1. What is the cause of the problems described in the case? How serious are these problems?
The cause of Problem in Nordstrom is misaligned Compensation system. The Compensation is not vertically aligned with the Strategy of the company. Nordstrom depended on its sales employee for customer care and selling the products. However, the compensation structure was not adequately aligned to reward those behaviours which forced employees to work off-hours without getting
Compensated for it.
The problems were very serious as is evident from the case; the company came under a barrage of national class action suits which made a huge dent into the brand of the company. They had to make a $15 million fund which wasn’t enough. More…show more content… [pic]
From the above model, we can clearly see that although People are their biggest yet the HR and
Compensation policies are not at all aligned.
Steps I would take :-
1. Abolish the SHP rule, although it might be efficient but Sales does not just include making sales
call or selling , it includes creating goodwill which includes a number of activities which cannot be
part of the evaluation .
2. Following the HPWS ( High Performance Work System) , I would increase the base salary
Substantially and have a bonus component dependent on the number of sales and company
3. Remove the threat to employment, assure employees that it is their company and they will not be
fired if they don’t perform in a quarter or so.
4. Create achievable goals for sales employees and they are given constant feedback by the
managers on how to achieve and exceed them.
5. Continue delegating responsibility as is being done by the company.
6. Create a culture where employees associate with the company and want to be there through an
incentive plan not necessarily including cash, maybe by rewarding like discounts, free trips .
7. Create a culture of cohesiveness where they feel united and feel proud calling themselves