7-Eleven’s Organizational Structure

7-Eleven’s Organizational Structure

The 7-Eleven company was founded in the year 1927 as a Southland Ice Company in Texas. The business whose initial area of operation was on selling ice learnt from one of their employees that they could branch out into offering other services and selling products that was complementary to their Ice business. The idea birthed by Uncle Johnny that included the selling of milk, eggs, and bread from the Icehouse was soon picked by Jefferson Green, of the leaders at the Icehouse, who duplicated the concept and spread the new line of business in all the branches of the Ice Company. This in effect birthed the whole concept of convenience shopping.

The massive customer satisfaction that followed caused 7-eleven to offer more services and products tailored to address the needs presented by the customers. 7-Eleven’s willingness to listen to the needs of their customers has seen it grow in leaps and bounds and a small ice company that begun in a small town in Texas has since transformed and made its presence felt on the international markets. The expansion that the company has witnessed over the 86 years that it has been in operation has caused it to come up with an organizational design that ensures smooth operations in both the local and international branches of 7-Eleven.

The 7-Eleven company has three types of stores: franchised, corporate, and licensed. The franchises are stores built by the company and leased out to individual entrepreneurs. In this arrangement, the company owns the property and the equipment. The franchisee pays an agreed amount of money to the company as a franchising fee. The corporate stores are owned and run by the company. The company appoints managers from its employees to manage their corporate stores. Licensed stores are akin to the franchise stores and they only differ in ownership: licensed are owned by the entrepreneurs who are licensed by 7-eleven and they have to design their buildings and everything to ape the design and layout of 7-eleven. The licensee pays the company a licence fee for the licence stores.

The success of every organization hinges on the kind of organization structure it operates has. An organization structure is of paramount importance to the firm because it determines the level of efficiency that the firm’s operations will enjoy. This structure also plays a cardinal role in define the chain of command used by an organization (Mills, 2007). Additionally, jobs and tasks are coordinated, grouped, and divided based on the organizational structure. The importance of a firm’s organizational structure places a demand on the firm to come up with a structure that will address its needs in a wholesome manner.

Figure 1. Below shows the organizational structure used by the 7-eleven US branch. The company uses a line organizational structure. This kind of structure is very specific in terms of the chain of command. The CEO is at the helm of the organization. He occupies a level designated for the head of the company. He is in direct contact with about nine senior managers that includes the CFO, COO, and CIO and other heads. Each of these heads man several departments under them (Corporate 7-Eleven.com/ Home., n.d.).).

 

 

 

 

Fig  1: 7-Eleven’s organizational Structure

This organizational structure is not ideal for a magnanimous company such as 7-Eleven. This is because the CEO looks overwhelmed by the number of officers that report directly to him. I believe that the organizational chart needs to be reorganized to take the shape of a geographical organizational structure (Baligh, 2011).

Figure 2: Showing a geographical organizational structure.

The geographical seems ideal for a company such as 7-eleven because of the nature of the company. The organization has multiple stores spread all over the globe. A geographical organizational structure will ensure that all the branches of the firm report to the CEO. The branches can be headed by the branch managers with fully-fledged executive members to cater for matters finance, sales, operations, and information. Such a design is ideal because it will hasten the speed at which changes and innovations are applied across all the branches in the world (Baligh, 2011).

Agency Problem at 7-Eleven

Agency problem arise when the welfare of the shareholders is dependent on the actions taken by the managers that have been appointed by the shareholders. In this case, the shareholders are the principal while the managers take the agent role. Thence, the principal-agent relationship is established. Generally, the shareholders expect the managers to act in a manner that will reflect positively on their welfare (Madura, 2007). However, this is not always the case. The managers have a challenging task of meeting the demands placed on them by the other stakeholders in the firm. These stakeholders may include creditors, the government, the customers, and the firm’s employees. The principle-agent relationship extends to include all the stakeholders (Madura, 2007).

Agency problem arises when the principal has to motivate the agent sufficient so that the agent will look out for the principal’s interest and not his own. This problem arises because the agent is often more knowledgeable than the principal and the agent can use this fact to their advantage. The shareholders of a company such as 7-eleven appoints a Board of Directors to run the affairs of the company because they might be lacking the time or skills and expertise needed to manage such a magnanimous business enterprise (Madura, 2007).

The agency cost arising from the agency problem in 7-Elevens might be too heavy for the shareholders to bear. Therefore, the shareholders can adopt certain strategies to cushion themselves from high agency costs. These strategies may include pegging managerial compensation to performance. The shareholders can offer bonuses to the management in case the performance is good. The shareholders can offer the management what is commonly called the executive share options plan. This plan is designed in such a way that the employees will but the company’s shares at a fixed price after a certain date. This will ensure that the employees at 7-Eleven work hard to improve the value of the business. If the agency problem persists, the shareholders can also used deterrent measures that include threats of firing and hostile takeovers (Madura, 2007). All these measures when correctly applied will ensure that the agency costs arising from the agency problem is reduced to a manageable level.

Job Dimensions at 7-Eleven

The job design used by the company is organized around a functional design. This type of design classifies employees according to the kind of work they do in the organization. The CEO is the head of the entire organization and he is at the helm of the organization. He is directly connected to senior executives that include the COO, CFO, CIO, Heads of International branches, Mergers and Acquisitions, Human Resource, Stores and Logistics, Legal and Secretary, and Marketing (Corporate 7-Eleven.com/ Home, n.d.).). The senior executive officers of the company report directly to the CEO. Each of the senior executive supervises and manages a number of departments that fall under their dockets.

Figure 3: Showing the Arrangement of Jobs according to the functional design

The Job design at 7-eleven is ideal for a business of its capacity. The functional design groups employees according to the job they do. Some are grouped under sales and marketing which falls under the dockets of both stores and marketing managers. The creation of a post for a manager of international operations affords the company a competitive advantage and ensures exogenous growth is attained at all the company’s branches.

Compensation and Remuneration at 7-Eleven

The employees at the organization are remunerated based on their job descriptions and responsibilities. The CEO and other senior executives are entitled to an annual enumeration that is above $500,000 each plus other bonuses. The salaries paid to the other employees ranges from $131,000 to $34,000 annually. The highest paid non-executive employee is the senior marketing manager who bags a cool $131,000 annually. The lowest paid employee happens to be the support staff that may include clerks and janitorial staff (Ishikawa, & Nejō, 1998). Aside from paying these rates to the employees, the company also has a compensation package for work done over and above normal working time. The company also offers bonuses and incentives to its employees on periodic basis.

The compensation package is effective for the purposes of the company. However, this can be improved to motivate the employees and inspire them to work harder. The shareholders can offer the senior management an executive share option plan to motivate them to work harder and minimize the occurrence of agency problems.

 

 

References

Baligh, H. H. (2011). Organization structures: Theory and design, analysis and prescription. New York, N.Y: Springer.

Corporate 7-Eleven.com/ Home. (n.d.). Corporate 7-Eleven.com > Home. Retrieved November 27, 2013, from http://corp.7-eleven.com/

Ishikawa, A., & Nejō, Tai. (1998). The success of 7-Eleven Japan: Discovering the secrets of the world’s best-run convenience chain stores. River Edge, N.J: World Scientific Pub.

Madura, J. (2007). Introduction to business. Mason, OH: Thompson/South-Western.

Mills, A. J. (2007). Organizational behaviour in a global context. Peterborough, Ont: Broadview Press.

 

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