HBS: Nordstrom: is it a great place to work?

February 28, 2010

If this is not a great system for you, move on, that it is for others. You don’t have to work nor take responsibility in any system as the one detailed in the case above, do you? To me, this case is not about the labor charges and pay backs brought against Nordstrom (this assumption is not to say that Nordstrom was exempted from responsibility); this case is more about the flawed policies, practices, and measurement systems that were in place, so I think this dilemma is pretty interesting.  Plus, I found many other interesting flaws in the organizational structure of Nordstrom to be the following:

  • Background: Nordstrom first started as a shoe store in 1901, it was run by members of the Nordstrom family. A century later, by the end of 1989, Nordstrom became the nation’s leading specialty retailer of apparel, shoes, and accessories capturing the National retail Merchants Association’s Gold Medal, the most prestigious award in the industry. 1989 was almost a historic year for the company; however it was until the end of that year when Nordstrom reported its first decline for that fiscal year. Up to that point they had enjoyed nearly 20 years of annual double digit growth.   
  • Philosophy: offer the customer the best in service, selection, quality, and value.
  • Policies, Practices, and Measurement Systems: Nordstrom adopted a commission system “SPH” that promoted in nothing but fighting, competition, and the worst didn’t promote a teamwork spirit amongst salespeople whatsoever. Yet, systems weren’t transparent; there was a lot inferred to the processes but not much specifically said as employees had to perform extra duties on their own time that they should have been compensated for. So the reward system itself led Nordstrom employees to file several class action suits against the company because they violated federal and state labor laws by treating their workforce unfairly.
  • Competition: is natural in a healthy system, however in this case was somewhat hidden and manipulated from top down. If you didn’t meet the SPH figure, you didn’t receive commissions, you could be working miserable hours, and in the worse scenario you could end up losing your job. All of that led to what we call an unhealthy atmosphere of competition where employees would steal each other’s time and commissions, so these unethical behaviors were certainly deemed illegal by the labor laws.
  • Sales force: young, college-educated people looking to pursue a career in retailing to whom Nordstrom gave them and other store managers a lot of independence and power over inventory, scheduling, compensation, and promotions (decentralization), so by doing so Nordstrom lost the power to control its workforce.   
  • Nordstrom spirit: They wanted their salespeople to have an entrepreneurial spirit so they saw their jobs as their own business so they went above and beyond for the company, therefore there seems to be a level of truth in this for me. What part of that level of service should be from internal motivation?
  • Motivation: at Nordstrom it was driven by making money and keeping one’s job. However, as I mentioned earlier, more than a time clock dilemma it is all about motivation and finding a job that fits your level of motivation.                   
  • No trust:  Unhealthy systems led managers to manipulate their salespeople into performing duties off the clock without being compensated for as required by individual employment contract or by law yet continued to promote or permit these activities to continue.
  • Organizational citizenship behavior dissonance: it was fear of losing their jobs that urged salespeople to provide great customer service, go that extra mile for the company, work off the clock, deliver merchandise to customer’s location, write thank you notes, attend company meetings, etc. so they weren’t performing those tasks because they wanted Nordstrom to succeed, they did so because they wanted to keep their jobs.

In summary, if Nordstrom would have admitted that there was some flaws in its system it would have saved tons of money in resolving the problems by working to affect change. However in the end Nordstrom pays back fairly well to employees, and still claims they have no desire to change the way their corporate operates.

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