The Link between Employees’ Working Condition and Organizational Performance: An Analysis of Sports Direct

SECTION 2
EVIDENCE REVIEW
2.0 Introduction

This section contains a review of the analytic frameworks adopted while analysis the current business environment of Sports Direct and offering workable solutions to its problems. The SWOT Analysis and Fielder’s Contingency Model were both discussed to highlight their advantages and pitfalls and weighed to ascertain their relevance in the study. Also, an assessment of the Leader-Member Exchange (LMX) Model aimed at gaining insight in its importance, procedure, and applicability to the litany of problems at Sports Direct.

1.1 SWOT Analysis
2.1.1 Introduction to SWOT Analysis

No organization survives market competition without solid internal and external structures which must undergo regular reviews for proper adjustments considering the volatile nature of business environments. This implies a careful examination of all factors classified as strengths, weaknesses, threats, and opportunities to formulate a dynamic plan relevant to industry demands and with capabilities of providing an edge over market contenders. Now, the SWOT Analysis proves an important tool.

SWOT is an acronym for STRENGTH, WEAKNESS, OPPORTUNITIES and THREATS. It is a management term often used in the administrative process of an organization. The term also refers to a strategic tool for planning (Ivancevich et al., 2007).

SWOT Analysis aids in assessing an organization’s current business environment to identify its weak points, internal strength, external opportunities and existing or anticipated threats incorporated in decision-making to provide lasting solutions to organizational problems. SWOT analysis helps to synchronize factors from both internal and external environments of the organization (Kouzes & Posner., 1987).

Among other purposes, SWOT Analysis helps in identifying new problem-solving approaches with an organization. It plays a crucial role when decisive actions in new opportunities or threats become unavoidable. In addition, the model provides justification for solutions offered as well as guides management in deciding when or what changes are necessary within an organization, especially when existing solutions have failed. The processes of SWOT Analysis allow mid-way reviews and adjustments for favourable results (Lamb & McKee., 2004).

Figure 5: SWOT Analysis Model


2.1.2 Internal Analysis

One of the best applications of SWOT Analysis is in presenting all internal factors deemed crucial in an organization’s survival. The factors include all activities performed under supervision by the management in delivering products and services which determine a company’s success or failure. These elements are categorised as strengths or weaknesses and are important in achieving competitive advantage.

While weaknesses refer to the internal factors which are responsible for failure, it is worth noting that certain circumstances can either represent strength or weakness depending on their end results.

The following are a list of the internal factors found within any organization:
• Operating Capital
• Number and Quality of Employees
• Efficiency of the Organizational Structure
• Customers’ Loyalty
• Equipment/Technology
• Suppliers/Channels of Distribution
• Patent Rights
• Copywrite Materials

2.1.3 External Analysis

The external analysis is complementary to the internal evaluation discussed above. Since no company exists in a vacuum, the external analysis seeks to identify all opportunities and threats within an organization’s external business environment, which comprises of the eco-system, markets and third parties as presented in Figure 4. Organizations have no control over high or low-impact external environments; therefore, managers need a thorough assessment of the factors to correctly classify them as either opportunities or threats (Gharajedaghi J., 2006).

Figure 6: External Analysis

Barnett Quaicoo, 2018

Valentin E. K. (2001) described market as a place where companies find their purpose of existence and a meeting point where customers or consumers of goods and services assemble. End-users of goods and services determine the producer’s profitability and as such their satisfaction present an important challenge in business.
Within the eco-system, we find existing factors and other expected ones with impacts on the organization, but these are independent of the market. An example of elements in the eco-system is new technologies which can transform business operations when utilized or create rooms for closure where managers fail to adopt same (Jago., 1982).

Third parties, as shown in Figure 6, include business partners, competitors, governments, and regulatory institutions, including the media or other entities which have impact on the organization but are neither customers nor part of the eco-system.
Every organization operates within a political, economic, social, and legal environment which, in turn, has different opportunities and threats. These factors are unavoidable but can create huge benefits when managers exploit them with effective business models. A good knowledge of the factors enables organizations to make adequate preparations against their weaknesses thus reducing impact of the threats (Newstrom & Davis., 1993).

As shown in Figure 7 below, opportunities for growth abound when managers implement changes within any of the following variables: lifestyle, social patterns, technology, population growth and government policy. SWOT Analysis therefore provides organizations with clear pictures of strategic factors that provide opportunities for diversification or expansion.

Figure 7: External Opportunities

Barnett Quaicoo, 2018

On the other hand, Figure 8 shows that changes in variables such as price reduction by competitors, high cost of supplies, change in lifestyle, new government policy, introduction of new technology, changes in consumer behaviour and economic recession will lead to low earnings or outright closure. This proves the importance of managers having knowledge of SWOT Analysis and applying same to gain competitive advantage (Valentin., 2001).

Figure 8: External Threats

Barnett Quaicoo, 2018

2.1.4 How SWOT Analysis Works

Using the SWOT Analysis does not end with identifying factors that represent the four quadrants. Uses of the framework include identification of how an organization’s Strengths and Weaknesses as well as the systemic Opportunities and Threats can improve the decision-making process thereby empowering managers to achieve long-term sustainability. Innovative managers use two different strategies namely Strengths-Opportunities (SO) and Strengths-Threats (ST) to identify the internal factors that control existing external opportunities. They also use the strategies to identify all internal strengths that aid elimination or reduction of negative impacts from external threats. Similarly, the other two strategies: Weakness-Opportunities (WO) and Weakness-Threats (WT), apply factors from opportunities to overcome organizational weakness, as well as ascertain how management can shield itself from identified weaknesses and thereby avoiding or minimizing impact from threats (Beare et al., 1997).

2.1.5 Merits of Using SWOT Analysis

SWOT Analysis is beneficial, not only to organizations but individuals, groups, and projects. The versatile nature of this analytic tool proves its usefulness to users who adopt it while proffering solutions to organizational problems. Its flexibility allows specific links to strengths, weaknesses, opportunities and Threats and collating results from the analysis to present workable solutions (Kimberly., 2018).

Considered as one of the best analytic frameworks, SWOT Analysis is simple to apply and required little explanations, even for first-time users. The process is participatory in nature and requires deep thoughts unlike in individual thinking where members of the receiving organizations can easily misunderstand the research consultant. Results from SWOT Analysis often identify participants in the brainstorming process irrespective of their ranks within the organization and offers members a sense of ownership to the proposed solutions (Chaudhry & Javed., 2012).

2.1.6 Disadvantages of the SWOT Analysis

Notwithstanding the benefits of SWOT Analysis, critics of the model argue against its subjective nature and reliance of data collated by biased researchers and members partaking in the thought process. Users of the framework are also likely to focus on one of the four quadrants thus losing sight of the other three. This may produce partial data which, when relied upon for decision making, may not provide an effective strategy for handling organizational problems. In addition, users of SWOT Analysis tend to oversimplify the model and thereby obtaining outdated or irrelevant results (Lewis et al., 1995).

2.2 Fielder’s Contingency Model

Results from the SWOT Analysis confirmed that Sports Direct management can rectify existing management problems, and this prompted the Consultant to use Fielder’s Contingency Model of Leadership. Although there are other leadership theories, the author applied this framework to ascertain quality of the leadership-staff relationship and pinpoint exactly what leadership requirements that individuals must possess to improve organizational performance. Fred Fiedler helped formulate and popularize the Fielder Contingency Model in the mid-60s (Lamb., 2013).

2.2.1 How the Fielder’s Contingency Model Works

A proper use of the Contingency Model requires innovation, with the idea that no single leadership style can solve all management problems for every organization. The model assumes that each company or leadership problem demands custom-made solutions since a manager’s effectiveness depends on the circumstance and choice of solution applied. “Leadership style” and “situational favourableness” represent the two important factors in this model.

Leadership Style

Fielder’s Contingency Model starts with examining the existing leadership style in an organization, using the Least-Preferred Co-Worker (LPC) Scale to rate employees’ orientation level, which is crucial in determining what style of leadership the staff need. As shown in Appendix A, the LPC Scale has sixteen variables on the scale of 1 to 8 used for workers’ identification of their most preferred colleagues beginning from 8 (the maximum rating) and 1 (the minimum score). The workers are people who may have had previous contact as individuals, members of a team, or those who have performed assignments/training together. Employees give answers to various questions using the numbers on each variable to get a summed-up score after the relationship-oriented exercise which, according to Fielder, indicates a task-oriented leader. High Least-Preferred Co-Worker (LPC) and Low Least-Preferred Co-Worker (LPC) are the two categories of leadership in this model which describes High LPCs as relationship-oriented leaders since participants in the survey recognised their LPCs in a positive manner. These leaders focus on building strong relationships with people in the workplace, using policies and systems that promote oneness, settle grievances and proffer solutions to organizational problems. The leaders are also human-centred, focused on team building and teamwork during assignments.

On the other hand, task-oriented leaders are those whose scored low because the recording of their LPCs followed an unprofessional process. The leaders focus on getting jobs done without considering the convenience of workers. In most cases, the leaders also apply strict procedures with less concern for the wellbeing of those performing the tasks (Forsyth., 2006).

Situational Favourableness

Fielder described “situational favourableness” as the first activity after understanding the leadership style within an organization. The three-phased structure includes: (a) Leader-Member Relations (b) Task Structure, and (c) Leader’s Position Power (Peretomode., 2012).

Leader-Member Relations: This refers to the degree of influence wield by a leader within an organization. The model asserts that the level of influence a leader has on workers is a determinant factor on their level of trust and confidence in the management, for example, a high level of trust and confidence means leaders can easily influence actions from employees and vice versa. In this circumstance, the leader efficiently performs tasks with his subordinates and gets respect more than the leader without trust or confidence in his workers (Fielder & Chemers., 1976).

Task Structure: Employees of every organizations, whether structured or not, have the duty to perform tasks and in any of these settings where leaders and their subjects have no clear understanding of how to execute tasks, jobs are “unfavourable” whereas workers in organizations with clear procedures for performing tasks see it as “favourable” (Robert., 2018; Bird., 1977).

Leader's Position Power: This model asserts that a manager either has control of leadership power or not, considering that true executive power is evident in directing of activities, rewarding outstanding performance or meting out punishment to defaulters. Such leaders have influence because they are in a favourable position to take actions whereas managers without leadership power are “unfavourably disposed” (Fielder., 1967).

Fielder’s Contingency Model comprises of three steps required in identifying Leader-Member Relations, what circumstance, and the type of leadership required. As shown in Figure 8, a leader in an organization either has “Good” or “Poor Leader-Member” relationships, “Strong” or “Weak” position power, and “High” or “Low” task structure. Using 8-Octant Continuum, a scale of 1 to 8 rates leaders as favourable or unfavourable while organizations that fall between 1-3 on the scale have Low Least-Preferred Co-Worker (LPC) and therefore need a task-motivated leader. The same leadership is necessary for all organizations that scored eight. On the other hand, organization that scored between 4-7 on the scale have High Least-Preferred Co-Worker (LPC) and should employ services from a relationship-motivated leader.

2.2.2 Advantages of Fielder’s Contingency Model
• The model is useful in finding the right kind of leadership needed for specific situations.
• Managers have successfully applied it for over 60 years, and it is still empirically credible in addressing management problems within organizations.
• It built further on preceding leadership theories which relied on behavioural traits, with the assertion that leadership style should be dynamic in response to changing situations.

2.2.3 Disadvantages of Fielder’s Contingency Model

Northouse (2007) argues that where a model becomes a failure when leaders are unable to improve organizational problems with given solutions. In Fielder’s Contingency Model, the Least-Preferred Co-Worker Scale is not acceptable by managers because it does not comply with standard leadership approaches. Moreover, the framework’s reliability becomes unfathomable in a situation where an organization scores 50% thus proving hard to rate on the scale.