Nordstrom case study analysis Document Transcript

1. CASE STUDY ANALYSIS<br />OF<br />NORDSTROM<br />SUBMITTED BY GROUP 1:<br /> AABHAS RASTOGI (11 DCP 053)<br /> - ABHAY GAHLOT (11 DCP 054)<br /> - ABHISHEK GUPTA(11 DCP 055)<br /> - ADESHWAR RAJA (11 DCP 056)<br /> - ADITI ANIL KUMAR SANGANERIA (11 DCP 057)<br /> - AKSHAY PRASAD (11 DCP 058)<br /> - AKANKSHA GUPTA(11 DCP 059)<br />CONTENTS<br />OVERVIEW<br />CASE ANALYSIS<br />PROBLEMS AND CAUSES<br />SOLUTIONS<br />RECOMMENDATION<br />OVERVIEW<br />The case discusses about the problems of Nordstrom of off the clock working and other of the harsh treatment of management towards the employees. Both of the issues refer to a common problem that is the implementation of a performance evaluation mechanism sales per hour<br />Nordstrom uses a sales per hour (SPH) program to rate their sales employees. The more the employee sells in the total hours they work, the more their SPH. Nordstrom management uses this SPH figures for remuneration, compensation and promotions but again this was used as a tool for identifying non-performance as well. If an employee had a low SPH, they are ought to have a bad time shift, scheduled fewer work hours, or even terminated. <br />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 of superior customer services, the sales team would have to write thank you notes, deliver purchases 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 sales per hour ratio high. If they booked those hours, their SPH would go down because they werent actively selling anything and would most likely be penalized for it in the end. But there really wasnt a clear definition as to what was selling time and non-sell time. The employees struggled with this because they werent exactly sure how the types of activities they did would impact their SPH. Nordstrom intended the SPH to be an incentive and a way to reward top sellers through commission, but they were really using it as a tool to force employees to work off the clock as to not impact their SPH and would punish them if they booked all the hours they worked.<br />Another problem in Nordstrom was their decentralized system of operations. Managers at all levels, department, store, and regional, were not very controlled as to how they should be treating their sales staff. Without proper protocol some managers misused their authority by improper and biased work schedules, relative compensation, and promotion of their sales staff.<br />What started out as a customer service powerhouse in the retail industry eventually turned into a company that exploits its employees.<br />PROBLEMS IN NORDSTROM AND THEIR SOLUTIONS<br />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 the employee worked for were considered as selling hours and were used while calculating Selling per hour. Hence the SPH of the employees accounted to be lower than what it accentually should have been. This fear of having lower SPH forced employees to make the non selling hours off the record and this resulted in loss to employees in both monetary as well as recognition of extra efforts work.<br />There should be a clear demarcation of the hours which would be categorized under selling hours and the non selling hours. And Nordstrom should keep track of these

hours of each of its employees judiciously. However the per hour rate of payment for selling and non selling hours could differ. As the time spent by employee under non selling hours is not adding any immediate profits to the company. This would equip the employees to declare both their hours clearly.<br />IS SPH AN APT PERFORMANCE MEASURING CRITERIA?The main cause of the problem is the commission incentive for the sales people. It causes employees 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 on good hours. Management punishes people with low SPH by giving them bad hours.<br />Hence it should not be the only performance measuring criteria. Behaviour of the employee on the floor, punctuality and the way he or she deals with customer should also be given considerable weightage.<br />PEER PRESSUREEmployees at Nordstrom were facing the problem of peer pressure. In order to get the best paying shifts, for example, the first day of a sale, employees had to put in a no. of off-duty hrs. Every employee wanted to be in the shifts that had maximum sales to increase their sales-per-hour. So, there was a lot of competition between the employees themselves which sometimes proved unhealthy. Policies like All Star rating and making the sales figures of individual employee public also put a lot of pressure on the employees.<br />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, the whole team should also be given a minor incentive at least.<br />MISGUIDING THE EMPLOYEESEmployees were also lied about the distinction between selling and non-selling hours. For example, they were repeatedly told on Saturday morning meetings that the punching clock was broken or the time cards were not accessible. They were accused of not being team players if they protested against this practice.<br />Employees should have been clearly told that they would have to put in extra working hours sometimes. It should also have been the companys responsibility to maintain the records of an employees working hours.<br />LAWSUIT FROM SHAREHOLDERSThe company also faced a lawsuit from three individual shareholders who alleged that they had suffered financial losses because the company had failed to report their labour problems and early claims for unpaid work.<br />The company should have reported the problems sufficiently early in time so that they could have been taken care of. These problems should not have been allowed to reach the level of a lawsuit. There should have been a system in place to handle the grievances of the employees as and when they are encountered.<br />WORK ON OFF-DAYS WITHOUT COMPENSATIONThe system in Nordstrom was decentralized, hence it gives a lot of power to supervisor and store managers. When an employee is not able to meet the unachievable sale target set for him then as a punishment the managers forced the person to come on his day off, without any extra compensation or salary for that day. Due to this most of the time majority of the sale force works off the clock.<br />The system in Nordstrom should be centralized and there should be proper guidelines and procedure must be there as what to do and in what situation. Every single second an employee works must be compensated whether it is on off day or on regular day. And above all there should be a proper criterion for setting the sale targets otherwise it will promote a biased behaviour.<br />FEAR AMONG EMPLOYEE: There was a lot of fear among employee of being fired due to unavailability in achieving the sale target; there is a fear of falling SPH which leads to termination. The employee should be given much more time to perform. The Manager should reduce their targets a little and manager should try to

recognise the persons ability clearly because a person good in selling cosmetics may not be good in selling apparel. Therefore manager should take an informed decision by taking into consideration the persons interest while allocating the person to different counters. Obviously the person should be given two months notice period if there is no other option other than fire him.<br />FOSTERING JEALOUSY, PETTINESS AMONG EMPLOYEES: In Nordstrom there is so much focus on individual performance. The management and their policies have created an environment of fierce competition among employees which leads to problem of starking in order to get ahead of others.When an individual performs well then motivating an individual is good but at the same time some credit must be given to his team and all co workers, who works and help him directly or indirectly in achieving the desired target. There is a strong need of culture change in Nordstrom; there should be a culture which focuses on Team spirit. People should be giving training and lectures on helping others and they should be taught the importance of team.<br />RECOMMENDATIONS<br />This Nordstrom case clearly shows that how important is the role of a proper training of the employees in any organization. It is evidently seen here that there was a lack of proper training of the sales per hour SPH program and as the program was initiated for the first time into the organization a formal training was indeed needed in order to make the employees feel satisfied and good about it and realise it as another opportunity instead of as a threat. There should have been clear policies defined for the SPH program.<br />The employee training of SPH program should clearly emphasize on the implementation and working methodology of the program, how it will be used for defining relative team goals and individual targets and how it should be used to estimate commissions and incentives over the fixed salary. It should also explain that how a flexible work hour scheduling is another boon for an employee in order to work efficiently and effectively.<br />This training program will definitely reduce the dissatisfaction in the employees and will make them feel as more integral part of the organization which is very necessary for a company in order to achieve success.<br /> http://www.slideshare.net/aabhas19871/nordstrom-case-study-analysis