Nordstrom

Nordstrom Case

Point of View

I opted to take the point of view of Jack McMillan, the company president since he has the over-all responsibility and authority of the whole Nordstrom Company.

Problem Statement

What course of action should Jack McMillan take to effectively motivate the company's salespeople to achieve organizational objectives with its current reward system design.

Objectives

➢ To identify the underlying reasons on the dissatisfaction of Nordstrom salespeople

➢ To identify the management's responsibility on resolving the current problem

➢ To identify and implement proper motivation theory that will best resolve the case

➢ To successfully formulate and implement plan to resolve the current scenario

Areas of Consideration

To have a better understanding and analysis of the case in finding the real cause of the problem, the Root Cause Analysis (RCA) will be used. It is a structured step by step technique that focuses on finding the real cause of a problem and dealing with that, rather than continuing to deal with its symptoms. Root cause analysis is a procedure for ascertaining and analyzing the causes of problems in an effort to determine what can be done to solve or prevent them. It is a process to help managers understand problem causes well enough to achieve permanent resolution of those problems.

The goal of RCA is to find out: what happened, why it happened and what can be done to prevent it from happening again.

What happened to Nordstrom that lead to the present problem on motivating its salespeople?

➢ Almost 500 complaints of unfair labor practices were filed by Nordstrom Salespeople against the company

Why did Nordstrom Salespeople filed the said allegations?

➢ These employees feel that the customers are catered to at the expense of their own working conditions

➢ The current reward, measurement and compensation system oppresses these employees, placing them in an environment of constant pressure, harassment and competition

o Employees do extra mandatory workload off the clock during holidays, weekends and even breaks, uncompensated.

o DRAW Commission System entails employee to work harder to reach high Sales per Hour (objective performance evaluator); the higher the total dollar sale, the higher the commission - the incentive is to generate high pace and high dollar sales.

o Successive (3 months) failure to reach targets can lead to dismissal.

o Competition among employees where their performance are being announced, printed and charts are being posted for them to know hoe they fair with co-employees.

o "Nordstrom way" entails a lot of pressure among employees

o Mandatory Saturday morning department meetings

o Firing employees without due process

➢ Employees receives a little formal training

➢ Managers (individualized) are solely responsible fro evaluating employees

o No standards of evaluation / operation / motivation

➢ Using a decentralized management approach

➢ No chief executive

➢ Remained a family operation

o Grandsons as Co-Chairmen

o Jack McMillan as President

➢ No proper standard / proper reward systems design that will explain the organization's compensation and measurement system.

Corrective and preventive action; what is/are the best method to change the root cause?

Since Nordstrom's success has been achieved through customer service. Nordstrom employees are said to be among the industry's friendliest and most enthusiastic, and they go to great lengths to keep their customers satisfied. They write personal thank-you notes to customers, for example, they have been known to deliver customers' purchases to their homes and warm up customers' cars in the store parking lot on wintry days.

The basis for many of these behaviors is Nordstrom's reward system. Most salespeople are paid on a complicated commission system that allows them to earn considerably more money than the industry average. Some earn in excess of $80,000 a year. Nordstrom salespeople also receive bonuses and surprise rewards for doing an especially good job.

The allegations reveal a dark side to the Nordstrom system of rewards. Nordstrom Inc. is using commission payments to motivate workers to go the "extra mile" for the business. This has motivated workers to put out additional effort as noted by the customer satisfaction and corresponding increase in sales. The management has achieved it's goal, however, simply applying a management technique to increase motivation

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