Nordstrom

Group 1
JM Agacer
Frytz Agosila
Brenda Balume
Karlo Prado
SYNTHESIS
Nordstrom is one of the most successful department stores in the United States, oasting
!""# sales of $%&"' illion dollars and a net income of $('% million& )ne of its most
significant characteristics is *hat they call +the Nordstrom ,ay,- *hich is asically an
intense focus to*ards customer ser.ice& Nordstrom employees regularly go to great
lengths to please their customers, often re/uiring much time and sacrifice of the part of
the employee& 0heir salespeople 1called +Nordies-2 are moti.ated y hourly salaries that
are much higher than the industry standard& Another important moti.ator is sales per hour
1SP324 lo* SP3 can lead to dismissal *hile high SP3 is one of the most important
criteria used to determine promotions&
0he importance gi.en to SP3 ho*e.er, puts a lot of pressure on each of the company5s
employees& 0his has reached the point *herein some salespeople do not cloc6 in their
o.ertime *or6, in order to maintain acceptale SP3 le.els& )ther employees feel that the
time they spend catering to the employees needs comes at the e7pense of their o*n *or6
conditions& A fe* of the stories told y e78Nordstrom employees *ere especially
disturing, and descried *or6 conditions that order on employee e7ploitation& Still,
many Nordstrom employees lo.e the company and understand the demands in.ol.ed&
POINT OF VIEW
,e *ill analyze the case using the point8of8.ie* of company president Jac6 McMillan&
Jac6 is the company president, and he has enough authority to address the company8*ide
concerns regarding employee *or6 conditions&
Also, he has sho*n the *illingness to admit that there are prolems *ith the current
system and has ac6no*ledged his responsiility to deal *ith them&
STATEMENT OF THE PROBLEM
,hat should Jac6 McMillan do in order to address Nordstrom5s prolems regarding
employee *elfare and *or6 conditions9
OBJECTIVES
To identify the problems with employee welfare and work conditions
Jac6 must ta6e an o:ecti.e loo6 at the present *or6ing conditions of his
employees, in order to identify any and all prolems that need to e addressed&
To determine alternative action plans that could help address these problems
After getting an idea of *hat prolems face the company, he must construct ideas
on ho* to sol.e these prolems& All feasile options should e considered in doing so&
To choose the most appropriate course of action from the alternatives formulated, and to
come up with a concrete implementation plan to support it
After determining all possile solutions, the ne7t step *ould e to *eigh the
disad.antages and ad.antages of each option against each other& 0his *ould allo* him to
systematically arri.e at the most ideal course of action& Finally, a specific implementation
plan should also e constructed to ensure that his planned results are achie.ed&
AREAS OF CONSIDERATION
As descried in the stories of its e78employees, there are se.eral significant
prolems *ith the current Nordstrom system& 0hese include the follo*ing;
Unpaid Overtime Work
)ne of the most apparent complaints against Nordstrom is its practice of
encouraging its employees not to cloc6 in their o.ertime *or6& 0his is not a fair practice
for se.eral reasons& First, it misleads :o applicants *ith regards to *hat 6ind of
compensation they can recei.e at Nordstrom& ,hile it is true that the hourly rates at the
store far surpass others in the industry, the compensation may not e superior to other
companies *hen considering the total numer of unpaid hours an employee is e7pected
to render& 0his could e one of the main reasons e7plaining *hy company5s turno.er rate
is significantly higher than the industry a.erage, e.en though it offers high hourly rates
that al*ays attract many :o applicants&
Also, since the o.ertime *or6 comes free of charge, middle management *ould
li6ely e less concerned aout controlling the o.ertime hours of their employees& 0he fact
that some employees *or6 (( straight days for !(8!# hours is of less concern to these
employees5 superiors since their departments are not charged for the e7tra *or6, *hile
they reap the re*ards from the added producti.ity&
Finally, it simply isn5t fair to the employees *ho ha.e to sacrifice so much time
and effort literally for nothing& <f employees ha.e to dedicate so much of their li.es to
their :os, then in the interest of fairness they should ade/uately e re*arded for it&
Moreo.er, the moti.ation of the people in.ol.ed *ould also suffer if they feel that they
are not recei.ing re*ards that are commensurate to the effort they put in&

SPH as a Performance Indicator
,hile using sales per hour as a 6ey performance indicator has its ad.antages, it
also poses se.eral prolems for Nordstrom employees& First, is that is reinforces the
practice of not paying employees for o.ertime& Since a lot of the o.ertime *or6 is non8
sales in nature, it has a negati.e effect on SP3& 0his creates a disturing scenario *here
the act of not filing o.ertime *or6 directly helps Nordstrom employees 6eep their :os&
0he application of SP3 at Nordstrom also creates constant pressure and intense
internal competition, to the point *here it has ecome destructi.e& A perfect e7ample of
this is the account of =indy Nelson, *ho *as the top seller for t*o years in one of
Nordstrom5s stores until se.eral other salespeople claimed that she *as stealing sales&
,hether she *as actually stealing sales or that the other salespeople intentionally
saotaged her *as not pro.en, ut it does sho* *hat lengths Nordstrom employees are
dri.en to ecause of competition& And as long as SP3 charts are displayed openly in
pulic, and so much focus is put on it as criteria for promotion, this competition *ill
continue to e .ery intense&
0his also contriutes to *hat some feel is a .ery to7ic *or6 en.ironment that
Nordstrom salespeople are su:ect to& 0his is understandale, since they are put under the
pressure of ha.ing constantly ha.ing to maintain SP3 or ris6 losing your :o, as *ell as
the pressure of constantly ha.ing to stay on top of the SP3 chart to earn a promotion&
ack of !ob Security
<n Araham Maslo*5s hierarchy of needs 1illustrated ao.e using a diagram lifted
from ,i6ipedia&org2, it is asserted that the human need of :o security 1a safety need2
transcends his or her need of a slightly higher income le.el 1essentially a physiological
need2& 0his could e another important reason *hy turno.er at Nordstrom is high4
employees might find other *or6 destinations that are more stale to e more desirale
than Nordstrom, maye e.en if it means earning slightly less& <f e.en employees *ho are
.ery good sellers, li6e Patty Bemis, ha.e to come to *or6 *ith strep throat or *hile
reco.ering from significant in:uries ecause they are scared to lose their :os, there must
e .ery little Nordstrom can offer in terms of :o security&
"ompany "ulture
0he hypercompetiti.e nature of the :o also is in large part attriuted to the
company5s culture& Nordstrom uses a *ide .ariety of internal pressures, such as contests,
titles 1e&g& Pacesetter, All8Star2, and the aforementioned SP3 chart *hich constantly
pushes its employees to sell more, put e7tra effort into satisfying customers and e.en
purchase Nordstrom clothing& )n top of that, managers constantly grill their employees
regarding their sales figures, argualy to the point of harassment& 0he result is that some
employees, as sho*n in the ,all Street Journal Stories, +feel li6e an asolute nothing
*or6ing for them&- >eferring once again to Maslo*5s *or6, the lac6 of esteem rought
aout y 6ind of treatment from management could also e a reason for the company5s
high turno.er&
Another notale characteristic of the company5s culture is that *hile there is high
regard for its customers, there seems to e less focus on the *elfare of the employees
*ho pro.ide the le.el of ser.ice /uality that these customers en:oy& Managers are
measured solely y their aility to achie.e sales and customer satisfaction targets, and not
at all y ho* their employees are treated&
#onstandard "ompany Policies
0he lac6 of company guidelines could also e a reason for the perpetuation of
some certain practices at Nordstrom& ,hile it is understandale *hy the decentralized
management style suits the company, the addition of certain company8*ide regulations
*ould control undesirale laor practices *hile maintaining the ad.antages of the current
system&
ALTERNATIVE COURSES OF ACTION
Option 1 - "ontinue implementin$ the current system without any chan$es
)ne of the choices a.ailale to Jac6 is simply to maintain status /uo, and continue
running the company using current practices& <t has een argued that although some
employees fold under all the pressures e7erted y company, most employees are happy
*ith it, as e.idenced y .oluntary initiati.e to end union representation& )ne also cannot
argue *ith Nordstrom5s results, the company continues to do .ery *ell and its customer
ser.ice and sales orientation are undoutedly t*o of the most important reasons *hy&
=hange in the company5s system might compromise *hat could e the company5s most
significant competiti.e ad.antages& 0he current system allo*s for a lot of producti.ity
*hile foregoing a lot of e7penses, *hich helps significantly Nordstrom5s financial
performance&
Unfortunately, the effecti.eness and efficiency of the current system comes at a
significant price& Nordstrom5s current practices are ad.ersely affecting one of its most
important sta6eholder groups, its employees& Any :o *hich re/uires e7tremely ta7ing
hours *ithout o.ertime pay or :o security is far from an ideal *or6place& <f nothing is
done to address these prolems, many employees *ill continue to fall under the intense
pressure in the company, *hich *ould lead to more complaints against Nordstrom& 3igh
turno.er rates *ould also persist if this is pursued&
Option 2 - %odify the current system such that it become fairer to its employees
Some modifications to the current system could e enforced that *ould ma6e the
system more employee8friendly& 0hese include the follo*ing;
?ranting o.ertime pay
Non8inclusion of hours spent stoc6ing, deli.ering and doing other non8selling
acti.ities in the SP3 computation
=onfidentiality of SP3 information
Ac6no*ledgment of employee *elfare as a core .alue
Standardization of the ao.e as non8negotiale company policies
@ach of these changes has its o*n enefits, all of *hich are in line *ith the asic
thrust of impro.ing employee *or6ing conditions& ?ranting o.ertime pay pro.ides fair
remuneration for the many hours spent for the company& Not including non8selling
acti.ities in the SP3 computation pro.ides a more accurate asis for e.aluating an
employee5s selling aility, and allo*s them to freely log their o.ertime& =onfidentiality
of SP3 information reduces intense internal competition and helps protect
underperforming employees in an en.ironment *here selling performance and self8
esteem are closely lin6ed& Ac6no*ledgement of employee *elfare as a core .alue *ould
influence the company to proacti.ely loo6 after the interests of sales force& 0his should
also stop management from constantly threatening the :os of e.en those employees *ho
are performing *ell& Percei.ed discriminatory practices should also e addressed in doing
so& And finally, standardization of these policies *ould greatly help its smooth
implementation& All these *ould help employee *elfare, impro.e Nordstrom5s image,
and lessen turno.er rates&
)ne of the most significant disad.antages of this system is its financial impact&
).ertime pay in the company is significant, as e.idenced y the $!# million in ac6 pay
that Jac6 had earlier set aside& 0he hours spent cascading the changes throughout all
Nordstom ranches in the United States also has a significant monetary effect&
<mplementation *ould also e some*hat difficult, since the changes made are significant
and company8*ide& Monitoring hours spent selling and not selling could e especially
prolematic&
Option 3 - "han$e the system completely& adopt a more traditional approach
0he most radical approach to*ards sol.ing the prolem *ould e to esche* the
Nordstrom *ay entirely, and use more traditional laor practices& )f the changes that
ha.e to e made, the follo*ing are the most significant;
SP3 *ould no longer e used, minimum sales /uotas *ill e enforced instead
0itles such as +all8star- and +pacesetter,- and .arious contests *ill li6e*ise e
eliminated
Non8mandatory than68you notes and personal oo6s
).ertime pay *ould e granted
Aessened pressure from management as long as sales /uotas are met
0his alternati.e ma6es Nordstrom more li6e its competitors in terms of employee
enefits and general treatment of staff& Since Nordstrom *ould e complying *ith
industry e7pectations in this regard, this should eliminate all concerns regarding
employee *elfare& Aess pressure from management and elimination of mandatory than68
you notes and personal oo6s also lessens employee *or6load, *hich comined *ith the
added enefits, should eliminate turno.er due to urnout or pressure&
0he most glaring disad.antage to this is that it could .ery *ell lead to lessened
producti.ity, and reduce the company5s competiti.e ad.antages& A lot of the present
employees find the current system .ery empo*ering, since it does lin6 performance *ith
self8esteem and celerates their accomplishments and hard *or6& @7isting employees
*ho are happy *ith the current system may not *elcome these changes e.en though it
may entail some added income& 0he e7pected decrease in turno.er may e.en e offset y
employees *ho disli6e the ne* approach& Also, as mentioned earlier, granting o.ertime
pay *ill ha.e significant financial implications on Nordstrom& Finally, this option is the
most difficult to implement, since it re/uires changes in the .ery essence of the company,
and *ill li6ely e met *ith many prolems&
RECOMMENDATION
,e ha.e formulated a list of disad.antages and ad.antages that *e *ill use to
e.aluate the decision at hand, and determined the relati.e importance of each criterion&
,e then ga.e numeric scores for each alternati.e ased on the aility of each to meet the
chosen criteria& 0hese are summarized in the tale elo*;
Scorin$ is done on a scale of '('), with ' bein$ the worst and ') bein$ the best
Criteria Weight Option 1 Score Option 2 Score Option 3 Score
Motivation/productivity 25% 8 2 8 2 3 0.75
Employee Welfare 25% 5 1.25 10 2.5 10 2.5
Financial mpact 20% 10 2 5 1 5 1
!urn"over 20% 5 1 8 1.# 7 1.$
Ea%e of mplementation 10% 10 1 # 0.# 3 0.3
7.25 7.7 5.95 WEIGHTED SCORE
Recommended Option:
%odify the current system such that it becomes fairer to its employees
As sho*n here, the t*o categories *e put primary importance on are
moti.ationBproducti.ity and employee *elfare& ?i.en that Nordstrom is in the retail
industry, most of its success hinges on the sales and ser.ice that are pro.ided y its
employees, *hich is *hy *e ga.e it more *eight than the financial implications in.ol.ed
*ith granting o.ertime pay or cascading ne* policies& @mployee *elfare is also an
important consideration4 Nordstrom should not compromise the /uality of life of its staff
:ust to sa.e money, particularly *hen much of their success is o*ed to the efforts of these
indi.iduals&
,e also consider turn8o.er to e e/ually important to the financial considerations
of the options in.ol.ed, since as mentioned earlier, much of Nordstrom5s success is
contingent upon the ser.ice /uality of their personnel, and lo* turn8o.er *ould help
maintain that le.el of ser.ice /uality that has een one of Nordstrom5s defining
ad.antages& Finally, *e also consider ease of implementation, since it *ould help ensure
that the intended goals are met&
,e feel that )ption % is significantly less ad.antageous than the other t*o,
mainly ecause it eliminates one of Nordstrom5s most important differentiating /ualities&
<ts negati.e effects on moti.ation and finances, as *ell as its difficulty to implement,
ma6e it less attracti.e than the other t*o options, as reflected in its lo* *eighted score&
0he choice then, is et*een )ption ! and )ption (& <t is difficult to determine
*hich one has a more positi.e effect on moti.ation and producti.ity& )n one hand, the
internal competition and constant pressure from management in )ption ! does force its
employees to e more producti.e, and pro.ides an effecti.e, aleit negati.e, *ay of
moti.ating Nordstrom staff& )n the other hand, )ption ( has positi.e effects on percei.ed
:o security, since management is not there to constantly threaten salespeople5s :os, and
self8esteem, ecause of more respect from management& ,e therefore gi.e oth an e/ual
score, especially since different moti.ational tactics *ould *or6 for different people&
0he ma:or difference et*een the t*o choices is that *hile )ption ! offers easy
implementation and less costs, )ption ( scores etter in t*o more significant categories,
employee *elfare and turn8o.er, *hich is *hy *e *ould recommend Jac6 to pursue this
option&
IMPLEMENTATION PLAN
0he first step Jac6 should ma6e to implement the changes *ould e to discuss
them *ith rest of the o*nership group& 0hey should e made to understand the .alue of
loo6ing after employee interests, and ho* the current set8up has its share of unfair
practices&
After doing so, Jac6, *ith the proper assistance from human resources, should
proceed to re.ise the company5s current standard policies& 0hey should schedule a formal
cascade to the company5s regional mangers, in order to ensure that the ne* guidelines are
not misinterpreted& <n line *ith the granting of o.ertime pay, it *ould also e *ise to
ad.ise the regional managers to loo6 into the possiility of hiring part8time or minimum
*age *or6ers to assist salespeople *ith their non8sales functions& 0his *ould help
minimize the financial affect of the o.ertime pay, as *ell as lessen the grueling hours
re/uired of each employee&
<t *ould then e the regional managers5 responsiility to relay the ne* guidelines
to each store manager, *ho *ould in turn pass them along to the .arious department
managers in his or her store& =hec68ups must e made regularly at all le.els to ensure
compliance& At first, these chec6s should e fairly regular, once a month *ould suffice&
As management gains more confidence in all managers5 aility to implement the ne*
guidelines as intended, these chec6s can ecome less and less fre/uent, until they can e
eliminated altogether&
0o reinforce the effort, company8*ide a*ards *hich recognize managers for their
e7emplary treatment of employees 1an +@mployee ,elfare All8Star- a*ard for e7ample2
can also e estalished sometime after the initial cascade& For this to e effecti.e
ho*e.er, it must e treated *ith the same importance and prestige that other company
a*ards ha.e&
LEARNING POINTS
<n this case, *e ha.e learned that *hile a company5s effecti.eness and efficiency
are its t*o asic measures of success, they should not come at an unacceptale price,
such as the *elfare of the employees in.ol.ed& 0he employees of a company, *ho dri.e
its success, must al*ays e treated fairly and ethically&
,e also gained an appreciation of the many moti.ational strategies that a
company can use, and the ad.antages and disad.antages of each& Since these can
significantly alter a company5s producti.ity, management must carefully decide the est
means of moti.ating its employees, to ensure their est chance of success&
REFERENCES
=erto, Samuel =& Modern Management Ci.ersity, Duality, @thics E ?loal @n.ironment&
('''& Ne* Jersey; Prentice83all, <nc&
http;BBen&*i6ipedia&orgB*i6iBMaslo*F(GsHhierarchyHofHneeds