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 2

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 3

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 4

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 5

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

Only works
because of
Extrinsic Intrinsic
Pay (SPH) Team Spirit
Discounts Recognition
SPH as Diagnostic Control Motivational, Public Goals
System Autonomy
Feedback & Reinforcement Empowerment
Fear Growth Opportunities
Selection

Motivation – Dr Michael Smets, November 2014 6

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 7
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 8

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
Employee expects that
the rewards resulting
from performance are
Personal those sought and valued
Goal
Motivation – Dr Michael Smets, November 2014 9
The Job Characteristics Model

Core Job Psychological

Outcomes
Characteristics States

Skill Variety
Task Identity Meaningfulness
Task Significance

Self-actualisation
Autonomy
Responsibility

Responsibility
Feedback 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 11

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 12

 Career Launch

90

80
77
74
70

63
60 59

50 49
47

40

30

20

10

0
Comfort/Lifestyle Structure Relationships Recognition Power Autonomy/Growth

Motivation – Dr Michael Smets, November 2014 13

© John W Hunt London 2013
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 14

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

Pressure to under-report Pressure to report accurately

To be a ‘team player’ Get paid for full-time worked
To get better shifts
Enhance chances of promotion
Join ‘pace setters’ club
Publicising SPH figures
Threat of termination

Told by supervisor not to clock

in
Manager erasing hours on time
sheet

Motivation – Dr Michael Smets, November 2014 15

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 16

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 17

Integrating Theories of Motivation

Motivation – Dr Michael Smets, November 2014 18

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 19