change in the environment often requires
change within the organization operating within that environment.
Change in almost any aspect of a company’s operations can be met with resistance, and different cultures can have
different reactions to both the change and the means to promote the change. In order to better facilitate necessary
changes, several steps can be taken that have been proven to lower the anxiety of employees and ease the transformation process. Often, the simple act of including employees in the change process can drastically reduce opposition to new methods. In some organizations this level of inclusion is not possible, and instead organizations can
recruit a small number of opinion leaders to promote the benefits of coming changes.
Some types of change, such as mergers, often come with job losses. In these situations, it is important to remain fair
and ethical while laying off employees. Once change has occurred, it is vital to take any steps necessary to reinforce
the new system. Employees can often require continued support well after an organizational change.


14.7 Exercises

Ethical Dilemma
Imagine that you are a manager at a consumer products company. Your company is in negotiations for a
merger. If and when the two companies merge, it seems probable that some jobs will be lost, but you have
no idea how many or who will be gone. You have five subordinates. One is in the process of buying a house
while undertaking a large debt. The second just received a relatively lucrative job offer and asked for your
opinion as his mentor. You feel that knowing about the possibility of this merger is important to them in
making these life choices. At the same time, you fear that once you let them know, everyone in the company
will find out and the negotiations are not complete yet. You may end up losing some of your best employees,
and the merger may not even happen. What do you do? Do you have an ethical obligation to share this piece
of news with your employees? How would you handle a situation such as this?

Individual Exercise
Planning for a Change in Organizational Structure
Imagine that your company is switching to a matrix structure. Before, you were working in a functional
structure. Now, every employee is going to report to a team leader as well as a department manager.

Draw a hypothetical organizational chart for the previous and new structures.
Create a list of things that need to be done before the change occurs.
Create a list of things that need to be done after the change occurs.
What are the sources of resistance you foresee for a change such as this? What is your plan of
action to overcome this potential resistance?

Group Exercise
Organizational Change Role Play
Get your assigned role from your instructor.
Discussion Questions


14.7 EXERCISES • 604

1. Was the manager successful in securing the cooperation of the employee? Why or why not?
2. What could the manager have done differently to secure the employee’s cooperation?
3. Why was the employee resisting change?

Chapter 15: Organizational Culture

Learning Objectives
After reading this chapter, you should be able to do the following:
1. Describe organizational culture and why it is important for an organization.
2. Understand the dimensions that make up a company’s culture.
3. Distinguish between weak and strong cultures.
4. Understand factors that create culture.
5. Understand how to change culture.
6. Understand how organizational culture and ethics relate.
7. Understand cross-cultural differences in organizational culture.
Just like individuals, you can think of organizations as having their own personalities, more typically known as
organizational cultures. The opening case illustrates that Nordstrom is a retailer with the foremost value of making
customers happy. At Nordstrom, when a customer is unhappy, employees are expected to identify what would make
the person satisfied, and then act on it, without necessarily checking with a superior or consulting a lengthy policy
book. If they do not, they receive peer pressure and may be made to feel that they let the company down. In other
words, this organization seems to have successfully created a service culture. Understanding how culture is created,
communicated, and changed will help you be more effective in your organizational life. But first, let’s define organizational culture.

15.1 Building a Customer Service Culture: The Case of Nordstrom

Figure 15.1

Wikimedia Commons – CC BY 2.0.

Nordstrom Inc. (NYSE: JWN) is a Seattle-based department store rivaling the likes of Saks Fifth Avenue,
Neiman Marcus, and Bloomingdale’s. Nordstrom is a Hall of Fame member of Fortune magazine’s “100
Best Companies to Work For” list, including being ranked 34th in 2008. Nordstrom is known for its quality
apparel, upscale environment, and generous employee rewards. However, what Nordstrom is most famous
for is its delivery of customer service above and beyond the norms of the retail industry. Stories about Nordstrom service abound. For example, according to one story the company confirms, in 1975 Nordstrom moved
into a new location that had formerly been a tire store. A customer brought a set of tires into the store to
return them. Without a word about the mix-up, the tires were accepted, and the customer was fully refunded
the purchase price. In a different story, a customer tried on several pairs of shoes but failed to find the right
combination of size and color. As she was about to leave, the clerk called other Nordstrom stores but could
only locate the right pair at Macy’s, a nearby competitor. The clerk had Macy’s ship the shoes to the customer’s home at Nordstrom’s expense. In a third story, a customer describes wandering into a Portland,
Oregon, Nordstrom looking for an Armani tuxedo for his daughter’s wedding. The sales associate took his
measurements just in case one was found. The next day, the customer got a phone call, informing him that



the tux was available. When pressed, she revealed that using her connections she found one in New York,
had it put on a truck destined to Chicago, and dispatched someone to meet the truck in Chicago at a rest stop.
The next day she shipped the tux to the customer’s address, and the customer found that the tux had already
been altered for his measurements and was ready to wear. What is even more impressive about this story is
that Nordstrom does not sell Armani tuxedos.
How does Nordstrom persist in creating these stories? If you guessed that they have a large number of rules
and regulations designed to emphasize quality in customer service, you’d be wrong. In fact, the company
gives employees a 5½-inch by 7½-inch card as the employee handbook. On one side of the card, the company welcomes employees to Nordstrom and states that their number one goal is to provide outstanding customer service, and for this they have only one rule. On the other side of the card, the single rule is stated:
“Use good judgment in all situations.” By leaving it in the hands of Nordstrom associates, the company
seems to have empowered employees who deliver customer service heroics every day.
Based on information from Chatman, J. A., & Eunyoung Cha, S. (2003). Leading by leveraging culture.
California Management Review, 45, 19–34; McCarthy, P. D., & Spector, R. (2005). The Nordstrom way to
customer service excellence: A handbook for implementing great service in your organization. Hoboken, NJ:
John Wiley; Pfeffer, J. (2005). Producing sustainable competitive advantage through the effective management of people. Academy of Management Executive, 19, 95–106.

Discussion Questions
1. Describe Nordstrom’s organizational culture.
2. Despite the low wages and long hours that are typical of retail employment, Nordstrom still has
the ability to motivate its staff to exhibit exemplary customer service. How might this be
3. What suggestions would you give Nordstrom for maintaining and evolving the organizational
culture that has contributed to its success?
4. What type of organizational culture do you view as most important?
5. What attributes of Nordstrom’s culture do you find most appealing?