1. What is the cause of the problems described in the case? How serious are these problems? How would you quantify the potential financial risk to R&R?
The problems relate to not only recessionary trends in the fashion industry but also specifically to the motivation levels of the workforce at R&R, specifically the sales associates. The main problem is that the company’s management, in its pursuit of customer service excellence, seems to have forgotten the concerns of its internal customers and stakeholders that are its employees (Wong, Chan, & Lam, 2009). It is apparent that the sales associates are not thoroughly motivated each day at their work, in contrast to what was observed in the years prior to 2007-2008. Hence, the problems appear to be linked to company policies, which are not sufficiently addressing issues of employee motivation and expecting them to behave like machines.
The problems described in the case are of a very serious nature as R&R at this stage should be recovering from recessionary trends in the year 2010. A recovery for the company requires full dedication of its sales associates and store managers who are on the shop-floor and responsible for direct customer interactions. The problems for R&R have become more severe as the company is currently facing a lawsuit and has previously lost a case on the issue of labor termination. Hence, negative publicity now prevails for the company which used to be known as one of the best employers a few years ago.
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The potential financial risk to R&R can be gauged from a summary of its financials presented in Exhibit 2. The financial risk for R&R is alarming as its net earnings have declined tremendously in the years 2008 and 2009, as opposed to the previous years. If the situation continues this way for R&R, without its issues being addressed properly, the company can very well run into Net Losses, with negative financials being reported. A large decline of well over 50% in net earnings in the year 2008 can lead to a worse financial crunch for the company.
Threats of job terminations should not be specified in the company as they lead to further problems and insecurity (Fernandes & Whalley, 2006). Rather, if the management at a stage feels that an employee has been given sufficient time to work upon sales, and then it may think of termination. However, in R&R’s case, the sales associates as well as the store managers are not focused on work because they are worried about their jobs. Hence, any good company would always protect the interests of its workforce rather than threaten them with job insecurity. R & R also needs to understand these basics of management and motivation as the company is passing through an important phase and cannot afford workforce that is not happy with their work.
2. Are R&R employees pressured inappropriate by the sales-per-hour system? By the management? By their peers?
Yes, the sales-per-hour (or SPH) system is putting inappropriate burden on the employees, primarily the sales associates as well as the store managers. The sales-per-hour system is usually introduced the management of any company to increase the number of output that the company is producing. However, such a decision and approach many times leaves the workforce with too much stress and burden and affects their work-life balance. Although the management, including the previous CEO, intended to motivate the workforce towards more aggressive selling with the SPH approach, it appears to have done the exact opposite. The main reason for the prevailing attitude and over-stretching of the sales associates is because they now fear for their jobs. This is because not meeting the sales targets for the SPH can ultimately lead to termination. This policy and its accompanying pressure are even making the employees to engage in unethical behavior by taking credit of sales initiated by other workers. It is about time that the management carries out a proper evaluation of the system that they have introduced before it is too late for the company to go for a turn-around.
Secondly, the management had introduced the concept of ‘Ownership’ in the organization. However, the ownership seems to be primarily targeting the store managers and not their subordinates who are the sales associates and responsible for more hardcore sales initiatives (Albers, 1996). The inappropriate pressure is also due to the fact that the company owners did not discuss the sales strategy with the people on the ground, that is, the store managers and the sales associates, and to get their feedback in the SPH. It was an imposed decision with which the sales associates have not been able to cope up with. It must be understood that the sales associates are the ones who are field workers and in direct contact with the customer base; hence, they should also be important stakeholders in the concept of ‘ownership.’
It has been observed in the case that the store managers since the implementation of SPH are being bossier and dominating towards the sales associates as opposed to their previous track record and correspondence with them. This may also be because the store managers themselves are worried about their sales targets, and hence, are transferring the pressures to their subordinates. The sales associates feel more burdened as their peers and line managers are themselves not discouraging unethical practices aimed at earning a sales commission.
The store managers are interfering with the sales associates time records- the number of hours worked as it impacts the calculation of SPH. Hence, there is considerable divide due to this system and methodology leading to lesser motivation and fatigue for the workforce (Simintiras, Cadogan, & Lancaster, 1996).
3. How effective is the memo reproduced as Case Exhibit #4 in clarifying the distinction between "sell" and "nonsell" time?
The document does not serve to define all aspects of sell and nonsell time. It appears that the company recognizes the hard work of the sales associates in bringing sales, but does not explicitly state which categories are sell and nonsell time, a factor that is critical in compensating the sales associates. Only two cases are specifically referred to in the company memo as confirmed compensatory work activities: hand deliveries and home deliveries. Besides these two categories, the corporate office has not explicitly mentioned any other work as directly qualifying for extra compensation. The concept of communication, both internal and external, is critical to the success of R & R at this stage. The work that qualifies as ‘extra compensation’ should be clearly listed down and any misunderstandings removed.
The reason why the memo does not distinguish clearly between sell and nonsell time is that it says all circumstances will be dealt on a case by case basis, by saying that such and such activity ‘may’ be compensated. Hence, a huge conflict can be expected between the management and the sales associates in this regard who have not been provided a clear direction. The sales associates may feel that many of the activities specified in the memo (Exhibit 4) classify as compensatory work regardless of the time input and the location. The primary criterion, therefore, should be whether a sales associate has added any value to the customer experience or has provided a benefit to the customer during the activity (AltÄ±ok, 2011).
If the sales associates or the store managers are delighting a customer, then the customer is likely to engage in more purchase. For a store selling luxury items, this can mean significant sales. Hence, it does not appear fair that the efforts of the employees are pushed into ‘nonsell times.’ For example, the use of the phrase ‘picking up dead wood’ is meant to signify that there are some activities which are non-productive and hence may not be compensated for. Such statements would not serve to motivate the workforce any further. The company should improve communications at all levels to ensure that all employees are aligned on the company’s business strategy (Lies, 2012). None of the employees should be chasing their personal goals; rather, the employees at all levels should abide by the mission and the vision of the organization. The senior management and the marketing teams sitting in the head office should hold a monthly meeting or an informal session where the sales, marketing, and senior management meet in an environment where they can openly discuss problems and issues. Once the sales force on the shop floor starts to feel that their concerns are being addressed by the senior management, they will start to be motivated.
4. How would you redesign compensation and performance appraisal systems at R&R?
The business strategy of R&R is to be the market leader in retailing of luxury brands. The company also aims to develop an ownership culture in the organization, which would ultimately result in improving the service offering to the high-end clients who are the retailer’s audience in this case. As per the senior management’s understanding, the employees would be motivated with a commissions-based approach. Hence, they have aligned the HR policies so as to benefit the end-consumer (Ernst & Latham, 2006). However, the policies need a revision in order to address the concerns of the workforce, who are not just motivated by money but by various other factors.
I do not think that SPH is an effective measure of customer satisfaction. This is because many times it is purely due to the efforts of the sales associates that a customer may engage in a purchase. Hence, linking this directly with customer satisfaction is not the correct approach. Secondly, the real levels of customer satisfaction may be different from what the sales figures are depicting. The world of fashion many times faces a ‘fad’ where the sales of a product fluctuate rapidly, at times producing very high sales and at times depicting extremely low sales. Hence, in the backdrop of such a situation, the compensation and performance appraisal systems at R&R need to be revised.
A balanced scorecard method of appraisal is recommended for the company (Velentzas & Broni, 2013). The method focuses on developing and communicating objectives on four fronts: internal business processes, learning and growth, financial, and customer. The sales force should be evaluated semi-annually on these four factors and questioned as part of their appraisal. The balanced scorecard approach would ensure that the employees are not just being evaluated on the sales they generate each hour and hence would serve to reduce their burden and improve performance. To improve the motivation of the workforce, primarily the sales associates, it is vital that strategies be designed which give them incentives without threats to job security. It is encouraged that there should be no discrimination in policies for compensating the sales force and their line managers. This is because otherwise the sales force shall be demotivated and feel discriminated against. This is exactly what is happening in the case of R&R, where, for example, there are different methods to calculate the number of hours worked for the sales reps and for the store managers.
Since the calculation of Sales per Hour was introduced by the company’s management and it is not an easy system to operate, the effectiveness of the system should be monitored and necessary changes be made as required in the best interests of the organization. However, the balanced scorecard would serve as one of the best options for the company’s future in the given circumstances.
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Ernst, C. T., & Latham, G. P. (2006). Keys to Motivating Tomorrow's Workforce. Human Resource Management Review , 181-198.
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Simintiras, A. C., Cadogan, J. W., & Lancaster, G. A. (1996). Salesforce Behavior: In Search of Motivational Determinants. Industrial Marketing Management , 421-437.
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