Who has to make recommendation/decision: Vetements Ltee Executives Has to do what: Adjust the incentive systems for both store managers and sales employees. Why: The sales employees began to engage in activities that had an adverse effect on inventory management, employee cooperation, and customer relations. When: Immediately
To Whom do they make recommendation: To the store managers of Vetements Ltee retail stores.
A. Issues and Symptoms (cause and effects)
OB issue: Expectancy Theory
Evidence: motivated to stay by door to get to customers first because of more commissions.
OB issue: Equity Theory
Evidence: Sales reps believe some reps are getting better locations to sell in or are “wasting time” doing inventory.
OB issue: Organizational Behavior Modification
Evidence: Employees are not working inventory management as much as they should (lack of punishment)
B. External Analysis
1) Brief industry analysis
Vêtements Ltée is a chain of men’s retail clothing stores located throughout the province of Quebec. Two years ago, the company introduced new incentive systems for both store managers and sales employees. However, the sales employees began to engage in activities that had an adverse effect on inventory management, employee cooperation, and customer relations. The store managers have tried, with limited success, to correct these problems.
2) STEP analysis:
Social- employee morale in down- customer service is lacking| Technological- new inventory system (assist in ordering)| Economic- old system putting employees in financial strain. | Political (& Environmental)|
C: Internal Analysis
1) SWOT Analysis
Strengths- has a automated inventory system | Weaknesses * Poor communication of staff * Hostility among staff * Loss of sales because of lack of inventory on shelf | Opportunities- customers want to shop there| Threats * Other mens clothing stores|
2) MOST IMPORTANT PART OF ANALYSIS – OB theory!!!!!
Internal Analysis of Systems, Structures, Individuals, Team, Organization This case shows that many symptoms exist to suggest that something has gone wrong. Employees stand near the store entrance, creating customer service problems, occasional conflict among employees over ‘ownership’ of customers, some parts of store are left unattended, employees are unwilling to restock and reorder inventory, and employee morale has fallen, particularly in terms of poorer relations with the store manager. Expectancy theory can be applied to this case to explain employee motivation to hoard customers at the store entrance rather than attend to lower traffic parts of the store and complete inventory duties. The E-to-P expectancy drops when every employee tries to hoard customers; the competition for customers reduces the change that effort will result in having more customers and therefore more sales.).
P-to-O expectancy is important because of issues higher pay, conflicts with other staff. There is a performance issue because of the difference possible outcomes of serving customers at the front of the store or working on inventory and remaining in the assigned location. Employees are unsatisfied because the employees at the front of the store get the customers and in turn the highest perceived payoff. Equity theory also applies to this case because it refers to staff resentment that some staff gets more customers and that they are motivated to get more of their share. The areas of focus in the equity theory are inputs (effort, time, ability), outcomes (pay, achievement), and comparison other (other employees). Employees who stock inventory and serve low traffic parts of store have same inputs but lower outcomes than the hoarders. This staffs feel inequity and thereby adjust their behaviour to minimize tension of inequity.
Behaviour modification is a key factor because the reward system reinforces the inappropriate behaviours. The OB Mod model, suggests that sales employees are motivated through positive reinforcement to maximize sales assigned to them. This means not only helping customers make purchases, but also ensuring that customers are assigned to them. This is why employees to stand near the store entrance and possibly fight over who owns the customer. The more customers a sales employee has, the more sales will be rung up in that employee’s name. The OB Mod concept of extinction explains why sales employees do not perform inventory control duties. By leaving the sales floor to restock merchandise and complete reorder forms, employees are losing the opportunity to increase sales assigned to their name.
Higher commissions lost while employees are doing inventory work. Store managers made ineffective use of punishment. Punishment is applied when store managers reprimand and threaten to dismiss employees for failing to perform inventory duties. Punishment tends to be effective only when the manager is present. Punishment also results in negative attitudes of those being punished towards the punisher. This should only be a last resort. Alternatives
Decision Criteria (specific, measureable)
1) Improve customer service and satisfaction
2) Improve employee involvement in inventory system (rewards)
3) Boost employee morale, and reduce employee conflict.
4) Improve store appearance and sales.
Viable Alternatives and their Analysis of Alternatives:
1) Alternative: Institute an even rotation of employee’s duties cycling from sales to inventory and stocking roles.
* Gets employee morale up
* Gives every rep an even chance for the good sales locations
* Will have financial high and lows depending on role that week.
* May result in role confusion.
2) Alternative: Fire the people who are not compliment with their inventory responsibilities.
* Will get employees motivated (short term)
* Will eventually lead to even lower employee morale
* Might cause HR issues
3) Alternative: Work as a team and share rewards and introduce incentive programs.
* Will improve employee morale and involvement (long term) * Rewards will result in employees improving store appearance and sales.
* Reduce employee conflict
* Might result in some employees slacking
* Might leave top sales reps financially unsatisfied.
The best option would be to implement alternative 3. Based on both expectancy theory and behaviour modification, the organization should redesign its incentive system for sales employees so that they also receive financial compensation for these organizational goals. For example, in addition to a sales commission, sales employees could share a quarterly reward for the store with the best appearance. Thus, this goal would be positive for employees in the winning store. This could also work for the inventory management duties. By redesigning the commission system to motivate group rather than individual performance, the problems of customer ownership and intimidation would be reduced.
The redesigned incentive would motivate team performance by dividing the work team’s reward equally among its members. This could be bad if some sales reps slack but it should balance out by the other reps motivating them. Also, if needed management could punish or fire employees, but with the new reward system this shouldn’t be necessary; however if used should be used clearly and effectively.