Nordstrom
Nordstrom's problems...
Nordstrom is a classic case of how complicated and counterproductive the business becomes if a system is not properly designed or implemented. Nordstrom’s intentions were very good when they launched their customized piece rate compensation technique called “Sales Per Hour (SPH)” for the first time in the retail industry. Their plan was to motivate all the sale employees to think and act outside the box and earn tremendous customer satisfaction thus augmenting the sales. Their intentions were good but they haven’t really anticipated the problems that they faced due to this idea, thus failed to create a system which was fool-proof and awarding for the employees. For example, the SPH system was set such that the employee with higher SPH gets compensation more than the one with lesser SPH. But it doesn’t account for the quality of work done in order to create that particular sale. What if a customer worked more hours to generate lesser dollar amount to satisfy the customer? Does that mean that the sales clerk deserves less money than someone who does a less intense work to create more SPH?
The fine line between selling time and non-selling time was not properly documented or practiced, which in a way brought the entire system down. Nordstrom’s management always were on a single loop learning process of reacting according to that particular situation and focused on the motivation aspect of the employees to enhance their sales but never concentrated in a double loop learning process of how things can be improved or what might go wrong with this idea etc. If they had implemented the double loop learning and be more proactive in extrapolating the glitches of the system, they would never have ended in a position like the one the case mentions about.
Nordstrom had used the expectancy theory of motivation for compensating their employees. When a sales clerk joined Nordstrom, he/she expected that they first will be valued and also will be
Nordstrom is a classic case of how complicated and counterproductive the business becomes if a system is not properly designed or implemented. Nordstrom’s intentions were very good when they launched their customized piece rate compensation technique called “Sales Per Hour (SPH)” for the first time in the retail industry. Their plan was to motivate all the sale employees to think and act outside the box and earn tremendous customer satisfaction thus augmenting the sales. Their intentions were good but they haven’t really anticipated the problems that they faced due to this idea, thus failed to create a system which was fool-proof and awarding for the employees. For example, the SPH system was set such that the employee with higher SPH gets compensation more than the one with lesser SPH. But it doesn’t account for the quality of work done in order to create that particular sale. What if a customer worked more hours to generate lesser dollar amount to satisfy the customer? Does that mean that the sales clerk deserves less money than someone who does a less intense work to create more SPH?
The fine line between selling time and non-selling time was not properly documented or practiced, which in a way brought the entire system down. Nordstrom’s management always were on a single loop learning process of reacting according to that particular situation and focused on the motivation aspect of the employees to enhance their sales but never concentrated in a double loop learning process of how things can be improved or what might go wrong with this idea etc. If they had implemented the double loop learning and be more proactive in extrapolating the glitches of the system, they would never have ended in a position like the one the case mentions about.
Nordstrom had used the expectancy theory of motivation for compensating their employees. When a sales clerk joined Nordstrom, he/she expected that they first will be valued and also will be