Nordstrom: Dissension In The Ranks

Nordstrom: Dissension in the Ranks (A)
1. What is the cause of the problems described in the case? How serious are these problems?

Nordstrom’s labor practices came under scrutiny after several employee grievances, union allegations and court suits claimed that Nordstrom was not paying the employees for the full amount of time that they were working at the company. Sales Per Hour (SPH) was at the core of these problems. Decentralized management and operations as well as the high peer pressure that existed at Nordstrom added to these extremely serious problems that led to litigations starting in 1991 by Local 1001 clerk union and could’ve cost Nordstrom its hard-built reputation in the industry.

The sales per hour (SPH) incentive compensation

Due to decentralization the top management also lost sight of their stores and employees, and only tracked them through their sales figures. The managers were expected to announce their yearly goals with much fanfare and pomp and it is possible that they inflated their goals and then pressured their employees to achieve their goals. Public sales contests, awards, and recognition also pressured the employees to focus on the SPH figures and feel pressured. Despite all these issues the top management didn’t acknowledge them for a long time leading to increased pressure on the

The functions that are listed as “sell” time are time spent in locating merchandise, stock assignments, sales promotion activities, personal touch activities, meetings etc. The employees will do all these hurriedly and inefficiently to increase their SPH.

4. Would you change the management systems at Nordstrom? If so, how? If not, why not?

1. Re-align incentives and commission with goals
• Create a performance system that is not so highly dependent on individual performance but on store performance as a whole.
• Pay employees for all hours they spend at work. Record their time better.
• Don’t induce fear through an individual or store performance indicator.
• Give better commission rate during slow hours to balance the SPH.

2. Re-orient the middle management: I would say that the lack of communication between the top and the middle management is one of the primary reasons for these issues being created. To create an organization with a single-minded focus on customers, Nordstrom’s top management needs to better control the middle management. Decentralization is great but more engagement through monthly meetings, setting and evaluating specific goals for middle management, trainings, correcting their approaches etc. would be the way to address these