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Nordstorm Case Analysis

1489 words - 6 pages

MGMT E-4000: Organizational Behavior WK 5: Case Analysis

Anirudh Udayashankar


“An unerring eye for what's next in fashion. A relentless drive to exceed expectations. For more than 100 years, Nordstrom has worked to deliver the best possible shopping experience, helping customers possess style - not just buy fashion. Nordstrom, Inc. is a leading fashion specialty retailer offering compelling clothing, shoes and accessories for men, women and children. Since 1901, we've been committed to providing our customers with the best possible service - and to improving it every day” is the introduction that the Nordstrom website offers to the passing visitor. Nordstrom is an upscale ...view middle of the document...

The metric has fuelled the ambitions of many, but has diffused many employees as well, which has led to protests and retaliations from the employee union. Nordstrom however seems to have weathered this storm, and has become largely non-unionized. This may be attributed partly to the inflated pay scale and commission incentives offered by the company, which is largely unmatched to date in the industry. The possibility of ‘making a lot of money’ is very much in the open, and this possibility offsets any major resistance to implement the ‘Nordstrom way’.

If we were to evaluate the sales per hour (SPH) formula implemented by Nordstrom, it is in alignment with the hygiene-motivation analysis (ERG Theory, Alderfer). The basic salary, is the hygiene factor, and ensures that the physiological needs are taken care of (first level of Maslow’s hierarchy as well). The commission that a salesperson can earn is determined by the effort and ability input no doubt, but is largely driven by the incentives associated with increased sales, in the shortest possible time. This provides the motivation to perform better, and incrementally improve; we can even associate this to higher levels of motivation along Maslow’s hierarchy pyramid. References in the case suggest that there is an active application of the goal setting theory to drive motivation in Nordstrom employees. There is a top-down approach in sales target setting, and these goals are directly linked to incentives. The employees are encouraged to set challenging targets and meet or better these goals to earn higher incentives. An interesting practice introduced by the company is that of the built in feedback – where all sales performance metrics were made public. This ensured ongoing competition between salespersons, as well as a check and measure of performance versus goals. The equity theory is largely in play here, where higher commissions were automatically justified – either consoling the employee who made less money or motivating him/her to perform better. The open information also served to satisfy esteem needs of employees who were rewarded with ‘customer service all stars’ certificates. The differentiator for this major department store has always been service. Nordies are known to write thank you notes to customers, strive to fulfil their needs, wait on them, act as personal stylist-chaperone-assistant all in one. This is reflective in what customers are used to expect from this chain. What started out as a differentiating factor, became hygiene for most customers. The salespersons however were expected to go out of their way to make the ‘Nordstrom Way’ happen. This included working after hours, extended shifts etc. While this worked out for the best for the company, it meant a sizeable dent in the personal lives of many salespeople. In order to shine through the SPH method, they were left with two options: either sell more, or clock less hours. This is expressed in ‘The Broken Clock’ section...

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