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Full Summary of The Nordstrom Way
Only One Rule
Nordstrom welcomes new employees with a handbook that outlines the company’s rules. The first rule is to use your good judgment in all situations, and Nordstrom trusts its employees to make decisions on their own. This attitude has helped it develop an army of highly motivated employees who are willing to take risks and enjoy working for this innovative company because they feel empowered.
The company’s liberal return policy and decision to empower workers enables them to perform heroic acts of customer service that add to the chain’s mystique. That, in turn, separates Nordstrom from its competitors. However, not everyone can handle such high demands and expectations. Employees must thrive in an unrestricted environment if they want to succeed at Nordstrom.
The Nordstrom Way
Nordstrom is a family-owned business that started in 1901. John Nordstrom and Carl F. Wallin opened their first shoe store, which they later expanded to include other items like clothing and accessories. They decided to change the inventory after some traveling salesmen told them that Swedish people needed larger shoes than what they had on offer at the time. Today, customers are still able to find everything from clothes to jewelry there because of its high value per square foot for inventory space.
Nordstrom is known for its customer service. The company has a policy of always putting the customer first, even when it’s more profitable to put their own interests ahead of the customers. If employees go above and beyond what is necessary for a customer, they are never reprimanded; however, if they don’t do enough for the customer, they will be punished.
Setting Employees Free
Van Mensah is a sales associate at Nordstrom’s Pentagon City, Virginia store. One day he received a letter from a customer who had purchased $2,000 worth of clothes and accidentally shrunk them by washing them in hot water instead of cold. The customer admitted to making the mistake but asked for Van’s advice on dealing with it.
Mensah immediately called the customer and told him that the shirts would be replaced. He asked the customer to mail the ruined shirts back to Nordstrom’s – at Nordstrom’s expense. Van Mensah never got permission from his superiors to react this way, but he did what he thought was best for both parties involved with no regard for consequences. Nordstrom expects its employees to act in a similar manner; they are empowered with freedom of action on sales floors so that they can take care of customers’ needs even if it means going against company policy or procedure.
Because Nordstrom gives its salespeople and managers a lot of freedom, they can act like small-business owners instead of being controlled by corporate rules.
Nordstrom’s corporate structure is an inverted pyramid. Customers are the most important aspect of their business, so it makes sense that sales and support staff would be next in line.
The hierarchy of Nordstrom is as follows:
Store managers, buyers, merchandise managers, regional and general managers (all work to support the sales staff and customer)
Board of Directors (they are at the top of the pyramid).
The company’s structure aligns with its philosophy that all tiers should work to support the sales staff and customers, not vice versa.
Nordstrom salespeople are free to sell merchandise from any department in the store. This gives them a chance to increase their sales.
Nordstrom’s Proving Ground: The Floor
Nordstrom starts every employee on the sales floor. This is an important step because it helps teach new employees what they need to do in order to serve customers better. The company’s policy sends a message that the store values the role of its salespeople more than anything else, and everyone recognizes this importance.
Nordstrom department managers are responsible for hiring, firing and coaching their sales staff. They spend most of their time on the sales floor talking with customers and employees. Their main responsibility is to set the tone for how a department operates. When they see their manager rushing over to help a customer, it sends a message that Nordstrom values its customers above all else. Managers are warned not to micromanage because it can stifle creativity from within the team.
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When salespeople are held accountable for their results, they will be more motivated and successful. Nordstrom is a company that allows its salespeople to take control of their own success by setting goals and achieving them. It helps the employees become more effective in their jobs and motivates them to do better work.
Nordstrom’s decentralized buying structure allows regional buyers to focus on items that customers in their area want. This allows Nordstrom to take fashion-forward risks without jeopardizing the bottom line.
When you’re a buyer, you spend several hours each week on the sales floor. You can get feedback from salespeople and customers by listening to them. Spreadsheets are great for seeing what sells but don’t show what doesn’t sell because it’s not in stock. The best buyers at Nordstrom listen well and adjust their choices based on customer feedback.
The structure of the sales process at Nordstrom makes it possible for small vendors to get their foot in the door. While this may be frustrating for sales representatives, it gives them an opportunity to sell more product.
Nordstrom has modified its buying structure somewhat because inexperienced buyers were making too many costly mistakes. Now, 80% of final decisions are made by a few experienced lead buyers who can negotiate with vendors for large quantities of merchandise.
Nordstrom attracts and retains good people by paying them what they are worth. The company wants self-starters who don’t require supervision. Commission and bonuses give these people the incentive to work harder. They pay a 6.75% commission on apparel sales, for example.
Every salesperson has a draw that the company calculates by dividing the commission rate into an hourly rate. The region’s prevailing rate determines how much they earn per hour. If they don’t make enough in commissions, Nordstrom covers their draw until they reach their predetermined amount of earnings. After that, if the managers fail to see improvement and it’s determined that a career in sales isn’t for them, then either they’re let go or reassigned to another position within the company.
Goal setting is important for every level of the organization. Sales associates, buyers and managers strive to meet their goals on a daily basis. They try to improve upon last year’s results by meeting their departmental, store and regional goals. If a department misses its target one day, the manager raises the next day’s goal in order to motivate them. Nordstrom employees are competitive with each other because they’re always trying to do better than yesterday or reach higher objectives through personal commitments and peer pressure. Employees start their shifts with reminders of today’s goals so that they stay focused throughout the day. Managers quiz sales associates about whether or not they’ve met their individual goals at different times during the shift so that they remain aware of what needs to be done.
Praise and recognition
Nordstrom salespeople are recognized as Pacesetters if they meet or exceed their sales goals for a year. Each year, the company raises its goal figures because so many people achieve the rank of Pacesetter.
The company has a program called the Pacesetter. Employees who meet specific goals for a year receive rewards and recognition. Those who maintain their status over many years get even more rewards. The company also selects “Customer Service All Stars” every month based on sales and quality of customer service support given to co-workers, as well as sales volumes achieved by each employee. These employees also receive 33% off merchandise at any time they want to buy something from the store, and are recognized in morning announcements before the store opens. At monthly meetings, managers read letters from customers about how much they appreciate certain employees’ help, while everyone cheers for one another’s accomplishments.
“Heroics” are stories of amazing customer service. When employees see a colleague giving great customer service, they write about it and give the story to their managers. Nordstrom prints up each week’s collection and distributes them among associates so that people have an example of good customer service to follow.
A Nordstrom employee went out of her way to help a customer. The customer had left the ticket at the counter in women’s apparel, and it was impossible for the airline to re-print it. So she took a cab and found the customer at the airport and gave her back her ticket. This is an example of how Nordstrom employees go above and beyond in serving customers, which has helped them maintain their stellar reputation for customer service.