Nordstrom Essay

1904 Words8 Pages
1. What is the cause of the problems described in the case? How serious are these problems? Nordstrom’s decentralized structure, financial controls and compensation policies have served to create one of the most productive workforces in the retail industry. But this irreprehensible customer service does not come easily. It requires very dedicated employees that go above and beyond to ‘wow’ the customers. Ironically, the same elements that enabled Nordstrom’s success are responsible for its current misfortune. The controversial Sales Per Hour System (SPH), the decentralized management structure, and the not very clear distinction between working hours and non-working hours, have had very damaging consequences for Nordstrom. This firm’s significant earnings growth came to an end in the late 80’s when employee complaints, union allegations, law suits and regulatory orders began to arise. In the summer of 1989, a discontent minority of employees from Washington voiced their complaints with the help of the UFCW Local 1001. These complaints resulted in a public campaign challenging the legality of the company’s labor practices. There were allegations that the company forced its staff to work off the clock without remuneration. A few months later, a formal complaint was placed. In addition, the campaign was aggravated with pamphlets, pickets and the press. This resulted in a direct impact on the untarnished reputation of the firm which further affected their financial results. Charges were coming from everywhere and investigations were triggered. In 1990, the administrative authorities ruled that Nordstrom had violated state wage and hour laws due to its incapacity to remunerate all the services provided. A domino effect was triggered: The legal problems of some areas were exposed and a wave of complaints started to come forth from all over the country.

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