Nordstrom Case

Synopsis

Nordstrom is a U.S. listed company leader in the retail of apparel, shoes and accessories. Founded in 1901, Nordstrom has exhibited high level of growth during years up based all the efforts in creating a superior customer service which represented its primary competitive advantage. Up to 1989, the company was the envy of all the competitors in terms of quality of services and productivity and they have been seeking to imitate the company’s strategy. However, starting from the end of 1990s, the company started to have some problems with unions. In particular, unions accused them to abuse of their employees, not paying them and they take some rigid measures against it.

The report dig into the causes of these problems, seeking to find some solutions to them.

1. What is the cause of the problems described in the case? How serious are these problems?

In February 1990s, Local 1001 Union took some measures against Nordstrom since the company was accused not to compensate some activities to employees and to encourage not to record properly the hours of work performed by employees.

Form our analysis, we get that effectively many hours are not recorded by the employees, often pushed by middle-managers, and many activities are made outside normal work without compensation such as writing thank-you notes, addressing advertising circulars or group meetings.

These problems are mainly due to an incentive scheme that is based on a Sales-per-Hours ratio (SPH) which measures the amount of sale for each clerk for each hour worked. Top management fixes some targets which need to be met. In case the targets are not met, the consequences would be decrease of hours or also, in some case, termination. The threat of decrease of hours or, worse, termination leads to frustrations among the employers who, fearing a decrease in salary, are coerced not to record the hours worked to increase the ratio. It has probably been this lack of serenity inside the company that has leaded to the first complaints to unions. This system clearly leads not to record hours and, thus, not all hours worked are effectively paid. Another cause to the problems is the not clear distinction between selling and not selling time. Time worked to activities which are not strictly linked to sales are considered selling time and, this, one more time, encourage not to record the hours worked and, therefore, these hours are not paid.

Furthermore, most of the problems are linked to the management control system; the decentralization of operations has played an important role in causing the intervention by unions. In fact, decision-making responsibility and rewards are delegated directly the front-line-salespeople who were closest to the customer. A decentralized system could lead to some abuses due to the lack of control by top management.

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