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Norstorm Hr Case Analysi

In: Business and Management

Submitted By RA007
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1. What is the cause of the problems described in the case? How serious are these problems?
The cause of Problem in Nordstrom is misaligned Compensation system. The Compensation is not vertically aligned with the Strategy of the company. Nordstrom depended on its sales employee for customer care and selling the products. However, the compensation structure was not adequately aligned to reward those behaviours which forced employees to work off-hours without getting
Compensated for it.
The problems were very serious as is evident from the case; the company came under a barrage of national class action suits which made a huge dent into the brand of the company. They had to make a $15 million fund which wasn’t enough. More importantly, it broke the numero Uno position and aura that Nordstrom was enjoying vis-à-vis their competitors.

2. Are Nordstrom employees pressured inappropriately by the sales-per-hour system? By management?
Yes, Nordstrom employees are pressured quite inappropriately by the SHP ( Sales Hour Performance) system. In this system, employees were assigned a given SHP and if they go above the SHP , then they would be eligible for commission otherwise they will just get the base price. Now, the employees worked “off hours” for doing everything from writing Thank You letters to sales meetings etc. but if they add the “off hours” then the SHP will go below the stipulated figure and they will not eligible for commission and without the overtime hours their salary reduced substantially.
So, it was counter mechanism, if you punch in all the work hours , the employee would suddenly find himself in the bottom rung of SHP which lead to reduced pay, termination as well. And if one doesn’t add the extra hours then also the pay is reduced but one can maintain SHP. So employees tried not to put their “off hours” but worked overtime.…...

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