2. About R&R:
Raleigh & Ross’s Palm Springs – chain of stores
in the luxury goods industry
Company Culture: High Customer Orientation
ready to go out of way to service the clients.
Customers: High net worth Individuals (5%
customers amounting to 53% sales).
Linda Watkins - appointed CEO in 2007. First
non family member to head the business.
3. Problem Statements
Currently facing lawsuit from their associates to the
tune of $200 million.
PR nightmare triggered by an article in Fortune
magazine criticizing and accusing R&R for violating
labor laws.
NYSD of Labor finds (based on a Fortune article)
R&R violating state wage and hour laws ordering
them to change their policies causing a loss of $50
million.
Dwindling sales due to economic downturn of 2008-
09.
Sales per Hour system facing resistance (only 60%
associates able to meet targets in the past week).
4. Situation Analysis:
This SPH clashed with the existing culture of
customer service. To generate SPH, the
associates had to be on the sales floor, selling
but over the years, the customer had started
expecting the associates to be available for them
and being available for customers was a
requisite.
If these non-selling hours were formally
recorded, the SPH would decrease. Hence, the
associates had to end up servicing customers in
their personal time(after work) causing unrest
among the sales associates.
5. Alternative Evaluation:
Risking a potential $200 million judgment against
it by deciding to fight a prolonged lawsuit. This
would also be combined with a reputational risk.
Settling the dispute outside the court by paying
the associates and agreeing to their demands of
making substantial changes to the “Ownership
Culture” and SPH as a part of the settlement.
6. Recommendations:
R&R should settle the lawsuit outside the court and
agree on an internal evaluation of its policies and
reiterating their objectives. A prolonged battle will only
lead to bad publicity and a monitory risk. For e.g.
Goldman Sachs settled the S.E.C lawsuit in order to
save itself from the reputational risks and continued
losses pertaining to it.
R&R should discuss the issues at hand with their
employees, about the problems and suggestions
made by them specially pertaining to the SPH
system.
R&R should motivate their employees especially
during the economic downturn by incentivizing and
assuring the employees about the firm’s commitment
towards them.
7. Recommendations
(cont’d):
Should try to develop a pay plan enabling the
employees to focus on the customers especially
during the recessionary times as the number of
customers are low which the organization needs
dearly.
The new pay structure should be a combination
of both 70% base salary and 30% sales
incentive. The process should be easy to
understand and open for continuous feedbacks,
changes and improvisations.
