The case has raised questions regarding Nordstrom’s compensation policies, practices and cultre for high-touch client service. Nordstrom received public criticism from labor unions and journalists for its policies, which led employees to underreport actual working hours. They did this in order to maximize their commissions, get the best floors, and curry favors with management. Norstrom’s biggest challenge was to find a compensation system that would keep employees happy while keeping costs down and sales high.
The first problem was that it was not clear whether the hours were selling or non-selling. The employees’ SPH was calculated lower because all the hours they worked were accounted for as selling. Employees were afraid of having a lower SPH, so they hid the non-selling time. This cost them both in terms of money and recognition for extra work. This issue can be mitigated by clearly defining the hours that would fall under the selling hours category and the non-selling hours. Nordstrom also needs to keep track on the hours each employee works. The per-hour rate for hours spent selling or not selling could vary. The time that employees spend in non-selling hours does not add immediate profit to the company. The employees would be able to accurately declare their hours and keep costs down.
SPH should not be the sole metric used to assess salespeople. The employees worked after hours to achieve a higher SPH. This resulted in them being paid less. Employees with high SPH were also scheduled at good times. I think that other metrics like punctuality, customer behaviour, etc. should be included. The employee’s bonus and evaluation system should also include these metrics. Nordstrom’s salesclerks were able to cope with the growth pressures, but they didn’t seem to have any strong training or screening programs. The company didn’t care much about its employees and did not provide fair compensation.
The memo referred to tasks like writing thank-you notes or attending meetings as “selling.” However, writing a client a thank-you note does not guarantee the customer will purchase again from you! It should not have been classified as selling but as an activity that occurs after the sale. The employee should not pay for it, but the company. This is because the company benefits most from the following purchase. Bruce Nordstrom likened this time spent not selling to that of an advertising or insurance salesperson. But there is a major difference in business models. In these businesses, the next sale would probably be made directly to this person. It was also possible to mislead employees. The employees were misled about the difference between selling hours and non-selling. In Saturday morning meetings, employees would be told that the punching machine was not working or that time cards weren’t accessible. If they protested, they were accused of being non-team players. Employees would have benefited from being told up front that they’d have to sometimes work more hours.
Nordstrom has a decentralized system, which gives store managers and supervisors a lot more power. The managers will force an employee to work on their day off if they are unable to reach the unrealistic sales target. They do this without paying them extra or giving them a salary. The majority of sales force work off-the-clock. While not all employees complained, it is clear that a majority of them were loyal to their employer and voted the union out.
Nordstrom won the case because Nordstrom’s employees were compensated for their work. The system is designed to discourage employees from reporting their hours. Nordstrom employees were not compensated by the Department of Labor and Industries because the order did not address cultural and systemic issues. Even though the employees had written time sheets, the real question was whether they would use them.