Dissension in the Ranks Essay Example

when stores were solely localized in Seattle. While the intention behind the incentive plan was positive, it led to Nordstrom's salespeople earning the highest wages in the industry. With growth and decentralization, it became increasingly challenging for management to effectively monitor employee behavior at all levels and ensure integrity.

In the case of a typical Nordstrom's salesperson and the Principal-Agent Employee's Effort Problem, some store employees had to exert additional effort (such as customer house runs and dry cleaning) without receiving sufficient extra income to compensate for the increased discomfort caused by increased effort. Although working more hours initially resulted in higher pay, this advantage disappeared over time as better hours were assigned to those who worked without compensation and achieved higher sales per hour through manipulation of total hours.

Executive Management needs to acknowledge that they have neglected the oversight of the system they previously introduced. They should also commit to examining and adjusting the sales-force management practices to better suit the company's current size. These adjustments will motivate the sales-force to maintain their exceptional customer service, closely monitor that no sales-force members work without compensation, and establish a system for tracking both sales and non-sales hours.

Additionally, Executive Management will offer further training to local managers in order to ensure the implementation of these newly introduced sales-force management practices. These practices will replace the previous method of unintentionally incentivizing employees to work off-the-clock. Nordstrom was legally obligated to compensate both current and former employees for the hours they were compelled to work without receiving proper payment.

Moreover, the court dismissed four out of five individuals involved in the Class Action lawsuit against Nordstrom.

Furthermore, the Union was warned to stop encouraging its members to work without compensation to support their case against Nordstrom. Shortly after settling, Nordstrom employees managed to revoke the Union's certification, resulting in Nordstrom no longer being a union shop. This extreme situation highlights how rapid company growth, decentralized management, and strict performance expectations can distort performance evaluation systems and lead to negative outcomes.