From the leaping stag logo to the famous old names of department stores such as Dickins & Jones and Barkers of Kensington, House of Fraser conjures up images of traditional service and upmarket clothes for the well-heeled middle classes. A land of Betty Barclay and Liz Claiborne, followed by tea and scones with mother.

But by the 1996, the opinion of City analysts was less cosy. The group had failed to meet its potential since its flotation on the stock market two years earlier. Slow decision-making and inefficient working practices were making the problems worse. Rumours of store closures and takeovers abounded.

The financial press was vicious. “A chimpanzee in situ would be good news,” quipped the Evening Standard on John Coleman’s appointment as chief executive. “The company needs someone with a totally new view of how to run department stores,” said the Daily Telegraph. The Daily Mail added that Coleman faced a “mammoth” task.

By the autumn of 1996 it was evident that the group’s survival depended on radical changes to practices and staffing structures. House of Fraser’s 51 stores were semi-autonomous, each operating its own conditions, job titles and management structure. Career paths were ambiguous and all systems were buried in paperwork.

“There was a feeling of make or break, and we had to show the City we were making changes,” says Jacquie Griffey, HR manager. “There was inconsistency in every kind of practice: what people did, how they did it, where it was done. A job title in one store might cover different responsibilities from the same title in a store 20 miles away, and job titles used in one store might not be used in any of the others.”

But changes had to be implemented quickly. New board appointments had focused the City’s attention on the group’s poor financial performance, and the peak trading Christmas season was not far off. At the same time, rumours of closures were alarming staff.

“The company had been terribly neglected and it needed some time and love spent on it,” says Caroline Mason, the group’s communications manager. But time was short and love had to be expressed through tough decisions.

The first of these stemmed from a realisation that any changes to working practices would be useless without a fundamental review of the management structure. Job titles, pay and promotion prospects had to be aligned with recruitment policies and made common across the company.

A half-hearted attempt to rationalise the hotchpotch of systems and job descriptions had been tried, but it was implemented sporadically and senior management were not involved. “It had been left up to individual store managers, and even those who tried to change got stuck because of personal loyalties and local politics,” Griffey says. “The difference this time was that change wasn’t optional and there was commitment right from the top.”

This support allowed a change management team, led by HR, to start from scratch. The existing management structure was top-heavy and too many managers spent too much time on excessive paperwork. “It is pointless having loads of great sales staff who never get an opportunity to sell because they spend most of their time chasing pieces of paper,” Mason says.

The team’s first task was to develop a common management structure based on clear job descriptions. This new structure had no place for the assistant managers, who undertook a wide, but poorly defined, range of tasks.

“There was an assistant manager to almost every manager, and nobody was sure what they did,” Mason explains. “Some people became assistant managers because of long service, while others took on a large part of their manager’s job.”

While the number of managerial positions fell, the scope and responsibility of those that remained increased. Each store section – fashion, home, visual and commercial – was put under a single manager, who was supported by sales managers.

The new jobs covered precise areas of expertise. Sales staff, for example, could concentrate on selling, while sales support staff coped with the admin.

Once each job title was tied to a list of responsibilities, the next step was to compile a list of the competencies that staff would need to tackle the new roles. These could also be used to decide development needs, pay and promotion.

The rationalisation programme was welcomed by some. “A number of people said: ‘It’s about time somebody took the bull by the horns,’” Mason recalls. But there was a human cost. Everybody had to reapply for jobs against the new competencies – and it was no secret that there were fewer new jobs than old.

Although there was no way of softening the blow for those who faced redundancy, the team could ensure that the process was seen to be fair. This meant that HR suffered as much as any other area. Traditionally, each store had a personnel manager and a training manager. But once line managers took on broader roles and processes were centralised, this could no longer be justified.

So the team created four regional HR offices, each containing an HR manager, a training manager, four advisers and administrative staff. The day-to-day tasks were absorbed by line managers and the regional offices acted as supporting consultants.

“This was probably one of the hardest things for us to do because so many of our colleagues were at risk,” Mason says. “They had to help identify the changes that would put their jobs on the line. The total number of HR staff fell from about 100 to 24.”

Not only did the competencies process have to be seen as fair; staff had to understand why it was being implemented and how they could benefit from it in the long run. An immediate advantage was that the salaries for standardised roles could be benchmarked against those in other retail organisations. Most staff found that their pay rose in the new jobs.

The new system also provided a clear promotion structure. All jobs were graded and everyone could see what competencies they would need to apply for a job on the next rung. Personal development plans were introduced along with twice-yearly performance reviews.

Pay was linked to performance to ensure that people could get a pay rise even if they did not want promotion, which might necessitate moving to a different store or working longer hours.

“We have tried to instil a shift in culture so that people can take more responsibility for deciding what training they need for promotion,” Mason says. “But we also stress that not everybody has to go for promotion. If you’re doing the job well and don’t want to move, that’s great too, and you will be rewarded for it.”

The only way to ensure that all staff understood how the changes would affect them was to provide constant communication. The first step was to provide a “Line manager’s guide”, backed up with a two-day briefing conference. An HR support centre based at head office monitored progress and two helplines offered advice for managers and staff.

All staff received fact packs explaining the new structure. Daily question-and-answer bulletins provided feedback on common queries, and staff elected regional and national representatives to take part in a formal consultation process.

“The helplines were vital to the process because they raised lots of issues that nobody had identified,” Griffey says. “People phoned up saying: ‘I employ a pianist and a lift attendant. How do I assess them?’ and: ‘One of my staff works half the time in one job and half in another. Which set of competencies should they be assessed against?’”

Once everyone was clear about the procedure, all staff involved in store management or selling support were assessed against the new competencies. The store managers doing the assessments were not told of the benchmark standards, so they could not influence the results.

The casualties were high: about a third of the 3,000 staff assessed lost their jobs. These people were offered outplacement support and issued with “A guide to support your future”, explaining redundancy payments and pensions, how to look for jobs and how to claim state benefits. Wherever possible, staff were offered jobs elsewhere in the company and the HR team also forwarded details of vacancies in other organisations.

“The worst part of this was that some people didn’t know whether we’d find a job for them right up to their very last minute in the company,” Griffey says. “But we had to keep all the options open for as long as possible. After all, there might have been someone in Scotland who was willing to move down to Kent, so they had to be given the opportunity.”

Surprisingly, only a few people used the external outplacement services. “We thought it would be particularly useful for those who had been in the same job for a long time, but only a handful took it up,” Mason says.

Most of those offered jobs accepted them, even when their new title sounded less impressive, because salaries were often higher and the new structure offered a clear path for progression. Some of those made redundant took their cases to tribunal, but none of them won.

“It was hard for people who had been with the company for years to be told that it’s not how long they had been in the job, but what skills they had that was relevant,” Mason admits. “We faced about 33 tribunal claims, but a lot of them were of the same type and when one collapsed the others pulled out.”

The team was astonished, but gratified, when the chairman of the Manchester tribunal described their procedure as “almost exemplary”. Other praise came from the same business press that had been so dismissive a few months earlier. This cautious optimism was reflected in a rise in the company’s share price.

But the most valued result is the opportunities the changes created for the company’s future. “Although we have introduced standardisation, there is still room for managers to use their own creativity and specialisations,” Griffey says.

Mason agrees: “We’re not saying conform and shut up, we’re saying challenge and speak out. We were a dinosaur, but now we’ve brought our department stores into the 20th and, we hope, into the 21st century.”

Award background
House of Fraser

Number of employees 9,500.
Number of stores 49 (previously 51).
Turnover £812 million in 1997-98.
History In 1849 James Arthur and Hugh Fraser founded a drapery shop in Glasgow. By 1948 House of Fraser had 16 stores. The group was bought by Mohammed Al Fayed in 1985 and floated on the stock exchange in 1994.

Judging panel’s comment No one would envy the task of the HR team at House of Fraser, who had to provide the policies and processes for a massive restructuring exercise that cut management numbers by a third, but provided a springboard for the group’s subsequent recovery.