Individual Case Analysis
Organizational Behavior
Nordstrom Case
205852437
August 2021
Individual Case Analysis
205852437
1. Use expectancy theory to analyze motivation at Nordstrom.
o Describe the 3 main elements of the model as it relates to Nordstrom.
o Then, analyze whether the necessary expectations and links were in place to
bring about the desired levels of motivation.
2. Drawing on your analysis, identify a (presumably) unintended consequence of the
compensation system. That is, what behavior does Nordstrom actually reward, in
contrast to what it hopes to reward?
The Nordstrom case is a clear example of how the EPO model can be troublesome when
people are just being rewarded by extrinsic factors and the links between Effort and
Performance or Performance and Outcome are not well defined. To be correctly motivated
by extrinsic factors, people must be clear on how their effort can translate into the expected
performance and how will that performance will then be measured, as well as how they can
maximize their performance to achieve the desired outcomes.
On the Nordstrom case, employees were being motivated by extrinsic factors, basically
money. They decided to join Nordstrom aroused by the possibility of doubling the income
they could make at a similar job and under the promise that they would be paid a base rate
per hour worked as well as a commission percentage of their sales. The desired outcome
was clear, and the employees were motivated by the possibility of outearning their peers.
Performance was also clearly measured. Nordstrom used sales per hour (SPH) as the
main metric that defined performance and defined targets for everyone as well. Moreover,
employees could also maximize their income by putting more hours into their work, as they
could also be paid overtime if they exceeded the agreed hours per week. Employees were
encouraged to go the extra mile for the customer with the promise that by doing this, they
would also achieve superior performance and get their desired outcome.
The issue here, laid in the fact that the only objective of Nordstrom employees was to
maximize their economic profit, and in this case, effort could translate into one of the two
metrics of performance that determined their desired outcome (hours worked or sales per
hour) but not both. Employees were told to go out of their way to make customers happy
and this required spending time doing customer care chores, that did not directly translate
to sales. So, they had to choose between two impossible options: either they cashed their
hours worked and hurt their SPH metric, or they did not punch the clock and preserve their
precious SPH.
This compensation system created a lose-lose situation in which people felt that it didn’t
matter how much effort they put into their jobs, they would still be getting only a part of
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Individual Case Analysis
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their desired outcome, leaving many frustrated as this was not what they agreed to when
joining Nordstrom. The company, who was supposedly trying to reward employee
productivity, ended up just rewarding people for not formalizing the amounts of hours they
had worked during each week.
As employees could get paid a lot more by reaching the desired SPH, everyone decided
to just put in that extra effort and work long hours, but not punch the clock. This left
employees with a bittersweet taste as despite probably making more money than others in
comparable positions, they still would be missing a part of their compensation plan: their
base pay for overtime.
3. Provide one recommendation for an actionable step that Nordstrom could take to
effectively foster a higher level of intrinsic motivation. Explain why this step would be
effective based on job characteristics model, and discuss potential challenges for
implementation.
To foster intrinsic motivation in Nordstrom, I would first propose to fix their current
compensation system. As long as Nordies are still measured using their current diabolical
metric: sales per hour, it will be difficult to get people motivated by other intrinsic factors.
As Maslow (1943) explains in his famous hierarchy of needs, people must first satisfy lower-
level needs, for example physical survival before thinking about going after higher level
needs such as recognition or status. Fixing the compensation plan would help employees
feel that they basic needs are taken care of and would be the first step for fostering intrinsic
motivation.
A much better way to instrument an incentive program for Nordstrom salesforce
would be the territorial estimate upward quota setting method (Rathi, 2019). In this method,
sales reps are asked to make an estimation of their potential sales for next years and then
every manager above them can make their own adjustments to these targets, considering
past performance and expected growth. By doing this, managers and salespeople can take
into consideration the amount of time people spend doing non-sales tasks, to calculate
what would be the expected sales per quarter per individual contributor.
Intrinsic motivation could also be fostered by giving the salespeople ownership of
the way in which they perform their work or the amounts of time they worked as it would
make them feel they have control of the way in which they can achieve their desired
performance. This way, if someone decides to clock in earlier to organize the store before
customers came, because he thought that this would help achieve his assigned sales quota,
he will feel good about being able to make that decision while still being fairly compensated
for the extra effort he put in.
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By allowing people to have a say in their quota setting as well as decide how much
time they want to work and how they want to spend that time, employees would feel they
have a greater autonomy, thus having responsibility for their own outcomes and increasing
general job satisfaction, according to the job characteristics model (Hackman, 1974).
This would not be easy though, as it would take time for employees to get used to
this new responsibility and there may be some that could even use this new system to cheat
(lowballing their quota estimates or working less time than they should). It would also be
difficult for the managers at Nordstrom as they would have to learn how to delegate and
trust in their teams, something they are clearly not used to. Nordstrom’s leadership would
then have to create new training schemes for both managers and salesclerks for them to
learn how to correctly handle these new responsibilities, but if they succeeded in doing this,
overall work effectiveness would most probably increase.
References
Hackman, J. R. & Oldham, G. R. (1974). The job diagnostic survey: An instrument for the
diagnosis of jobs and the evaluation of job redesign projects. Department of Administrative
Sciences: Yale University.
Maslow, A. H. (1943). A theory of human motivation. Psychological Review
Rathi, D. (2019). Salesmanship, Selling, Process and Sales Promotion. LULU Publication
Weston, H. (1999). Nordstrom, Dissention in the Ranks? (A). Harvard Business Review.
