Nordstrom Case Analysis
Nordstrom Case Analysis
Former Nordstrom employees accuse them of using unfair labor and discriminatory practices to intimidate employees and force them to perform tasks like stocking and picking up merchandise during non-working hours . Nordstrom employees receive little formal training when hired or promoted to new positions, but they are expected to perform their duties consistent with the “Nordstrom Way” which is customer service above and beyond the call of duty. Training is informally provided through on-the-job communication, which increases the opportunity for miscommunication.
This communication can be deliberate due to peer competition and pressures to succeed from managers, or lack of knowledge by co-workers and managers from whom they are encouraged to seek training. Management skills are not required to manage employees, nor is training provided to employees who achieve management positions. There is no real evaluation system in place to measure employee performance. There is no goal setting process that requires “manager – employee pair sets benchmarks for measuring progress, particularly when the employee is new in the role” (Harvard Business School Press, 2007).
Goals help to define what managers expect from their employees. The only employee metric used that is measurable is Sales per Hours (SPH) even-though there are other performance criteria such as customer service and teamwork which are part of the employee evaluation process. Employees who do not achieve the minimum required SPH are categorized as under-performers. If SPH is consistently below the minimum standard set by the department manager, this can lead to termination or isolation as employees feel uncomfortable and inadequate.
Upon being hired by Nordstrom employees are told that “the three Nordstrom performance criteria: customer service, productivity and teamwork” (Buller, Paul F. and Schuler, Randall S. , 2003) are needed to be promoted. However employees are not advised as to how the criteria will be evaluated. The only evaluation employees receive is from their manager, there is no secondary layer of management to review the employee performance evaluation to ensure fairness. Nordstrom does not have a formal company-wide evaluation form, therefore there is no consistency in the evaluation process.
The evaluation technique is different for each manager, making it difficult to compare employee performance across the different functional areas in the company. Employees performing tasks not directly related to merchandise sale, are not compensated for hours worked. Observational learning was used to encourage employees to work non-selling hours off the clock “If one employee is donating a lot of time it forces others to do the same” (Buller, Paul F. and Schuler, Randall S. , 2003). Employees are forced to adhere to the informal organizational culture or they are not considered team players.
Nordstrom should establish formal and consistent Standard Operating Procedures, to which their employees can resort to for guidance. Managers should be required to attend training programs. This would enable managers to provide their employees with formal training base on the company’s policies and procedures. Formal training along with on-the-job training would help to alleviate some of the obstacles faced by current or new employees who are promoted to new positions within the organization.
Employees should be provided with handbooks and/or training materials that specifically outlines how performance criteria will be measured and evaluated. Managers and employees need to establish goals and ways to achieving them. They should meet on an on-going basis to discuss employee progress for each performance criteria. Nordstrom has used their decentralized management approach to build a very successful and profitable retail empire. They encourage entrepreneurial opportunities among their employees.
New employees are given business cards and encouraged to build relationships with their customers, by creating personal “thank you” letters, and keeping records of merchandise they sell. They are also encouraged to develop a solid customer base. Nordstrom allow employees to be involved in the decision making process, by not restricting them with lots of rules, for instance “Nordstrom replaced its 20-page rule book with a one-page sheet and few words of wisdom: “Use your best judgment in all situations” (Buller, Paul F. nd Schuler, Randall S. , 2003). This allows employees to do whatever it takes to ensure their customers are satisfied. Self-motivation courses are offered to both employees and managers with emphasis on setting daily accomplishments. Employees are allowed to set their own personal goals and the pace at which they achieve those goals.
For example one employee stated “the first year I consciously set quarterly goals to achieve the Pacesetter requirement……and closely monitored my progress” (Buller, Paul F. and Schuler, Randall S. 2003). Employees are given the flexibility to essentially manage themselves and track their own progress with one objective: keep sales per hour high relative to hours worked. Employees are duly compensated for their hard work and dedication “Nordstrom employees earn some of the highest salaries in the retail business” (Buller, Paul F. and Schuler, Randall S. , 2003). They also encourage hard work by promoting from within which motivates employees to work hard as a promotion could lead to a higher salary and other incentives.
Nordstrom uses positive reinforcements by providing various incentives to employees to encourage them to achieve high SPH, for example free dinners, cash rewards and store discounts. Employees who achieve the highest sales are recognized by having their picture displayed in the store and also having their names broadcast over the store’s loudspeaker system. Employees can track how they are performing in relation to their peers on a regular basis, as SPH figures are displayed for all to see via charts and electronic printouts.
The problem arose because Nordstrom did not have any formal company policies which are necessary in order to establish required behavior from individual employees. Employee expectations were not explicitly communicated and expectations were established by managers without employee involvement. Managers did not take the time to “find out what employees think of the proposed expectations” (Harvard Business School Press, 2007). Their only focus was ensuring that Sales per Hour (SPH) remained high, employee development was not important to managers.
Nordstrom’s hiring policy requires employees to be innate “Nordies. ” Nordies are “nice, motivated, hardworking….. self-empowered people who have an entrepreneurial spirit” (Buller, Paul F. and Schuler, Randall S. , 2003). Employees and managers never collaborate to set individual goals, instead goals were set by departmental managers or store managers, but employees are still expected to achieve goals. Outstanding performance was expected from all employees even-though goals were not individually tailored.
Employees who “regularly had trouble meeting sales quotas or coping with pressure to improve performance were dismissed” (Buller, Paul F. and Schuler, Randall S. , 2003). Steep negative consequences were suffered by employees that did not perform up to par with their peers. Setting individual employee goals and ways to achieve them will yield the most desired result in the long term. By providing formal training to employees, and explicitly stating what is expected from the employee, will result in more productivity from employees in the long run and reduce the company’s turn-over rate.
This will also reduce the cost for hiring new employees, as replacing employees cost one and a half times the current employee salary to hire a new employee, therefore saving Nordstrom money in the long term. On-going review of employee progress will help to level the playing field and relieve some of the pressures and intimidation some employees feel working at Nordstrom. Formal training of employees is both costly and time consuming. The time spent training employees lowers SPH as this time would be considered non-selling hours.
Employees who are successful under the current system might resist changes. Employees might not have the educational capacity to learn new techniques. Employee training is the best option, and will yield the most desired long term results. Develop and roll out a company-wide Standard Operating Procedure handbook using input from outside sources in order to achieve desired results. Develop a company-wide evaluation form enabling standardization of the way employees are evaluated by managers.
Roll out on-the-job training for all employees, ensuring that all employees understand how to perform their job functions. Provide employees with written job descriptions. Establish consistent company-wide goals. Goals can then be tailored for each department. Collaborate with each employee to establish how the goals will be achieved and the milestone dates for achieving those goals. Establish a specific time frame for reviewing employee goals. Offer employee feedback on an on-going basis.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 19 October 2016
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