Nordstrom

Developing Effective Managers Nordstrom: Dissension in the Ranks (Wk2) Dr Michael Smets November 2014

Nordstrom: Dissension in the Ranks

1. How does Nordstrom’s 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 Nordstrom’s systems and processes? If yes, how?

Motivation – Dr Michael Smets, November 2014

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Nordstrom’s Business Model & Strategic Position Focused differentiation strategy full price, high value merchandise, limited categories, deep selection individualised, high quality customer service exclusive locations

KPIs customer loyalty sales turnover sales per sqf

KPIs achieved via price selection personal attention from sales people

Nordies perform costumer ‘heroics’ locate stock requested by customers work with buyers to ensure suitable stock Motivation – Dr Michael Smets, November 2014

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How does the SPH align with that?

SPH provides: direct measure of sales productivity (individuals, dept’s, 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

Motivation – Dr Michael Smets, November 2014

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Nordstrom: Dissension in the Ranks

1. How does Nordstrom’s 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 Nordstrom’s systems and processes? If yes, how? Motivation – Dr Michael Smets, November 2014

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What is it about Nordstrom that attracts and motivates people to such a high level?

Extrinsic

Only works because of

Pay (SPH) Discounts SPH as Diagnostic Control System Feedback & Reinforcement Fear

Motivation – Dr Michael Smets, November 2014

Intrinsic Team Spirit Recognition Motivational, Public Goals Autonomy Empowerment Growth Opportunities Selection

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Performance & Motivation Performance = 𝑓(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) Motivation – Dr Michael Smets, November 2014

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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) Motivation – Dr Michael Smets, November 2014

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Expectancy Theory Motivation depends on expectation and valence of outcome Effort Employee expects that effort will make a difference to performance

Performance Employee expects that effective performance will produce rewards

Reward

Personal Goal Motivation – Dr Michael Smets, November 2014

Employee expects that the rewards resulting from performance are those sought and valued

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The Job Characteristics Model Core Job Characteristics Skill Variety Task Identity

Psychological States

Outcomes

Meaningfulness

Task Significance

Autonomy

Self-actualisation Responsibility

Feedback

Responsibility Knowledge of results 10

Motivation – Dr Michael Smets, November 2014

How to Create Enriching Jobs?

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

Motivation – Dr Michael Smets, November 2014

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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” Motivation – Dr Michael Smets, November 2014

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Career Launch 90

80 74

77

70 63

60

50

59

49

47

40

30

20

10

0 Comfort/Lifestyle

Structure

Relationships

Motivation – Dr Michael Smets, November 2014

Recognition

Power

Autonomy/Growth

© John W Hunt London 2013

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Nordstrom: Dissension in the Ranks

1. How does Nordstrom’s 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 Nordstrom’s systems and processes? If yes, how?

Motivation – Dr Michael Smets, November 2014

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Is it the sales-per-hour system that is causing the problems or the way that management enforce it?

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

Pressure to report accurately Get paid for full-time worked

Told by supervisor not to clock in Manager erasing hours on time sheet Motivation – Dr Michael Smets, November 2014

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Nordstrom: Dissension in the Ranks

1. How does Nordstrom’s 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 Nordstrom’s systems and processes? If yes, how?

Motivation – Dr Michael Smets, November 2014

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How would you change Nordstrom’s 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

Motivation – Dr Michael Smets, November 2014

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Integrating Theories of Motivation

Motivation – Dr Michael Smets, November 2014

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Key Lessons Align Motivation, HR Strategy and Competitive Strategy Align 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 incentives What’s legal? What’s ethical? Motivation – Dr Michael Smets, November 2014

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