Posted by: A.R. Cherian | October 8, 2009

Nordstrom and SAS Institute compensation structures and motivation

Two separate case studies by the Harvard and Stanford Business Schools that I read recently dealt with different management philosophies related to employee compensation structures at Nordstrom (a retailer) and the SAS Institute (a software company) during the 1990s.

Below are some of the key differences that I saw in some core management philosophies from the two case studies.

In the end, one management philosophy shared by executives at both companies at the time of the case studies was that you cannot please everybody.  People either like the company and are willing to work for it, or they are not and will leave.

These two companies have significantly different management systems. I’ve learned that not everybody will fit into a particular business system. Employers should advertise their particular style clearly and be highly selective of employees who they think will fit best into their system. Employees also have the responsibility to research about the company they want to work for and see if it will be a good fit with their personality and goals.

Philosophy about:

Nordstrom

SAS Institute

Employee motivation Extrinsic (commission structure based on sales per hour) Intrinsic (emphasis on coaching and mentoring)
Financial Incentives as a source of motivation for employees Plays a large part Does not play a large part
Sales representatives Based on commission Not based on commission
Customer Focus Building long term relationships Building long term relationships
Publicizing sales representative performance within the company Employees ranked in order of sales per hour and listed internally. Has led to internal competition and peer pressure. Does not publicize sales data by name. Seeks a collective orientation and discourages competition among account executives.
Managing performance Structured incentives Relationship with employees rather than an infrastructure
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