Nordstrom Executive Summary

In addition to restructuring the performance measurement and incentive compensation systems to more intrinsically-motivated approaches, Nordstrom should consider offering career development and educational opportunities to its sales associates. For example, employees could benefit greatly from classes that will benefit their career development and keep them engaged beyond their day-to-day job responsibilities (i.e. courses could cover topics such as sales techniques or finance). A day-on-the-job program, where associates can gain exposure to different departments within the firm, would give employees a perspective on managerial and executive positions within the company in order to help them establish career paths and goals. These days would
Further, these supplemental educational opportunities inherently boost personal satisfaction, thus increasing intrinsic motivation. The program would also stand to benefit Nordstrom since they would be able to identify highly talented sales associates who could potentially move upward to managerial and executive level roles. Overall, the program could help drive performance and reduce employee turnover in a segment of the industry known for high turnover rates (retail employee turnover rates are cyclical and have historically exceeded 50% per year, and were 74.9% as recently as 2013). The support of employee development would allow Nordstrom to grant employees control of their future at the company, a highly intrinsic motivator. These opportunities would also complement employee progression through the expectancy model by tightening the links between each stage of the model and Nordstrom’s long- term goals of internal advancement. Individuals with more knowledge and understanding of the company would be more motivated to succeed if they understand the long term benefits of their
The system created several unintended consequences, including employees feeling pressured to under report hours worked and in some cases to steal sales credit from their colleagues. Our primary recommendation is for Nordstrom to overhaul their employee compensation system to a model oriented around more intrinsic factors, by rewarding employees based on overall store profitability, department profitability, and customer feedback, in addition to removing the distinction between non-selling and selling hours. The intent would be for Nordstrom to enhance its reputation as an industry-leading customer service retailer, yet fostering a more collaborative employee culture. We also recommend supplementing the overhaul in the compensation system with an education reimbursement program that rewards high-performing employees and, at the same time, creates significant goodwill for the