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Nordstrom's HR Strategy Revamp

The document summarizes issues with Nordstrom's compensation structure and company culture in the late 1980s. It notes that the system of measuring sales per hour encouraged underreporting of hours worked and did not capture overall employee performance. The culture expected unpaid overtime and favored employees who did so, putting pressure on peer relationships. This misalignment between the incentive focus only on sales and Nordstrom's philosophy of customer service led to employee dissatisfaction and was a factor in problems faced by the company during its national expansion in 1989. Recommendations include rebalancing incentives to consider customer satisfaction and non-sales activities, as well as reforms to promote collaboration over competition.

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RUCHI CHOUDHARY
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133 views10 pages

Nordstrom's HR Strategy Revamp

The document summarizes issues with Nordstrom's compensation structure and company culture in the late 1980s. It notes that the system of measuring sales per hour encouraged underreporting of hours worked and did not capture overall employee performance. The culture expected unpaid overtime and favored employees who did so, putting pressure on peer relationships. This misalignment between the incentive focus only on sales and Nordstrom's philosophy of customer service led to employee dissatisfaction and was a factor in problems faced by the company during its national expansion in 1989. Recommendations include rebalancing incentives to consider customer satisfaction and non-sales activities, as well as reforms to promote collaboration over competition.

Uploaded by

RUCHI CHOUDHARY
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

NORDSTROM

DISSENSION IN THE RANKS?

GROUP 7
Ayush Maiti – PGP 35 206
Nidhi Soni – PGP 35 222
Ritija Monali – PGP 35 336
Ruchi Choudhary – PGP 35 402
Vazrala Lohitha – PGP 35 097
Vamsi Krishna – PGP 35 095
PROBLEMS WITH COMPENSATION
STRUCTURE

Sales per hour = Weekly sales / Hours reported


SPH to measure
performance This system encourages employees to under report
hours worked to increase commissions.

With inadequate weightage to ‘non-selling activities’,


SPH as the only
improvements etc., this system fails to capture the
KPI
overall employee performance.
PROBLEMS WITH THE CULTURE

Failure to Employees are expected to work beyond the


professionalize prescribed working hours without pay in order, but
the relationship these weren’t explicitly laid out.
between The ones who did, received favour from the top
management management and further improved their promotion
and employees chances.

- Pressure to become an ‘All star’ could result in


sharking
Increased peer
pressure and - Awards for the most multi-item sales
unhealthy - Management’s elaborate goal setting process
competition
- Automation helped in comparing performance to
own targets + peer performance
SO WHAT CAUSED THE 1989 FIASCO?

NATIONAL EXPANSION PLAN STRATEGY MISMATCH

 Increase in employee base from 5,000 in 1980 to  Company’s philosophy of to offer the customer the
30,000 in 1989 best in service, selection, quality, and value was
 The decentralized structure of Nordstrom had not in tandem with the company’s incentive plan
which focused only on sales generated every hour.
compromised top management’s ability to control
local managers’ implementation of sales force  This results to less willing employees to perform
management systems. “heroics”.
 Customer service value versus employee
satisfaction
WHY SERVICE ORIENTED CULTURE IS IMPORTANT?

• Satisfied employees make for Satisfied customers


• Customer’s perception of service quality are affected by the
customer-oriented behaviour of employees
HUMAN RESOURCE STRATEGIES FOR DELIVERING
SERVICE QUALITY THROUGH PEOPLE
KEY CONSIDERATIONS
 Align HR Strategies to balance between competitive
strategy and employee satisfaction
 Balance between employee satisfaction and performance
 Bring change at both levels – salesforce and managers
 Prevent against gamifying the incentive structure
RECOMMENDATIONS

Collaborative Sit with disgruntled employees and understand their


-
concerns and assuage them
approach for De- - Focus on maximizing employee motivation and
escalation satisfaction levels

Customer - Incentive system should be not just based on sales and


oriented hours put in, but on overall customer delight
Incentive system - Employees can be separately rewarded for both

- Team skill rewards beside individual rewards-


Group Incentive Eliminates unhealthy competition amongst employees
Reward - Group recognition in form of appraisal mails can act a
strong motivation factor

Reform across - Managers also need to be trained for new incentive


organization structure and culture
RECOMMENDATIONS

- Promote collaboration, cooperation, interpersonal


Culture understanding
- Balance between centralization and decentralization

- Instead of SPH, standardized shift rotation system can


be followed
Work hours - Working off the clock should not be promoted as
company’s culture

Performance - Track sales and non sales activities well


Tracking - Due credit should be given to the right person
THANK YOU

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