Nordstrom

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  • Topic: Compensation methods, Working time, Remuneration
  • Pages : 9 (2604 words )
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  • Published : August 11, 2010
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Prepared for the Nordstrom Executive Management Team
Success: The Nordstrom Way

CONTENTS

DIAGNOSIS OF THE PROBLEM3
OPPORTUNITY OVERVIEW4
ANALYSIS5
Management Model……………………………………………………………………….5 Compensation……………………………………………………………………………..5
RECOMMENDATION6
Revamp Corporate Culture and Implement Compliance Measures6
Overhaul SPH Compensation Policy………….....………………………………………..7
JUSTIFICATIONS9
RISK 10
CONCLUDING REMARKS10
BIBLIOGRAPHY11
EXHIBITS………………………………………………………………………….. .….12

DIAGNOSIS OF THE PROBLEM
Nordstrom’s decentralized structure, financial controls and compensation policies have served to create one of the most productive workforces in the retail industry. Ironically, the same elements that enabled Nordstrom’s success are responsible for its current misfortune. The decentralized structure of Nordstrom has compromised top management’s ability to control local managers’ implementation of sales force management systems. This compromise of oversight, in tandem with the corporation’s employment of a controversial sales per hour (SPH) compensation policy, has had damaging results. The corporation’s twenty-year streak of significant earnings growth came to an end in the fiscal year 1989 and the first half of the year 1990 is proving to be a public relations nightmare (Westin, 1999, p.8). While some of the financial losses can be attributed to a slowing economy, others are directly related to retroactive wage payments ($0.11 EPS loss for 1989) and reputational damage resulting from negative publicity (Nordstrom Annual Report, 1990, p. 4). This paper will serve to rectify the latter issues, which are within Nordstrom’s control. The retroactive wage payments and negative publicity stem from issues related to: lack of intra-corporate regulatory oversight, inconsistent culture/policy communication and employee manipulation of a cumbersome compensation system. The solutions provided are specifically aimed at improving earnings growth and stock value while repairing Nordstrom’s reputation.

OPPORTUNITY OVERVIEW
In order to restore Nordstrom’s earnings growth and internal and external reputation, a number of opportunities have been considered for this study: 1. Revamp Corporate Culture and Implement Compliance Measures – establish a corporate culture that emphasizes achieving results the right way; mitigate compliance weaknesses associated with decentralization 2. Modify Controls – shift from a sole reliance on financial controls by incorporating several strategic operating controls that emphasize teamwork; reward mitigation of macro-economic effects 3. Overhaul SPH Compensation Policy – institute a less cumbersome method of determining sales commission and performance 4. Implement a Public Relations Campaign – highlight efforts being made to rectify issues at hand, settle legitimate litigation claims promptly, reestablish image to employees and stockholders All of these opportunities, when exploited properly, will help reestablish Nordstrom as the corporation most admired for its people, productivity and profits (Chevron Corporation, 2009). This study will incorporate the two most influential opportunities to improve Nordstrom’s current standing: revamping corporate culture and implementing compliance and overhauling the SPH compensation policy.

ANALYSIS
Management Model
Over the past year and a half, it has become increasingly clear that there are serious problems with Nordstrom’s management model and systems. These problems are most evident through employees’ lack of proper recording of time worked. This major gap in labor law compliance demonstrates that Nordstrom’s management model does not contain a functioning system of checks and balances. Furthermore, the decentralized structure of Nordstrom’s management, combined with the current culture of “whatever it takes” to meet or exceed financial targets, has led empowered local managers to condone...
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