Nordstrom

Introduction

Nordstrom’s decentralized structure and their compensation/evaluation system have proven to be very successful which led to uninterrupted earnings growth of over 20 years. It also created one of the most productive salesclerks with the highest wages in the retail industry. The average Nordstrom sales clerk earned $20,000 to $24,000 a year compared to the national average of $12,000 a year. They were even sales clerks who earned over $80,000 a year at Nordstrom.

However, with the company’s rapid growth in size, from 5,000 employees in 1980 to more than 30,000 employees, the decentralized management structure and the compensation/evaluation system, which contributed to their past success, are responsible for current problems of the company.

Problems with the decentralized management structure

After the Nordstrom’s rapid growth, the decentralized management structure has compromised top management’s ability to control and to watch daily operations of their department stores all over the country. They empowered local managers and told them to “run the stores as it was their own business”.

Although the decentralized management structure had also positive effects, as they empowered local manager to control stock and decide which items to put on the store shelves, but the increased pressure on local managers, and the lack of functioning systems of checks and control of their decentralized structure, created the culture of doing “whatever it takes” to meet financial targets. This created various problems.

These problems are most evident through employees’ lack of proper recording of time worked.

Sales clerks were “forced” to understand, against intuition and common sense, when they were supposed to leave off certain hours from their time card. Of course, Nordstrom couldn’t enforce this policy, but it was implied through bullying tactics, casting those that would question this behaviour as not being “team players”.

Problems with the...