Nordstrom Case - Organizational Behaviour

RODRIGO BARRERA G.

NORDSTORM CASE

MGMT S4000.

JUNE 27th/2016

Nordstrom has been recognized for being one of the most triumphant department stores in the US. Founded in 1901 in Seattle, they have focused their efforts on customer service leveraged on employee motivation and satisfaction. They believe service is an art form, which can be translated into customer loyalty and affection.

Nordstrom motivates employees with high salaries, which are variable based on sales commissions, calculated on their own SPH (Sales per Hour) indicator. Also, the company doesn’t hire managers: all are company grown, and promotions depend on their performance (quantitative and qualitative), which empower employees to build a career inside the company. Recognition is the last motivation form used by Nordstorm: in every store employees can see how everyone is performing and a ranking is displayed. This ranking shows who is the “pace maker” which is the current best salesperson.

The SPH motivation practice can be directly related with the equity theory, which relates the possible outcome (payment) received and the inputs (time) dedicated by the person. The fact that Nordstrom doesn’t hire managers and promote from the within, is related to McClelland’s theory need for achievement which fulfills the individual desire to perform well. The last practice, based on recognition and rankings, fulfill the McClelland’s need of power, and the desire to influence people and events.  

These practices has created a organizational culture that has make Nordstrom incredibly successful and a company that people hopes to work for due to the progress and success employees can reach. But not everything is as good as it seems: this motivation practices has led to and incredibly competitive environment and sales budgets and goals generate pressure that many times becomes difficult to handle.

The first problem Nordstrom was facing was because their SPH indicator.  One of the variables was the Selling Hours, which determined pay rates, but people were actually working more hours and not reporting them for maintaining the indicator high and keeping their jobs. This was a problem because extra hours were not being paid and not being recognized as an extra effort.

Even though a high SPH indicator was something that can benefit employees due to the commissions, recognition, or better hours scheduling, it also affects negatively those who doesn’t reach the optimum number. They get a bad recognition, less payment, and were assigned to difficult to sell hours, making even harder to get a high SPH number again. Also were forced by store managers (Who had the power to do it due to the decentralization) to come on their days off to do other duties without being paid or re cognized.