STRATEGIC HUMAN RESOURCE MANAGEMENT AT SEARS
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Strategic Human Resource Management at Sears • 329
STRATEGIC HUMAN RESOURCE MANAGEMENT
AT SEARS
Steven P. Kirn, Anthony J. Rucci,1 Mark A. Huselid,
and Brian E. Becker
This article describes the HR Management System in place at Sears. Key emphases of Sears’
HR management infrastructure include: (1) formulating and communicating a corporate
mission, vision, and goals, (2) employee education and development through the Sears Uni-
versity, (3) performance management and incentive compensation systems linked closely to
the firm’s strategy, (4) validated employee selection systems, and (5) delivering the "HR Ba-
sics” very competently. Key challenges for the future include: (1) maintaining momentum in
the performance improvement process, (2) identifying barriers to success, and (3) clearly
articulating HR’s role in the change management process. © 1999 John Wiley & Sons, Inc.
Introduction and divesting Allstate, Coldwell Banker, the The makeover
Discover Card, and Dean Witter brokerage in also included a
focus on a target
We’ll know we have been successful as HR order to focus on Sears’ core businesses. Sears customer—the
leaders when there is no perceived need for is now in the midst of a five-year-old trans- middle class
HR anymore—when we are transparent. formation that includes a $4 billion store American mom
—Senior HR Professional, Sears refurbishing program. The makeover also (25–54,
included a focus on a target customer—the homeowner with
a household
Sears, Roebuck, & Company incorporated in middle class American mom (25–54, home-
income between
1886 and is currently a retailing giant with a owner with a household income between $25,000 and
market capitalization over $41 billion. Arthur $25,000 and $60,000)—and implementing a $60,000)—and
Martinez, CEO of Sears, is effecting a sig- complementary marketing campaign of focus- implementing a
nificant transformation of this retailing insti- ing on “the softer side of Sears”. These ef- complementary
tution by broadening its scope to include an marketing
forts have been rewarded by an increase in
campaign of
expanded array of home repair services and market share and profits, and by Sears being focusing on “the
thousands of small stores, most of which will named by Fortune this year as the most inno- softer side of
be closer to consumers and farther from shop- vative general-merchandise retailer. Sears”.
ping malls. Martinez took the helm in 1992, The firm’s recent reorganization (in early
when Sears was losing $3.4 billion annually, 1996) left it with five distinct business units:
and has since rejuvenated the company (1) full-line stores (approximately 250,000
through eliminating the Sears Catalog; employees), (2) home or “off the mall” stores
downsizing 50,000 jobs; closing 113 unprof- that include hardware, Homelife furniture,
itable stores; selling the famous Sears Tower; dealer stores, and a variety of new concept
Human Resource Management, Winter 1999, Vol. 38, No. 4, Pp. 329–335
© 1999 John Wiley & Sons, Inc. CCC 0090-4848/99/040329-07330 • H UMAN RESOURCE MANAGEMENT, Winter 1999
specialty stores under development (approxi- much of the “low hanging fruit”, and that go-
mately 10,000 employees), (3) automotive (tires, ing forward, incremental improvements
parts, service, and Western Auto; approximately through HR will be much harder to find.
35,000 employees), (4) home services (product Both CEO Martinez and Tony Rucci point
services and licensed businesses; approximately to the importance of employee ownership in
30,000 employees), and (5) Sears credit (12,000 facilitating the implementation of Sears’ strat-
employees). These business units were created egy, stating that “Ownership is the next phase
to discourage management from making deci- in the transformation of Sears”. They argue
sions solely through the lens of the full-line for the importance of creating an “ownership
stores, and to help management develop and culture” at Sears that involves each employee
implement strategies tailored to their particu- staying informed, taking action, and building
lar market segments. Sears recently sold off its a financial stake in the future of the business.
interest in Sears Mexico, leaving a 49% stake in In the following sections we highlight those
Sears Canada as its only international opera- HR practices, policies, or strategies we con-
tion. CEO Martinez does not have any further sider to be “high impact” (i.e., Sears was very
international expansion plans, noting that in- good at them and such policies did have or
ternationalizing Sears is “eleventh on his top were expected to have a significant effect on
ten list of things to do”. The company is, how- the success of the firm).
ever, moving into marketing and selling certain
key products via the Internet. High Impact HR Policies at Sears
Central to the implementation of Sears’
new strategy will be the opening of 380 new Formulating and Communicating a Corpo-
stores this year, of which 358 will be freestand- rate Mission, Vision, and Goals
After some ing specialty outlets (e.g., some of which will
experimentation sell only hard goods like tools and automotive Perhaps the most salient of Sears’ “best prac-
with a more
parts representing “the harder side of Sears”). tices” in the management of people is reflected
“conventional”
mission and Martinez explained the irony of the obvious in its process for developing a clear competi-
vision statement contradictions by stating “a hallmark of great tive strategy and associated operational goals,
(which was found companies is an ability to recognize the game and then relentlessly communicating both
to have little has changed and to adapt”. In order to achieve strategy and goals to employees. After some
direct impact on this flexibility, he also recognizes his people experimentation with a more “conventional”
employee
behavior), Sears have to be re-educated to the structural and mission and vision statement (which was
developed a business strategy changes and made to “feel found to have little direct impact on employee
conceptual comfortable outside a command-and-control behavior), Sears developed a conceptual model
model of firm environment . . . getting them used to risk tak- of firm performance linking employees, cus-
performance ing and innovation. . . .” tomers, and shareholders in a causal chain.
linking
employees,
This model, known throughout the firm as the
customers, and HR at Sears “three Cs” (for the creation of a compelling
shareholders in a place to work, compelling place to shop, and
causal chain. The HR community at Sears, under the di- a compelling place to invest), was subse-
rection (through early 1998) of Senior VP of quently validated with very substantial
Administration and HR, Tony Rucci, has been amounts of data collection and econometric
widely identified as the single most important analysis. In 1995 Sears hired a consulting firm
business group in leading the change efforts skilled in econometrics to help analyze data
within the firm, most of which have come taken from 800 stores throughout the system
about largely as a result of purposive changes (Rucci, Kirn, & Quinn, 1998; Yeung &
in the way in which Sears manages its people. Berman, 1997). These analyses confirmed
The HR function has clarified its vision, added what Sears’ management had long believed:
more resources, and moved its staff closer to Corporate financial performance is a lagging
the stores, but this has raised the expectations indicator, informative about what has already
of the firm around HR going forward. There happened throughout the firm, but providing
is the sense that HR at Sears has eliminated little information about what will happen.Strategic Human Resource Management at Sears • 331
Sears was able to establish that in its “high the most recent results along with the tar-
touch” retailing environment, employee atti- get and the stretch goals that have been
tudes affected customer attitudes and behav- set for the firm. The hope and intent is
ior, both of which affected Sears’ financial that they will cause managers to become
performance. Moreover, Sears has been able more proactive.
to show that an increase in employee satisfac- Given Sears’ focus of the development of
tion in one quarter will increase customer the three Cs, it should come as no surprise to
retention in the next quarter, which will sub- learn that the firm has identified a series of
sequently be reflected in shareholder returns 12 leadership competencies that are intended
the quarter after that. Yeung and Berman to support each of the three “Compellings”.
(1997) describe the magnitude of these inter- There is significant commitment to the 12
relationships as follows: competencies because there was widespread
participation in their development. Over 100
. . . for every 5% improvement in associates executives participated in the process, which One surprising
behaviors, customer retention was increased included a significant amount of survey work and consistent
outcome of this
by 1.3%, revenues by 1.04% and profit by and focus groups. An interesting point is that
process was the
0.4%. the 12 competencies do not apply exclusively finding that most
What does this mean to Sears? It means to exempt employees: Sears has four levels employees had
that if Sears succeeds in improving associ- of employees throughout the firm, and very little
ates behaviors by 5% (e.g., from 50% to the competencies are generic to all levels, understanding of
the financial and
55%), its revenue will be increased by $300 although each level may have different
operations
million (Sears’ current revenue is approxi- behavioral expectations. aspects of Sears’
mately $38 billion). (p. 326) As noted above, in developing the three business.
Cs a large number of focus groups were con-
As such, much of Sears’ competitive ducted at all levels of the organization, in one
strategy involves making the firm a compel- way or another involving 80,000 associates.
ling place to work and to shop, which it has One surprising and consistent outcome of this
demonstrated will subsequently make it a process was the finding that most employees
compelling place to invest. Sears’ “3C” had very little understanding of the financial
model and its associated measurement in- and operations aspects of Sears’ business.
dicators consist of the following elements: Thus, the firm developed a series of interven-
tions to increase the level of economic literacy
1. Compelling Place to Work. Measured among the employees while concurrently re-
via associates’ attitudes toward their inforcing the firm’s mission, vision, values, and
company and their jobs (the “My the three Cs.
Opinion Counts” survey). One very visible way in which Sears does
2. Compelling Place to Shop. Contains this is through the development of a series of
measures of both customer satisfac- Learning Maps. Learning Maps take the form
tion and customer retention. of large poster-sized graphical representations
3. Compelling Place to Invest. Contains of a variety of topics of importance to the
measures of revenue growth, operat- implementation of Sears’ strategy. Highly col-
ing margin, and return on assets. orful and engaging, Sears has developed five
Learning Maps to date, covering such topics
As a result of this research process, and as (1) Ownership: How does it create value?
simplicity and clarity of the message con- What effect does it have on shareholder
tained in the three Cs, this framework has wealth?; (2) Sears Total Performance Indica-
a considerable amount of credibility in the tors, including a detailed description of the
eyes of management. Data are collected on interrelationships among the three Cs; (3) a
an ongoing basis on workplace, customer, New Day on Retail Street, which describes the
and shareholder outcomes; and these data changes in the retailing industry and docu-
are presented to the Sears workforce on a ments the shift from mall to “off the mall”
quarterly and an annual basis—including stores; (4) Voices of Our Customers, which332 • H UMAN RESOURCE MANAGEMENT, Winter 1999
describes the changing demographics and prod- dedicated building for Sears University. The im-
uct/service choice processes of the Sears’ cus- petus for Sears University came from the Se-
tomer base; and (5) The Sears Money Flow, nior Executive team, who fully funded the
which describes how each dollar of revenue is initiative. While there is recognition that at some
spent at Sears. Learning maps are presented to point they may have to charge back regions or
employees in focus groups of ten employees, stores for services, the initial intent was to fully
and the response to them has been overwhelm- fund the program at the corporate level to re-
ingly positive. Learning Maps, in conjunction duce any resistance to using the services and
with a variety of other communication tools, all also to build a strong base of support for what
The impetus for
Sears University help Sears to help its workforce become engaged the leadership is trying to do. Executives in
came from the and informed. charge of Sears University cite the strong links
Senior Executive between the curriculum, the Sears’ strategy, and
team, who fully Education: The Sears University senior management buy-in, as critical success
funded the factors in the project’s success.
initiative.
Designed to a very great extent as a vehicle to
help Sears transmit its culture and “DNA” to Performance Management and Incentive
the new and continuing workforce, Sears Uni- Compensation Systems
versity offered its first courses in the fall of 1994.
With a curriculum consisting of classroom as Like many organizations, Sears has increased
well as cassette, CD-interactive, and self-paced its emphasis on performance management and
instruction, employees self-select into classes incentive compensation systems in the recent
based on a developmental plan negotiated with past. Sears believes that its management pro-
their managers (as part of the performance cess must be linked closely to the three Cs for
management process). The capacity of Sears it to be effective, and it is well on the way to
University is currently about 20,000 managers achieving this objective. For Sears this has
annually. Course sign-ups are on a first come- meant a recrafting of these systems to reflect
first served basis, and the University is currently the importance of the three Cs on evaluating
only able to satisfy two-thirds of the demand and developing the 12 leadership competen-
for the courses. The courses are offered at Sears’ cies that the firm has identified (this process
corporate headquarters in Chicago and at seven is described in a 70-page manual made avail-
regional centers located around the country. able to managers).
Entry-level courses are taught almost exclusively While the firm has provided managers
by Sears’ managers, with outside faculty used with multi-perspective performance apprais-
more frequently at the senior management level. als for nearly five years, this process is now
Outsiders are used only if they can demonstrate being much more broadly implemented
that they know Sears very well and are able to throughout the firm. To deal with any po-
effectively integrate the three Cs and the 12 tential negative consequences arising from
leadership dimensions into their courses. Go- this process, the firm is providing coaching
ing forward, the firm is considering the use of and training on dealing with the feedback
additional distance learning methodologies and plus individual attention as well, if neces-
going on-line with courses. Interestingly, Sears sary. Overall, it is felt that this process
U makes its faculty available for 4 to 5 weeks a (which is mandatory all the way down to
year for consulting on “special projects” that mid-level managers) has effected a signifi-
might come up; this often involves working with cant change in the behavior of managers
a team to solve a problem in a troubled store. because they know that they will be held
And as a general rule, Sears U has a strong pref- accountable for their behavior. For the Sales
erence for teaching and working with intact Associates working in the stores, the process
teams or work groups, as it is felt that this fa- differs somewhat. In an effort to gain more
cilitates the transfer of knowledge back to the direct feedback on employees, Sears ran-
store or office. domly prints a $5 coupon on sales receipts,
The concept has been wildly successful, which can be redeemed if customers call
so much so that the firm plans to build a an 800 number (at their convenience) andStrategic Human Resource Management at Sears • 333
provide the store with detailed feedback cannot deliver the services better or cheaper
about their shopping experience. on an outsourced basis. One way this process
For managers, total compensation is com- has been facilitated was to reduce over a seven-
prised of base, annual incentive, and (for the year period the number of associate service
top 250 managers in the firm) long-term centers (handling employee benefit questions)
incentives. Sears is now focusing more on pay from 200 to just a single center. The delivery
for performance (incentive pay is becoming of the HR basics in a world-class manner is
more variable), and this pay is based to a larger one important way in which the firm keeps
extent on customer service than in the past. and gains legitimacy with line managers and
Sears bases variable pay 50% on financial other constituencies throughout the firm.
performance, 25% on measures linked to cre-
ating a compelling place to work, and 25% on Challenges Facing HR at Sears
measures linked to creating a compelling place
to shop (for 1998 these proportions will be The business turnaround at Sears in the last
33% each). Sears has also increased incentive four years and the ongoing efforts at cultural
pay levels from the 50th to the 60th percen- transformation have been impressive. A corner-
tile in its benchmark sample of firms with high stone of this process has been the articulation
total shareholder return (the target is to move of what Sears wants to be known for (a compel-
to the 75th percentile). The intent of this move ling place to work, shop, and invest), and sub-
was to increase the quality of new applicants stantial energy has been invested in infusing the
and to aid in the retention of high potential three Cs into Sears’ culture. Over the past sev-
employees. In addition, all salaried associates eral quarters, however, the pace of improvement
receive annual stock option grants. in revenues, customer satisfaction ratings, and
associates’ attitudes about Sears as a place to
Employee Selection Systems work has slowed. In addition, there is a growing
sense that the firm is losing momentum (or even For example, the
Still another area of competency for Sears is worse, losing ground) in the desire and willing- basic transaction
reflected in the development and deployment ness to do what it takes to continue the signifi- processing issues
are handled so
of a series of validated selection devices for cant levels of improvement recently achieved.
efficiently that a
hourly and managerial employees, as well as an In fact, the firm describes itself as “reaching a number of
extensive series of structured interview guides crossroads”. Actions taken today may determine consulting firms
for a wide variety of positions. For example, whether Sears: have told Sears
selection tools have been developed to assess that they cannot
an applicant’s “customer service aptitude and • successfully reinvigorates the orga- deliver the
services better or
dependability”. There is a stated policy that all nization to continue improving, cheaper on an
applicants will be administered a selection test • accepts its progress to date as “good outsourced basis.
if one is available for the position for which they enough”, or
are applying. These selection tools are aided by • regresses to a pre-turnaround men-
a computerized system to manage employee tality.
hiring (RESTRAC) and a recently introduced
job posting system. The use of these tools is The challenge, of course, is to build a strat-
facilitated through the development of a very egy that ensures the “successful reinvigo-
clear written documentation for these tests. ration” outcome for Sears. Those leading
the HR organization at Sears are currently
Delivery of the “HR Basics” using the following questions to help frame
a discussion on how to achieve this:
Finally, and of significant consequence, the
firm is described as consistently delivering the • What makes us think that we’re losing
“nuts and bolts” HR very competently. For momentum in our desire to improve?
example, the basic transaction processing is- • What does a “compelling place” look
sues are handled so efficiently that a number like to our associates, customers, and
of consulting firms have told Sears that they investors?334 • H UMAN RESOURCE MANAGEMENT, Winter 1999
• Do we know people who exemplify this time employees to the three Cs?
vision when we see them? What do - Seeing “change management” as
we do about those that don’t? Do our something that can be put in a
promotion, termination, and recogni- binder or around which a meet-
tion programs accurately define who’s ing can be built?
“got it” and who hasn’t? • What is HR’s role in driving contin-
• What barriers slow us down or un- ued improvement? Have we abdicated
dermine change efforts? responsibility by saying “it’s not an HR
- Few people know what “transfor- issue”? If so, is that a mistake?
mation” means—and many more • Is it possible to create a large, con-
are just plain tired of hearing that tinuously self-renewing organization
word? or must change, by necessity, proceed
- Loss of heart or lack of commit- in “bursts”, precipitated by some
ment at the top? crisis?
- Diffusion of focus or lack of co- • What are the likely consequences for
operation across multiple busi- Sears if we don’t fully engage our as-
ness formats? sociates in making Sears a compelling
- Failure to connect our many part- place to work, shop, and invest?Strategic Human Resource Management at Sears • 335
STEVE KIRN is Vice President, Organizational Learning and Development for Sears,
Roebuck, and Co. In this role he is responsible for Sears’ management and executive
development programs, for corporate direction of training efforts in Sears’ various
business groups, and for organizational change and development programs. He is also
responsible for developing strategies to support continuous learning and businesses
throughout Sears. Prior to joining Sears he was a Principal with the consulting firm of
William M. Mercer, Inc., in its human resource management consulting practice.
Dr. Kirn earned his M.A. and Ph.D. degrees in clinical psychology from the University
of Florida.
ANTHONY J. RUCCI holds a bachelors, a Masters, and a Ph.D. in organizational psy-
chology from Bowling Green State University. Dr. Rucci became Dean of the College
of Business Administration at the University of Illinois at Chicago (UIC) in 1998.
From 1979 to 1993 he was employed by Baxter, ending his career there as Senior VP
for corporate strategy, business development, and media and investor relations. Be-
tween 1993 and 1998 he was Executive Vice President for Administration for Sears.
He is a Fellow in the National Academy of Human Resources and was recently named
to Human Resource Executive Magazine’s Executive of the Year Honor Roll. In 1997
he was named Executive of the Year by the International Association of College and
Professional Recruiters.
BRIAN E. BECKER (Ph.D., University of Wisconsin–Madison) is Professor of Human
Resources, and Chairman of the Department of Organization and Human Resources,
in the School of Management at the State University of New York at Buffalo. Professor
Becker has published widely on the financial effects of employment systems, in both
union and non-union organizations. His current research and consulting interests fo-
cus on the relationship between human resources systems, strategy implementation,
and firm performance.
MARK A. HUSELID is an Associate Professor in the School of Management and Labor
Relations (SMLR) at Rutgers University. He holds a Ph.D. in Human Resource Manage-
ment, an M.A. in Industrial and Organizational Psychology, and an M.B.A. His current
research and consulting activities focus on measuring and evaluating the impact of hu-
man resource management systems on firm performance. He has published widely on
these topics and currently serves on the editorial board of five major academic journals.
The recipient of numerous awards for his research, Huselid is on the Board of Directors
of the SHRM Foundation and is a member of the Executive Committee of the Human
Resource Management Division of the Academy of Management.
REFERENCES
Rucci, A.J., Kirn, S.P., & Quinn, R.T. (1998, January– through human resources: Reorienting human
February). The employee-customer-profit chain at resource measurement to drive business perfor-
Sears. Harvard Business Review, 83–97. mance. Human Resource Management, 36, 321–
Yeung, A.K., & Berman, B. (1997). Adding value 335.
ENDNOTE
1. Dr. Rucci was employed at Sears during the preparation of this article.You can also read
