Business Case Study: Nordstrom's Compensation System

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Day 4 Report
Nordstrom Case Study

Background

Nordstrom was founded as a small shoe store in 1901 and its service-oriented strategy accelerated the company to become the nation’s leader in the retail industry. In the mid-1960’s, Nordstrom introduced an innovative incentive system-SPH to support its high-service strategy and motivate its sales force. SPH was a compensation system evaluated by the sales per hour. During the first two decades since introduction, the SPH system played an important role in the phenomenal success of Nordstrom. However, at the end of the 1980s, the SPH compensation and performance measurement system were distorted and Nordstrom was even sued by some of its employees, trade unions for claims of unpaid work.

Problems
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Some of the workers agreed with Nordstrom’s compensation while others disagreed. I think this also told us the flaw of this system. Due to the decentralization, the stores could make the decision for recruiting. Hence, some of the sales people didn’t have the capability to meet Nordstrom’s requirement. The SPH system requires the efficiency and those sales people who had excellent sales skills and well-time management skills would easily to reach the goal. On the other hand, the employees who were lack of entrepreneurial spirit would be difficult to meet the company’s…show more content…
Human resource management consists of utilizing a mechanism (human resource system) to influence behaviors and actions of members of the organization.
If I were the HR in Nordstrom, I would recommend to improve the system as follows:
Acquisition of talents
Centralizing the hiring system, HR department should conduct the hiring process under the same standard. According to Nordstrom’s corporate strategy, they need some one with entrepreneurial spirit to fit their positions. The HR department should base on this criteria to look for the people to join the sales team. It is very important to have the right person with the right skills and personalities on the right position. In the past, Nordstrom gave the hiring authority to each store which led the skill gap among the sales people.
Training and Career Development

Provide the necessary trainings to all employees. For the sales staff, providing the sales skill training, quality service training as well as the ethical training. In addition, direct the career path for the employee by offering any possible opportunities. For the department managers and store managers, provide regular management and leadership

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