Nordstrom Versus Walmart: Differences in Compensation and Benefits and the Effect on Organisational Performance Essay Example
A Tale of Two Pay Packets
Pat works in the men’s clothing section of a well-known department store. He has been in that position for more than 20 years, and his hourly wage is $11.25 per hour. Across town, Lucy is working in another highly successful retail chain and earns slightly less, around $10.75 per hour. She will make $19,000 a year, calculated over an average working week. Pat will make over $90,000. Pat works at Nordstrom, Lucy is from Walmart, and both are employed at successful companies that offer vastly different compensation and benefits. What is the impact of these differing compensation policies on employee behaviours, and what link (if any) is there to each company’s organisational performance?
Nordstrom: Incentivising Service
Nordstrom began as a Seattle shoe retailer in 1901, and soon branched out into apparel. By the 1980’s it was a multi-billion dollar retailing behemoth, with large full-line department stores offering the nation’s leading range of speciality apparel, shoes and accessories (Weston, 1999). Nordstrom has come to be recognised as an up-market retailer that puts a premium on delivering “heroic” customer service, internally dubbed “The Nordstrom Way”. This focus on the customer has been one of the primary drivers of Nordstrom’s extraordinary 20 years of double-digit growth, which has also resulted in the highest sales per square foot in the industry (Weston, 1999).
Nordstrom’s management has developed a highly trained sales force, and linked employee compensation and benefits to the consistent delivery of its lofty service standards. Employee pay is based primarily on sales commissions, and sales per hour (SPH) is the main performance metric that is measured. Nordstrom employees are encouraged to set their own SPH targets, earning from 6.5% to 10% commission on net sales if they achieve or exceed this goal (failure to do so results in only a base hourly rate being paid). Top salespeople have the potential to earn six figure
Pat works in the men’s clothing section of a well-known department store. He has been in that position for more than 20 years, and his hourly wage is $11.25 per hour. Across town, Lucy is working in another highly successful retail chain and earns slightly less, around $10.75 per hour. She will make $19,000 a year, calculated over an average working week. Pat will make over $90,000. Pat works at Nordstrom, Lucy is from Walmart, and both are employed at successful companies that offer vastly different compensation and benefits. What is the impact of these differing compensation policies on employee behaviours, and what link (if any) is there to each company’s organisational performance?
Nordstrom: Incentivising Service
Nordstrom began as a Seattle shoe retailer in 1901, and soon branched out into apparel. By the 1980’s it was a multi-billion dollar retailing behemoth, with large full-line department stores offering the nation’s leading range of speciality apparel, shoes and accessories (Weston, 1999). Nordstrom has come to be recognised as an up-market retailer that puts a premium on delivering “heroic” customer service, internally dubbed “The Nordstrom Way”. This focus on the customer has been one of the primary drivers of Nordstrom’s extraordinary 20 years of double-digit growth, which has also resulted in the highest sales per square foot in the industry (Weston, 1999).
Nordstrom’s management has developed a highly trained sales force, and linked employee compensation and benefits to the consistent delivery of its lofty service standards. Employee pay is based primarily on sales commissions, and sales per hour (SPH) is the main performance metric that is measured. Nordstrom employees are encouraged to set their own SPH targets, earning from 6.5% to 10% commission on net sales if they achieve or exceed this goal (failure to do so results in only a base hourly rate being paid). Top salespeople have the potential to earn six figure