Nordstrom

Developing Effective Managers

Nordstrom: Dissension in the Ranks (Wk2)

Dr Michael Smets

November 2014

Nordstrom: Dissension in the Ranks

1. How does Nordstroms incentive system

support its strategic position?

2. What is it about Nordstrom and the SPH system that

attracts and motivates people to such a high level?

3. Is it the sales-per-hour system that is causing the

problems or the way that management enforce it?

Discuss.

4. Would you change Nordstroms systems and

processes? If yes, how?

2Motivation Dr Michael Smets, November 2014

Nordstroms Business Model &

Strategic Position

Focused differentiation strategyfull price, high value merchandise, limited categories, deep selection

individualised, high quality customer service

exclusive locations

KPIscustomer loyalty

sales turnover

sales per sqf

KPIs achieved viaprice

selection

personal attention from sales people

Nordiesperform costumer heroics

locate stock requested by customers

work with buyers to ensure suitable stock


How does the SPH align with that?

SPH provides:

direct measure of sales productivity (individuals, depts, stores)

indirect measure of customer satisfaction

indirect measure of customer loyalty

Further, SPH:

gives high performers recognition by posting SPH figures & at

sales meetings

identifies high performers for promotion and advancement

deals with adverse selection by weeding out underperformers



1. How does Nordstroms incentive system support its

strategic position?

2. What is it about Nordstrom and the SPH system

that attracts and motivates people to such a

high level?



Discuss.




What is it about Nordstrom that attracts and

motivates people to such a high level?

Extrinsic

Pay (SPH)

Discounts

SPH as Diagnostic Control

System

Feedback & Reinforcement

Fear

Intrinsic

Team Spirit

Recognition

Motivational, Public Goals

Autonomy

Empowerment

Growth Opportunities

Selection


Only works

because of

Performance & Motivation

Performance = (A x M x O)

Motivation

Competition

Recognition

Fear

Ability

Staff selection

Learning informal rules

Capable of

Checking & laying out stock

white collar work

Entrepreneurialism

Opportunity

Best salespeople get best slots (matching A-M-O)


Goal Setting

SPH goals are

Clearly defined

Self-set

Public

Achievable yet aspirational

Time-related (time-bound)

SMART

They are helped by

Recruitment of high-efficacy self-starters

Future-orientation of staff (additional deferred compensation)


Effort

Performance

Reward

Personal Goal

Expectancy Theory

Employee expects that

effort will make a

difference to

performance


effective performance

will produce rewards


the rewards resulting

from performance are

those sought and valued

9

Motivation depends on expectation and valence of outcome

Motivation Dr Michael Smets, November 2014

The Job Characteristics Model

Core Job Characteristics

Psychological States

Outcomes

10

Motivation Dr Michael Smets, November 2014

Feedback

Responsibility

Knowledge of results

AutonomySelf-actualisation

Responsibility

Skill Variety

Task Identity

Task Significance

Meaningfulness

How to Create Enriching Jobs?

Motivation Dr Michael Smets, November 2014 11

Source: J. R. Hackman and J. L. Suttle (eds), Improving Life at Work (Glenview, IL: Scott Foresman, 1977), p. 138. Reprinted by permission of Richard Hackman and J. Lloyd Suttle

What other Factors Make SPH Work?

College trained, ambitious workforce

Promoting only from within

Sales people work closely with buyers and departmental

managers

Decentralised systems

Management bonus strongly linked to budget goals

Recognition (customers letters read out, Customer All

Stars)

Public goal setting

Automation (allows records to be seen and compared)

Culture of Nordies


0

10

20

30

40

50

60

70

80

90

Comfort/Lifestyle Structure Relationships Recognition Power Autonomy/Growth

4947

59

63

7477

Career Launch

Motivation Dr Michael Smets, November 2014 13 John W Hunt London 2013



strategic position?



3. Is it the sales-per-hour system that is causing

the problems or the way that management

enforce it? Discuss.




Is it the sales-per-hour system that is causing the


Pressure to under-report

To be a team player

To get better shifts

Enhance chances of promotion

Join pace setters club

Publicising SPH figures

Threat of termination

Told by supervisor not to clock

in

Manager erasing hours on time

sheet

Pressure to report accurately


Get paid for full-time worked



strategic position?





Discuss.




How would you change Nordstroms systems

and processes, if at all?

Belief Systems

Core values of how employees should act

Boundary Systems

Guidelines for managers, especially first line.

Punish offenders (managers) who try to abuse system

Internal Controls

Clear distinction between sell and non-sell time

Avoid potential sharking

Keep the good parts of the model, but minimise abuse


Integrating Theories of Motivation

Motivation Dr Michael Smets, November 2014 18

Key Lessons

Align Motivation, HR Strategy and Competitive StrategyAlign individual and managerial goals with strategic KPIs

Be clear whether you motivate for:Job satisfaction (turnover, retention)

Performance (selection, performance)

Both

Be clear about trade-offs between motivational tools

Motivational job design motivates task accomplishment

Varied jobs more easily combine motivational tools

Beware of self-fulfilling prophecies

Protect against rigging quota goals

Closely monitor managers of high-powered incentivesWhats legal?

Whats ethical?


Nordstrom

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