Marks and Spencer used to be structured under a Functional or U-Form design which works by breaking the company into departments like operations, marketing, finance, human resources, and research and development. This design works well with smaller companies but with bigger companies there is too much information for the top manager to handle and deal with. This is exactly what happened to Marks and Spencer. In 1991, Sir Richard Greenbury took over Marks and Spencer for seven years and structured the company to fit the Functional design. He made the company very aristocratic and rigid where by “Head office knows best” (The Economist). This created an atmosphere where by the company focused on their products instead of focusing on their customers. Although Marks and Spencer grew and made huge profits within this time, in 1998 their profits fell very quickly and sharply. Marks and Spencer closed a chain of stores which they owned in Canada and rumours were spreading that they would also close two chains of stores which they owned in the United States. The combination of Marks and Spencer’s quick expansions and the aristocratic rule had definite visible implications on Marks and Spencer’s well-being. The combination of Marks and Spencer’s aristocratic rule and structure just couldn’t handle everything that was going on. Another one of Marks and Spencer’s weaknesses stemmed from their heavy reliance on inside promotions. The company would hire college students and have them work their way up the ladder. Very rarely did the company hire outside candidate for senior positions. This prevented outside innovations from coming into the organisation.
In 1998 Marks and Spencer needed to do something drastic because it was losing out on its market share and their reputation was going down the tubes. The company decided it was time to restructure. The new structure of Marks and Spencer would be more like the Conglomerate or H-Form design. In this design the organisation is set up basically as a holding company comprised of unrelated products. The new Marks and Spencer would have seven different business units: women’s swear, men’s wear, lingerie, children’s wear, food, beauty, and home. This would allow the company to create a more flexible structure which could respond to the fast changing environment. This flexible structure would give autonomy to individual business units helping them tailor to their customers better. Marks and Spencer would no longer operate under the “head office knows best” principle and would give the customers what they really wanted. Another change was also made in the management of the company. At first, Peter Salsbury took over Marks and Spencer after Sir Richard Greensbury resigned and currently Luc Vandevelde heads the company. The company’s head management is running under a short term strategy in order to find someone who can lift Marks and Spencer out the hole. Luc Vandevelde came to the company in May 2000 and will stay on for a year unless he can turn the profits around. To help him out, Roger Holmes, an expert in profit turnaround and customer-focused organisational change, will also join Marks and Spencer in January of 2001 as executive director. The only problem facing the two is that neither have much experience in retailing food or clothing so if they can’t turn profits around, the company board will look to acquire a top level manager from Wal-Mart, the worlds largest retailer.