1. MANAGING PEOPLE AND ORGANIZATIONS
October 11, 2011
GROUP 1 Page 1
CASE STUDY
ANALYSIS
OF
NORDSTROM
SUBMITTED BY GROUP 1:
- AABHAS RASTOGI (11 DCP 053)
- ABHISHEK GUPTA (11 DCP 055)
- ADESHWAR RAJA (11 DCP 056)
- ADITI ANIL KUMAR SANGANERIA (11 DCP 057)
- AKSHAY PRASAD (11 DCP 058)
- AKANKSHA GUPTA (11 DCP 059)

2. MANAGING PEOPLE AND ORGANIZATIONS
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CONTENTS
OVERVIEW
CASE ANALYSIS
 PROBLEMS AND CAUSES
 SOLUTIONS
RECOMMENDATION
OVERVIEW

3. MANAGING PEOPLE AND ORGANIZATIONS
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The case discusses about the problems of Nordstrom of „off the clock‟ working and
other of the harsh treatment of management towards the employees. Both of the issues refer
to a common problem that is the implementation of a performance evaluation mechanism
„sales per hour‟
Nordstrom uses a sales per hour (SPH) program to rate their sales employees. The
more the employee sells in the total hours they work, the more their SPH. Nordstrom
management uses this SPH figures for remuneration, compensation and promotions but again
this was used as a tool for identifying non-performance as well. If an employee had a low
SPH, they are ought to have a bad time shift, scheduled fewer work hours, or even
terminated.
The integral part of the problem was also identified in poor differentiation of “non-
sell” and “selling” time. In order to sustain the tradition and their competitive advantage of
superior customer services, the sales team would have to write thank you notes, deliver
purchases timely, participation in mandatory meetings, and the likes, on “off the clock” time,
because they were coerced by the existing performance evaluation system to keep their” sales
per hour” ratio high. If they booked those hours, their SPH would go down because they
weren‟t actively selling anything and would most likely be penalized for it in the end. But
there really wasn‟t a clear definition as to what was “selling time” and “non-sell” time. The
employees struggled with this because they weren‟t exactly sure how the types of activities
they did would impact their SPH. Nordstrom intended the SPH to be an incentive and a way
to reward top sellers through commission, but they were really using it as a tool to force
employees to work off the clock as to not impact their SPH and would punish them if they
booked all the hours they worked.
Another problem in Nordstrom was their decentralized system of operations.
Managers at all levels, department, store, and regional, were not very controlled as to how
they should be treating their sales staff. Without proper protocol some managers misused
their authority by improper and biased work schedules, relative compensation, and promotion
of their sales staff.
What started out as a customer service powerhouse in the retail industry eventually
turnedinto a company that exploits its employees.
PROBLEMS IN NORDSTROM AND THEIR SOLUTIONS

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1. THE LACK OF CLEAR DISTINCTION BETWEEN “SELLING TIME” AND "NON SELL"
WORK TIME EXACERBATED THE PRESSURES ON EMPLOYEES.
As there was no clear distinction between selling and non selling hours. All the hours the
employee worked for were considered as selling hours and were used while calculating
Selling per hour. Hence the SPH of the employees accounted to be lower than what it
accentually should have been. This fear of having lower SPH forced employees to make the
non selling hours off the record and this resulted in loss to employees in both monetary as
well as recognition of extra efforts work.
There should be a clear demarcation of the hours which would be categorized under selling
hours and the non selling hours. And Nordstrom should keep track of these hours of each of
its employees judiciously. However the per hour rate of payment for selling and non selling
hours could differ. As the time spent by employee under non selling hours is not adding any
immediate profits to the company. This would equip the employees to declare both their
hours clearly.
2. IS „SPH‟ AN APT PERFORMANCE MEASURING CRITERIA?
The main cause of the problem is the commission incentive for the sales people. It causes
employees to work while off the clock to increase their SPH. Since they work off the clock,
the employees get paid less. It also causes management to schedule people with high SPH on
good hours. Management punishes people with low SPH by giving them bad hours.
Hence it should not be the only performance measuring criteria. Behaviour of the employee
on the floor, punctuality and the way he or she deals with customer should also be given
considerable weightage.

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3. PEER PRESSURE
Employees at Nordstrom were facing the problem of peer pressure. In order to get the best
paying shifts, for example, the first day of a sale, employees had to put in a no. of off-duty
hrs. Every employee wanted to be in the shifts that had maximum sales to increase their
sales-per-hour. So, there was a lot of competition between the employees themselves which
sometimes proved unhealthy. Policies like All Star rating and making the sales figures of
individual employee public also put a lot of pressure on the employees.
A solution to this problem could be forming sales teams instead of individual sales persons.
Even if one member of a team performs exceptionally well and is suitably rewarded, the
whole team should also be given a minor incentive at least.
4. MISGUIDING THE EMPLOYEES
Employees were also lied about the distinction between selling and non-selling hours. For
example, they were repeatedly told on Saturday morning meetings that the punching clock
was broken or the time cards were not accessible. They were accused of not being team
players if they protested against this practice.
Employees should have been clearly told that they would have to put in extra working hours
sometimes. It should also have been the company’s responsibility to maintain the records of
an employee’s working hours.
5. LAWSUIT FROM SHAREHOLDERS
The company also faced a lawsuit from three individual shareholders who alleged that they
had suffered financial losses because the company had failed to report their labour problems
and early claims for unpaid work.
The company should have reported the problems sufficiently early in time so that they could
have been taken care of. These problems should not have been allowed to reach the level of a
lawsuit. There should have been a system in place to handle the grievances of the employees
as and when they are encountered.

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6. WORK ON OFF-DAYS WITHOUT COMPENSATION
The system in Nordstrom was decentralized, hence it gives a lot of power to supervisor and
store managers. When an employee is not able to meet the unachievable sale target set for
him then as a punishment the managers forced the person to come on his day off, without
any extra compensation or salary for that day. Due to this most of the time majority of the
sale force works off the clock.
The system in Nordstrom should be centralized and there should be proper guidelines and
procedure must be there as what to do and in what situation. Every single second an
employee works must be compensated whether it is on off day or on regular day. And above
all there should be a proper criterion for setting the sale targets otherwise it will promote a
biased behaviour.
7. FEAR AMONG EMPLOYEE: There was a lot of fear among employee of being fired
due to unavailability in achieving the sale target; there is a fear of falling SPH which
leads to termination.
The employee should be given much more time to perform. The Manager should reduce their
targets a little and manager should try to recognise the person’s ability clearly because a
person good in selling cosmetics may not be good in selling apparel. Therefore manager
should take an informed decision by taking into consideration the person’s interest while
allocating the person to different counters. Obviously the person should be given two months
notice period if there is no other option other than fire him.
8. FOSTERING JEALOUSY, PETTINESS AMONG EMPLOYEES: In Nordstrom there is
so much focus on individual performance. The management and their policies have
created an environment of fierce competition among employees which leads to problem
of starking in order to get ahead of others.
When an individual performs well then motivating an individual is good but at the same time
some credit must be given to his team and all co workers, who works and help him directly or
indirectly in achieving the desired target. There is a strong need of culture change in
Nordstrom; there should be a culture which focuses on Team spirit. People should be giving
training and lectures on helping others and they should be taught the importance of team.
RECOMMENDATIONS

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This Nordstrom case clearly shows that how important is the role of a proper training
of the employees in any organization. It is evidently seen here that there was a lack of proper
training of the „sales per hour‟ SPH program and as the program was initiated for the first
time into the organization a formal training was indeed needed in order to make the
employees feel satisfied and good about it and realise it as another opportunity instead of as a
threat. There should have been clear policies defined for the SPH program.
The employee training of SPHprogram should clearly emphasize on the
implementation and working methodology of the program, how it will be used for defining
relative team goals and individual targetsand how it should be used to estimate commissions
and incentives over the fixed salary. It should also explain that how a flexible work hour
scheduling is another boon for an employee in order to work efficiently and effectively.
This training program will definitely reduce the dissatisfaction in the employees and
will make them feel as more integral part of the organization which is very necessary for a
company in order to achieve success.