Question

Nordstrom Inc. is a Seattle-based department store rivaling the likes of Saks Fifth Avenue, Neiman Marcus, and Bloomingdale’s. Nordstrom is a Hall of Fame member of Fortune magazine’s “100 Best Companies to Work For” list. Nordstrom is known for its quality apparel, upscale environment, and generous employee rewards. However, what Nordstrom is most famous for is its delivery of customer service above and beyond the norms of the retail industry. This service orientation serves as a form of control as it helps employees decide how to behave when they encounter new situations. Stories about Nordstrom service abound. For example, according to one story the company confirms from long ago, in 1975 Nordstrom moved into a new location that had formerly been a tire store. A customer brought a set of tires into the store to return them. Without a word about the mix-up, the tires were accepted, and the customer was fully refunded the purchase price. In a different story, a customer tried on several pairs of shoes but failed to find the right combination of size and color. As she was about to leave, the clerk called other Nordstrom stores but could only locate the right pair at Macy’s, a nearby competitor. The clerk had Macy’s ship the shoes to the customer’s home at Nordstrom’s expense. In a third story, a customer describes wandering into a Portland, Oregon, Nordstrom looking for an Armani tuxedo for his daughter’s wedding. The sales associate took his measurements just in case one was found. The next day, the customer got a phone call, informing him that the tux was available. When pressed, the associate revealed that using her connections she found one in New York, had it put on a truck destined to Chicago, and dispatched someone to meet the truck in Chicago at a rest stop. The next day she shipped the tux to the customer’s address, and the customer found that the tux had already been altered for his measurements and was ready to wear. What is even more impressive about this story is that Nordstrom does not sell Armani tuxedos.

How does Nordstrom persist in creating these stories that serve as a way to control and direct employee behavior? If you guessed that they have a large number of rules and regulations designed to emphasize quality in customer service, you’d be wrong. In fact, the company gives employees a 5½-inch by 7½-inch card as the employee handbook. On one side of the card, the company welcomes employees to Nordstrom and states that their number one goal is to provide outstanding customer service, and for this they have only one rule. On the other side of the card, the single rule is stated: “Use good judgment in all situations.” By leaving it in the hands of Nordstrom associates, the company seems to have empowered employees who deliver customer service heroics every day.

1. The controlling facet of the P-O-L-C framework introduces you to a variety of controls. What types of controls does Nordstrom seem to effectively incorporate into their operations?

2. Does Nordstrom use behavioral controls? What are some examples?

3. Does Nordstrom use outcome controls? What are some examples?

4. What suggestions would you give Nordstrom for maintaining and evolving the organizational culture that has contributed to its success?

5. What balanced scorecard elements does Nordstrom seem to view as most important?

Answer 1

1) Controlling is a very important facet in the P-O-L-C framework. The importance of Controlling is more so because it is the way by which the company can come back to track in case it has deviated. An organization has a goal and the path to achieve that goal is through a plan. If the organization fails to execute the plan properly then controlling will play a major role in the company's goal achievement.  

There are three types of controls. They are:

a) Feedforward control i.e. solve the problem before they occur

b) Concurrent control i.e. solve the problem as and when they occur

c) Feedback control i.e. solve the problem after it has occurred.

In the given case, Nordstrom incorporates Concurrent control as it solves the problems as and when they occur. It ensures that the right things are done at the right time to achieve the company's goal of providing outstanding customer service.

2) From the given information it appears that Nordstrom does not have behavioral controls. This is because behavioral controls determine the way in which an employee of the oganization should behave. But in Nordstrom, there is no such direction given. The only instruction given to the employees is to use their good judgement in all situations.

3) Outcome control means that the control measures that can be taken based on the outcomes. It is based only on the end result of the situation. This type of control is present in Nordstrom as the outcome of the above given situations is good customer service that indirectly helps the other employees to decide how they should handle such situations.

4) In order to maintain and evolve such organizational culture, Nordstrom should give the employees proper recognition in the form of awards, rewards, bonus, promotion etc so that they become examples for the other employees. The other employees should be motivated and encouraged to help the company achieve its goal.

5) They components of Balanced Scorecard are: Organizational capacity, Internal Processes, Customer and Financials. Nordstrom gives maximum importance to Customer over the other components.