PERFORMANCE MANAGEMENT

RALEIGH & ROSSE: MEASURES TO MOTIVATE EXCEPTIONAL

SERVICE

Faculty: Dr. Saleena Khan

Submitted by: Group 6
S No

Name

Roll No

Harnoor Sahni

2015022

Chitrini Chalmela

2015091

Phalguni Bharadwaj

2015163

Milind

2015218

Bisaka Sarkar

2015273

B H Bala Srinivas

2015333

Prateik Ghogre

2015354

Introduction
Raleigh & Rosse, a luxury goods brand was incorporated in New York in 1903. Raleigh and
Rosse had a total of 38 retailers as of 2007. It was known for exceptional customer service and
relations, primarily due to its corporate culture. The Employees of Raleigh and Rosse are well
of compared to the industry standard. In 2007, Linda Watkins was hired as the new CEO of
Raleigh and Rosse, till 2007 Rand R was managed by the family. Raleigh and Rosse soon faced
economic decline that hit the company hard compared to others in 2008. Soon a lawsuit against
Raleigh and Rosse emerged due to its performance management systems sales per hour.
Industry & Company Background
Luxury goods are uprooted in Europe and it is very hard to supply the same for the clients across
the USA. As most businesses are family owned the spread of these businesses is also very slow.
But after noticing the demand from US many European companies step forward to establish their
own U.S. retail networks. From 1995-2007, worldwide luxury goods industry revenue more than
doubled whereas preceding years were effected by recession across the industry.
Hence the demand fluctuations in the industry also affected the company as well. Raleigh and
Rosse (R&R) is a luxury goods brand that started in New York since 1903. R&R have a total of
38 retailers internationally as of 2007. Also in 2007, Linda Watkins was hired as CEO and as one
of the first officer in R&R that is not family related. In January 2010, U. S. luxury goods retailer
Raleigh & Rosse is being sued by its employees for encouraging "off the clock" hours.

CUSTOMER SERVICE APPROACH AT R&R:

Client gratitude and loyalty meant greater earning potential for R&R sales associate.
Their exceptional service effort paid them off by attracting a loyal base of ultrawealthy clients.
The wealthiest 5% of Americans accounted for 53% of R&R revenues. The associates
used to perform the customer services as it was their own job to provide customer
delight; they went off their tracks to satisfy the customers.
The departmental stores were handled by the store managers who were also
responsible of the people working under them as associates and also for the hiring,
control, and training of the sales associates.
The customer service approach followed by the company was highly desired by the
Americans but they faced a major transition in Chicago and thus the CEO brought in
Linda Watkins for a more scalable and formulaic set of HR policies and practices.

Ownership culture:
It was a set of initiatives and policies to create more entrepreneurial and accountable
environment. They also included the following practices:

Hiring profile for sales associates was changed and they shifted to recent college
graduates from experienced sales professional. This step was taken since fresh graduates
are more ambitious.

Internal motivation was continued by exposing associates to opportunities for

advancement.

Commission system was revamped resulting in enabling unprecedented earnings

potential of $ 100000. This was revolutionary in this sector.

New IT systems were imposed. This helped in increasing the managers authority to use
these systems to optimize merchandise mix.

Significant autonomy was granted to the store managers on staffing, scheduling and other
aspects of the program. This was aimed to optimize staffing levels and increase in sales
associate productivity.
Store managers: own their business
Sales associates: own their relationships.

The SPH Program

Performance of Sales Associates was measured by weekly sales.

Performance of Sales Managers was measured by standard metrics like revenues, gross
margins etc.

If actual SPH was higher than target SPH then associate was paid 7.35% commission,
was given more or better hours and a better chance for promotion.

If actual SPH was lower than target SPH the associate was paid his hourly wage, his
work hours were decreased and he was eventually terminated.

Non-Selling hours were not recorded for the associates as if they were recorded SPH
would decrease.

Consequences of SPH Program

As the pressure to become Client All Stars was too pressurizing on the employees of
R&R there was inappropriate behavior which resulted in stealing credit for sales made by
others.

Few associates and managers ended up manipulating the system because of the excessive
pressure.

Store associates expressed their dissatisfaction of working off the clock or late hours
which lead to undisputed issues with their senior executives. On addressing this issue the
HR managers got the excuse from the store managers of being in a misunderstanding.

The publication of a very unattractive story by the Fortune magazine highlighting on

some of its store practices created a negative impact overall.

2008-2009: Recession and Lawsuit

Worldwide luxury goods industry revenue dropped by 10% & US luxury good revenue
by 14%

Downsizing workforces by competitors

Hiring freeze by R&R, suspension of new store openings, no layoffs

Poor Performance of associates due to high pressure ultimately lead to their dismissal

On Jan 4, 2010 a lawsuit was filed against R&R under FLSA, alleging violation of wage
and hour laws

Reputational risk of R&R was at stake, with financial risk worth $200 million

Did R&Rs prior success obscured critical flaws of its PMS ?

Shifting from SPH to Balanced Scorecard approach & challenging R&Rs sacred cows

Recommendations

Linda Watkins should settle the lawsuit outside and bring about changes in ownership
culture and SPH.
Modifying SPH and implementing it clear lines to be drawn between working hours
and non work hours, only work hours should be counted in the SPH. Moreover, Non

Work hours should be documented and compensated at a standard rate, giving employee
necessary motivation.
Incentives should be given not just on numbers, but also for relationships created and
maintained.