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Nordstrom case study analysis


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Nordstrom case study analysis

  3. 3. MANAGING PEOPLE AND ORGANIZATIONSOctober 11, 2011GROUP 1 Page 3The case discusses about the problems of Nordstrom of „off the clock‟ working andother of the harsh treatment of management towards the employees. Both of the issues referto a common problem that is the implementation of a performance evaluation mechanism„sales per hour‟Nordstrom uses a sales per hour (SPH) program to rate their sales employees. Themore the employee sells in the total hours they work, the more their SPH. Nordstrommanagement uses this SPH figures for remuneration, compensation and promotions but againthis was used as a tool for identifying non-performance as well. If an employee had a lowSPH, they are ought to have a bad time shift, scheduled fewer work hours, or eventerminated.The integral part of the problem was also identified in poor differentiation of “non-sell” and “selling” time. In order to sustain the tradition and their competitive advantage ofsuperior customer services, the sales team would have to write thank you notes, deliverpurchases timely, participation in mandatory meetings, and the likes, on “off the clock” time,because they were coerced by the existing performance evaluation system to keep their” salesper hour” ratio high. If they booked those hours, their SPH would go down because theyweren‟t actively selling anything and would most likely be penalized for it in the end. Butthere really wasn‟t a clear definition as to what was “selling time” and “non-sell” time. Theemployees struggled with this because they weren‟t exactly sure how the types of activitiesthey did would impact their SPH. Nordstrom intended the SPH to be an incentive and a wayto reward top sellers through commission, but they were really using it as a tool to forceemployees to work off the clock as to not impact their SPH and would punish them if theybooked all the hours they worked.Another problem in Nordstrom was their decentralized system of operations.Managers at all levels, department, store, and regional, were not very controlled as to howthey should be treating their sales staff. Without proper protocol some managers misusedtheir authority by improper and biased work schedules, relative compensation, and promotionof their sales staff.What started out as a customer service powerhouse in the retail industry eventuallyturnedinto a company that exploits its employees.PROBLEMS IN NORDSTROM AND THEIR SOLUTIONS
  4. 4. MANAGING PEOPLE AND ORGANIZATIONSOctober 11, 2011GROUP 1 Page 41. THE LACK OF CLEAR DISTINCTION BETWEEN “SELLING TIME” AND "NON SELL"WORK TIME EXACERBATED THE PRESSURES ON EMPLOYEES.As there was no clear distinction between selling and non selling hours. All the hours theemployee worked for were considered as selling hours and were used while calculatingSelling per hour. Hence the SPH of the employees accounted to be lower than what itaccentually should have been. This fear of having lower SPH forced employees to make thenon selling hours off the record and this resulted in loss to employees in both monetary aswell as recognition of extra efforts work.There should be a clear demarcation of the hours which would be categorized under sellinghours and the non selling hours. And Nordstrom should keep track of these hours of each ofits employees judiciously. However the per hour rate of payment for selling and non sellinghours could differ. As the time spent by employee under non selling hours is not adding anyimmediate profits to the company. This would equip the employees to declare both theirhours clearly.2. IS „SPH‟ AN APT PERFORMANCE MEASURING CRITERIA?The main cause of the problem is the commission incentive for the sales people. It causesemployees to work while off the clock to increase their SPH. Since they work off the clock,the employees get paid less. It also causes management to schedule people with high SPH ongood hours. Management punishes people with low SPH by giving them bad hours.Hence it should not be the only performance measuring criteria. Behaviour of the employeeon the floor, punctuality and the way he or she deals with customer should also be givenconsiderable weightage.
  5. 5. MANAGING PEOPLE AND ORGANIZATIONSOctober 11, 2011GROUP 1 Page 53. PEER PRESSUREEmployees at Nordstrom were facing the problem of peer pressure. In order to get the bestpaying shifts, for example, the first day of a sale, employees had to put in a no. of off-dutyhrs. Every employee wanted to be in the shifts that had maximum sales to increase theirsales-per-hour. So, there was a lot of competition between the employees themselves whichsometimes proved unhealthy. Policies like All Star rating and making the sales figures ofindividual employee public also put a lot of pressure on the employees.A solution to this problem could be forming sales teams instead of individual sales persons.Even if one member of a team performs exceptionally well and is suitably rewarded, thewhole team should also be given a minor incentive at least.4. MISGUIDING THE EMPLOYEESEmployees were also lied about the distinction between selling and non-selling hours. Forexample, they were repeatedly told on Saturday morning meetings that the punching clockwas broken or the time cards were not accessible. They were accused of not being teamplayers if they protested against this practice.Employees should have been clearly told that they would have to put in extra working hourssometimes. It should also have been the company’s responsibility to maintain the records ofan employee’s working hours.5. LAWSUIT FROM SHAREHOLDERSThe company also faced a lawsuit from three individual shareholders who alleged that theyhad suffered financial losses because the company had failed to report their labour problemsand early claims for unpaid work.The company should have reported the problems sufficiently early in time so that they couldhave been taken care of. These problems should not have been allowed to reach the level of alawsuit. There should have been a system in place to handle the grievances of the employeesas and when they are encountered.
  6. 6. MANAGING PEOPLE AND ORGANIZATIONSOctober 11, 2011GROUP 1 Page 66. WORK ON OFF-DAYS WITHOUT COMPENSATIONThe system in Nordstrom was decentralized, hence it gives a lot of power to supervisor andstore managers. When an employee is not able to meet the unachievable sale target set forhim then as a punishment the managers forced the person to come on his day off, withoutany extra compensation or salary for that day. Due to this most of the time majority of thesale force works off the clock.The system in Nordstrom should be centralized and there should be proper guidelines andprocedure must be there as what to do and in what situation. Every single second anemployee works must be compensated whether it is on off day or on regular day. And aboveall there should be a proper criterion for setting the sale targets otherwise it will promote abiased behaviour.7. FEAR AMONG EMPLOYEE: There was a lot of fear among employee of being fireddue to unavailability in achieving the sale target; there is a fear of falling SPH whichleads to termination.The employee should be given much more time to perform. The Manager should reduce theirtargets a little and manager should try to recognise the person’s ability clearly because aperson good in selling cosmetics may not be good in selling apparel. Therefore managershould take an informed decision by taking into consideration the person’s interest whileallocating the person to different counters. Obviously the person should be given two monthsnotice period if there is no other option other than fire him.8. FOSTERING JEALOUSY, PETTINESS AMONG EMPLOYEES: In Nordstrom there isso much focus on individual performance. The management and their policies havecreated an environment of fierce competition among employees which leads to problemof starking in order to get ahead of others.When an individual performs well then motivating an individual is good but at the same timesome credit must be given to his team and all co workers, who works and help him directly orindirectly in achieving the desired target. There is a strong need of culture change inNordstrom; there should be a culture which focuses on Team spirit. People should be givingtraining and lectures on helping others and they should be taught the importance of team.RECOMMENDATIONS
  7. 7. MANAGING PEOPLE AND ORGANIZATIONSOctober 11, 2011GROUP 1 Page 7This Nordstrom case clearly shows that how important is the role of a proper trainingof the employees in any organization. It is evidently seen here that there was a lack of propertraining of the „sales per hour‟ SPH program and as the program was initiated for the firsttime into the organization a formal training was indeed needed in order to make theemployees feel satisfied and good about it and realise it as another opportunity instead of as athreat. There should have been clear policies defined for the SPH program.The employee training of SPHprogram should clearly emphasize on theimplementation and working methodology of the program, how it will be used for definingrelative team goals and individual targetsand how it should be used to estimate commissionsand incentives over the fixed salary. It should also explain that how a flexible work hourscheduling is another boon for an employee in order to work efficiently and effectively.This training program will definitely reduce the dissatisfaction in the employees andwill make them feel as more integral part of the organization which is very necessary for acompany in order to achieve success.