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Nordstrom Case

In: Business and Management

Submitted By jane2015
Words 1885
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Founded by J.W. Nordstrom in 1880 as a small shoe store, by 1995 Nordstrom had become a giant retailer with net earnings of $203 million and over 35,000 employees. Nordstrom remains a family operation to date. The idea of the ‘Nordstrom Way’ - with strong commitment to the firm, emphasis on proactive service, no external hiring, and a decentralized management structure (e.g., Nordstrom has no CEO) - is central to their employee relations, and is seen as central to their success. Average compensation within the company is above industry average.

Despite this, the company has encountered problems over the years with its employees, leading to high turnover rates and lawsuits. While some employees are very happy with the way company operates, others criticize Nordstrom for unjust labor practices. As the company continuous to expand, the labor-force becomes further divided on whether or not the working conditions and compensation systems are fair.

Improvements that would increase employee job satisfaction and organizational commitment can be made on the basis of two basic issues: the company’s compensation system and management style. The following factors contribute to the two major problems described above, and must be dealt severally in order for them to be a positive outcome for firm.

1. Sales per Hour (SPH): double edged sword.

SPH is a commission structure based on which the “employees receive either their commission percentage times their total sales for that pay period or their hourly rate times their total work hours depending on which is higher”, so “consequently, only if an employee’s sales are high relative to the hours they have worked, will they receive a commission.” Though this rewards ‘good’ employees, it can also result in the ‘punishment’ of less successful ones - through reduced working hours, forcing employees to work off the clock...

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