Nordstorm
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Nordstrom: Dissention in the Ranks
Case Analysis and Consultation
Introduction
Nordstrom was a firm hailed as a model example of success and profitability in the merchandise retail industry with superb financial performance, excellent workforce morale, and fierce customer loyalty. However, a failure to adapt and revise Nordstrom’s business model, most notably its sophisticated system of compensation (Sales-per-hour incentive), culminated in a financial and public relations dilemma in the years of 1989 and 1990, where stock prices plummeted, legal litigations mounted, and negative publicity ensued. We will attempt to examine in this case the reasons why Nordstrom’s existing system of SPH compensation and current methodology of management lead to its crisis in 1989 and 1990, address its failing, and suggest some clauses that could be implemented to alleviate and overhaul Nordstrom’s compensatory system. It is our desire to return Nordstrom to its prestige and status, and revitalize Nordstrom’s role as the dominant retail firm in the industry.
Causes
We have identified four core reasons that revealed the flaws in Nordstrom’s existing system, and unless corrected, pose a serious threat to Nordstrom’s long term sustainability:
First off, Nordstrom’s rapid expansion in 1989 from 5,000 employees to over 30,000 is one of the most pressing issues leading to Nordstrom’s financial and legal breakdown. Nordstrom maintained 59 department stores across 6 US states prior to its expansion in 1989. The succinct and controlled scope of this operation allowed Nordstrom’s executive management to micromanage the day to day operations of its retail locations with finesse and professionalism. We took into account Nordstrom’s policy of in house promotions, and as a result, we analyzed that Nordstrom could not evenly distribute its talented and experience middle management across its new locations to manage its new employees.
Nordstrom: Dissention in the Ranks
Case Analysis and Consultation
Introduction
Nordstrom was a firm hailed as a model example of success and profitability in the merchandise retail industry with superb financial performance, excellent workforce morale, and fierce customer loyalty. However, a failure to adapt and revise Nordstrom’s business model, most notably its sophisticated system of compensation (Sales-per-hour incentive), culminated in a financial and public relations dilemma in the years of 1989 and 1990, where stock prices plummeted, legal litigations mounted, and negative publicity ensued. We will attempt to examine in this case the reasons why Nordstrom’s existing system of SPH compensation and current methodology of management lead to its crisis in 1989 and 1990, address its failing, and suggest some clauses that could be implemented to alleviate and overhaul Nordstrom’s compensatory system. It is our desire to return Nordstrom to its prestige and status, and revitalize Nordstrom’s role as the dominant retail firm in the industry.
Causes
We have identified four core reasons that revealed the flaws in Nordstrom’s existing system, and unless corrected, pose a serious threat to Nordstrom’s long term sustainability:
First off, Nordstrom’s rapid expansion in 1989 from 5,000 employees to over 30,000 is one of the most pressing issues leading to Nordstrom’s financial and legal breakdown. Nordstrom maintained 59 department stores across 6 US states prior to its expansion in 1989. The succinct and controlled scope of this operation allowed Nordstrom’s executive management to micromanage the day to day operations of its retail locations with finesse and professionalism. We took into account Nordstrom’s policy of in house promotions, and as a result, we analyzed that Nordstrom could not evenly distribute its talented and experience middle management across its new locations to manage its new employees.