Nordstrom: Dissension in the Ranks

Case Write-ups: Nordstrom: Dissension in the Ranks

1. What is the cause of the problems described in the case? How serious are the problems?

Nordstrom is well-known for its brand name, superior customer services and strong customer loyalty facing. However, it is facing a number of problems: damaged reputation, employees’ dissatisfaction, internal discord and labor disputes. It is in an especially critical situation when the company is currently facing law suit in multiple fronts. They even have to reserve $15 million for back-pay fund to employees and change recording system.

These problems were due to a couple of reasons:

1. Incentive system: Nordstrom set up the incentive system that was focus on sale per hour (SPH) metrics. With this system, employees with high SPH ration will earn high commission and receive better promotion such as better working shift. Thus, they underreported number of actual hour working.
2. No other reward metrics such as group: Employees mostly compete against each other based on the incentive system. This causes consequences such as stealing credit among employees.
3. Unclear definition of selling and non-sale hours: There is not clear different between “selling” and “non-sale” hours. If more “selling” hours are recorded, employees will have a lower SPH ratio. Thus, employees have to records activities that are important to customer relation such as writing thank you notes and changing tires as “non-sale” hours. Although more selling hours which result in overtime will bring employees more income but they scarify month to month financial gain to receive better working hours and promotion.
4. Decentralized management: Store manager have autonomy power. Top manager has little power over how sale system in each store was set up. In order to compete among others, store managers have excessive demand on employees’ performance and alternate their incentive system accord to their needs.
5. Promote from within only: It is a typical culture at Nordstrom. By itself, this is not a problem. However, combining with the incentive system and decentralized management, this caused ambitious employees who want to stay and thrilled in the company to not voice their concerns and problem.

1. Are Nordstrom employees pressured inappropriately by the sales-per-hour system? By management?

With the way the hourly system is set up, Nordstrom employees will have no choice but to record less actual working hours if they want to keep their jobs.  Moreover, as there was no other measure system in place, employees do not have any other way to prove themselves and to receive promotion.

Management also played a role in pressuring employees to carry out such a practice. Employees will be put in bad shifts which would result in low sale volume. Moreover, the article also mentioned how a sign “Do Not Punch the Clock” was put up during the mandatory meeting on the weekend.