Essay About Nordstrom’S Incentive Compensation System And Sales Staff

Nordstrorm Case – Expectancy Model
Nordstrom: Expectancy ModelThe expectancy Model can be depicted as Effort (E) → Performance (P) → Outcome (O).  The three main elements of Expectancy Model are Expectancy (E→ P), Instrumentality (P → O), and Valence[1]. Nordstrom’s incentive compensation system was instituted with an aim to promote extrinsic motivation in its sales staff. The incentive compensation system was driven by sales per hour (SPH).   Nordstrom’s incentive compensation system was not in accordance with the expectancy model that promotes extrinsic motivation as the E→P link was mainly broken. The Expectancy (E→P) is based on the belief that higher effort results in higher performance. Nordstrom employees Efforts (E) included selling activities and non-sell activities. The selling activities involved directly interacting with the customers on the floor and selling merchandise. It was common practice for a sales clerk to perform non-sell activities such as: drive to another Nordstrom store to retrieve an out-of-stock item; drive to customer’s home to deliver merchandize, write thank you notes to customers for their purchases. Sales clerks also spent time performing so called “heroics”: changing a customer’s flat tire in the store parking lot, taking a customer to lunch, etc. In addition, Sales clerk spent a great deal of time in routine tasks such as merchandise stocking, store display activities or attending numerous sales staff meetings. The sales clerk’s SPH determined his or her performance levels (P) for Nordstrom.  “The reason is that Nordstrom carefully evaluates salespeople on their sales per-hour ratio”[2]. A sales clerk can put in a tremendous level of effort but he or she may not receive higher SPH depending on the busy/non-busy store hours shift. The (E→P) was also broken because the sales clerk’s non-sell activities effectively lowered the sales per hour ratio.