Case 3 Nordstrom_Dissension in the Ranks (A)

HarvardBusinessSchool9-191-002Rev.October15,1999HilaryWestonpreparedthiscasefrompublicsourcesunderthesupervisionofProfessorRobertSimonsasthebasisforclassdiscussionratherthantoillustrateeithereffectiveorineffectivehandlingofanadministrativesituation.Copyright©1990bythePresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685orwriteHarvardBusinessSchoolPublishing,Boston,MA02163.Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,usedinaspreadsheet,ortransmittedinanyformorbyanymeans—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.1Nordstrom:DissensionintheRanks?(A)ThefirsttimeNordstromsalesclerkLoriLucascametooneofthemany“mandatory”Saturdaymorningdepartmentmeetingsandsawthesign—”DoNotPunchtheClock”—sheassumedthemanagersweretellingthetruthwhentheysaidtheclockwastemporarilyoutoforder.Butasweekswentby,shediscoveredthatonsubsequentSaturdaystheclockwasalways“broken”orthetimecardswerenotaccessible.Whensheandseveralcolleagueshand-wrotethehoursontheirtimecards,theydiscoveredthattheirmanagerwhited-outthehoursandaccusedthemofnotbeing“teamplayers.”Commentingonthevarietyoftasksthatimplicitlyhadtobeperformedafterhours,Ms.Lucassaid,“Youcouldn’tcomplain,becausethenyourmanagerwouldscheduleyouforthebadhours,yoursalesperhourwouldfall,andnextthingyouknow,you’reoutthedoor.”1PattyBemis,whojoinedNordstromasasalesclerkin1981andquiteightyearslater,toldasimilarstory:Nordstromrecruiterscametome.IwasworkingatTheBroadwayasEsteeLauder’scountermanagerandtheysaidtheyhadheardIhadwonderfulsalesfigures.We’dallheardNordstromwastheplacetowork.TheytoldmehowIwoulddoublemywages.TheypaintedagreatpictureandIfellrightintoit...Themanagersweretheselittletingods,alwaysgrillingyouaboutyoursales....Youfeltlikeyourjobwasconstantlyinjeopardy.They’dwriteyouupforanything,beingsick,thewayyoudressed....Thegirlsaroundmeweredroppinglikeflies.Everyonewasalwaysintears....Workingofftheclockwasjuststandard.Intheend,reallyservingthecustomer,beinganAll-Star,meantnothing;ifyouhadlowsalesperhour,youwereforcedout....Ijustcouldn’ttakeitanymore—theconstantdemands,thegruelinghours.Ijustsaidoneday,life’stooshort.21SusanFaludi,AtNordstromStores,ServiceComesFirst—ButataBigPrice,WallStreetJournal,February20,1990,p.A1.2Ibid.FortheexclusiveuseofH.CHENThisdocumentisauthorizedforuseonlybyHuiminCheninHighPerformanceRewardstaughtbyHuaWangfromMay2012toNovember2012.191-002Nordstrom:DissensionintheRanks?(A)2DespiteemployeegrievancessuchasthoseofLoriLucasandPattyBemis,topmanagementatthefashionspecialtyretaileracknowledgednoseriousproblemswithitsmanagementsystems.JimNordstrom,co-chairmanofthecompanywithhisbrotherJohnandcousinBruce,explainedmanagement’spositioninastatementtothepress:Wehaven’tseenanycomplaintsfromtheunion....Ifemployeesareworkingwithoutpay,breaks,ordaysoff,thenit’sisolatedorbychoice.Alotofthemsay,“Iwanttoworkeveryday.”Ihaveasmanypeoplethankusforlettingthemworkallthesehoursascomplain.Ithinkpeopledon’tputinenoughhoursduringthebusytime.Weneedtoworkharder.Alotofwhatcomesoutmakesitsoundlikewe’reslavedrivers.Ifwewerethatkindofcompany,theywouldn’tsmile,theywouldn’tworkthathard.Ourpeoplesmilebecausetheywantto.3BackgroundoftheCurrentSituationJohnW.NordstromfoundedNordstromin1901asashoestore.Nearlyacenturylater,bytheendof1989,thecompanyhadgrowntobecomethenation’sleadingspecialtyretailerofapparel,shoes,andaccessories.Thecompanyoperated59departmentstoresinsixstatesandwasimplementinganationalexpansionplanthatcalledforstoreopeningsinseveraladditionalstatesintheearly1990s.Bytheendof1989,saleswereapproaching$3billionandNordstromenjoyedoneofthehighestprofitmarginsinitsindustry.Nordstrom,whichissuedsharestothepublicin1971,hadalwaysbeenrunbymembersoftheNordstromfamily,whostillownedroughlyhalfofthecompany.ThethirdgenerationofNordstromfamilymanagers,whohadbeenatthehelmsince1970,upheldthemanagementphilosophyofthecompany’sfounder:offerthecustomerthebestinservice,selection,quality,andvalue.SuperiorcustomerservicewasNordstrom’sstrongestcompetitiveadvantageandconsequentlyamajorsourceofitsfinancialsuccess.Theretailerhadenjoyednearly20yearsofuninterrupted(primarilydouble-digit)earningsgrowthbeforereportingadeclineforthe1989fiscalyear.(Exhibit1providesahistoryofNordstrom’sfinancialperformance.)Withsalespersquarefootof$380in1988,4Nordstromwasamongthemostproductiveintheindustry,generatingroughlydoublethe1988industryaverageforspecialtyretailersof$194persquarefoot.5Throughoutthe1980s,Nordstrom’ssalespeopleweretheenvyoftheindustryintermsoftheirqualityandproductivity.Thecaliberofthecompany’ssalesclerksseemedtowithstandthepressuresofrapidgrowthasthecompany’sworkforceexpandedgeographicallyandgrewfrom5,000employeesin1980to30,000in1989.Theclerks’“heroics”(astheycalledtheirexceptionalcustomerserviceefforts)helpedtobuildthestore’salluringimage,itsextremelystrongcustomerloyalty,anditsloftysalespersquarefoot.3Ibid.4RichardW.Stevenson,WatchOutMacy's,HereComesNordstrom,NewYorkTimes,August27,1989,p.34.5Natio