1.

Sense of Urgency:
Martinez took a slew of actions to establish a sense of urgency among the
management. He shut down Sears catalogue along with 113 full-line stores which were
unprofitable and lay off the excessive workforce. He also aggressively started hiring for
senior executives from outside the organisation.

2. Forming coalition:
Martinez set up a foundation of the Phoenix team that included top 65 executives of
Sears. Meetings were conducted periodically to discuss action-producing agendas.

3. Vision:

Martinez set out a vision for the company by establishing five strategic initiatives as the
building blocks for Sears’ revitalization:
• focus on core businesses (retailing);
• make Sears a more compelling place to shop;
• establish greater local market focus;
• improve cost structure and productivity; and
• develop a winning culture.

4. Communicating the vision:

To communicate the 5 strategies conceived by Martinez, 3Cs and 3Ps were devised with the
Phoenix team. These 3Cs and 3Ps were communicated till an Entry associate by modifying
their compensation package according to TPI. Training and employee education program
were revived to imbibe the vision in the employees.
Town hall meetings became more frequent and the 29000 page policy was overhauled with
broad guidelines.

5. Empowerment:
The front line was re-engineered so that the individuals could sell, or provide sales support,
instead of being burdened with administration.
Few companies other than retail were sold off to make the senior management focus only
on retail.
Women were was identified as the target customer by analysing the customer data and the
strategy was made on women apparel and accessories.

6. Short Term Wins:

To the long-term goal of 3Cs, which includes making of the place compelling to shop is to
preceded by a need to make the place compelling to work.To motivate employees, 10% of
the bonus was linked to a change in customer satisfaction. Payouts were based on TPI
performance in contrast to goal over a period of three years, with minimum payouts of 0%
and a maximum of 150% (of annual salary for each of the three years in the period). Other
incentives included annual stock option grants (averaging 18% to 50% of annual salary) and
annual cash bonuses equal to an average of 40% to 80% of salary (minimum 0% and
maximum 230%) based half on division income for which the individual was responsible, and
half on Sears’ aggregate profit
7. Consolidating Improvements and Producing Still More Change:
To achieve the final goal of make the place compelling enough to invest, his 13 most senior
managers were made to purchase three times their salary in Sears stock, and all top 200
executives to purchase their salaries in stock. Martinez himself had set a goal of acquiring
five times his salary in Sears stock. This would motivate the senior employees to work well
for the company to make its finances stronger.
The review process was overhauled completely, which provided the basis of promotion. 5%
of an individual’s review was based on numeric indicators of sales, profits, credit card use,
inventory, shrinkage, and customer service levels. The remaining 65% was based on what
Sears called “transformational issues,” i.e., how well a manager performed in terms of
communication, leadership, and people development.

8. Institutionalizing new approaches:

Goalsharing model was introduced to improve the results tied to their efforts. It also forced
managers to cede some degree of decision making (and responsibility for the decisions
made) to those associates.
Associates who chose to participate in goal-sharing worked on teams to design and
implement changes and new processes that would improve performance. The gain from
these activities (defined as improvements in performance beyond those expected from
other sources and thus built into budgeted targets) was shared between the organization
and the participating individuals. This was delivered as a bonus in addition to regular wages,
with each associate receiving a portion of the total based exclusively on the average number
of hours he or she worked. If performance did not improve, no bonus was paid. If
performance declined, future bonuses (although not wages) were reduced. Thus
participants shared in both the benefits and the risks associated with their activities.