Lauren’s Balancing Act

Lauren’s Balancing Act

FACTS OF THE CASE:

• Lauren Brewster        - DeMarco’s Dept. Store Manager.
• Jack Klein                - assistant of Lauren Brewster
• “Think about it. People brag about their bank or the local bar where everybody knows your name, or enjoy showing off a favorite restaurant where the hostess always remembers their favorite table.
• DeMarco’s, like other upscale dept. stores, suffered the double whammy of a slumping economy and increased competition from discount retailers and online shopping.
• We’ve always known that it’s all about customer service.
• Grabbing a giant plastic shopping cart and slogging through some giant warehouse in your shorts and flip-flops and then joining the herd at the checkout.
• Lauren’s idea was that store customers receive that personal upscale, “you’re somebody special here”
• Sales associates would rise their own professional level, regard customers as worthy of personalized service and build their own clientele.
• As added incentive, the entire DeMarco’s sales team was changed over from hourly pay to straight commission.
• Your pay is built through your own initiative and individualized that makes customers return to you again and again.
• Lauren instructed the sales force at the outset of the experiment.
• The idea intrigued Corporate which approved a two-year experiment.
• The new plan created a minor exodus among those who wanted the assurance of a regular paycheck.
• First year, both store and corporate management was pleased with the overall results.
• Marketing pushed the new image of elite. Katherine at DeMarco’s helped select outfit or Damien.
• Two years, Corporate urged Lauren to submit a full assessment of the program as a potential model of implementation throughout the dept. store chain.
• Sales numbers vouched for the overall success, particularly over the last two quarters of the second year.
• Associates, Katherine Knowles in designer dresses and Damien Fotopolous in women’s shoes, showed significant gains as a result of straight commission, and sales associates and customers responded favorably overall, urging a continuation of the program.
• Reliance on commission inspired these and other sales associates to treat their individual dept. as if it were their own small business, becoming experts on nuances of merchandise, exploring designs, and trends, finding ways to promote their expertise and building an impressive number of loyal customers.
• The satisfaction level of customers was apparent in the numbers- not only sales numbers but in repeat business, customer referrals to friends, and customers comment cards, all of which had been tracked since the beginning of the program.
• The down side of the experiment was that while some associates soared others either veered toward an aggressive, pushy sales style or became intimidated by coworkers and teetered, monthly on the verge of being replaced because they weren’t making sales.
• The once- proud tradition of cooperation among sales staff was, in many instances, being eaten away by relentless competition.
• Work assignments away from the sales floor were resented.
• Managers and sales associates of certain departments, complained of lower wages because, as one sales associates pointed out “My commission on a belt is nothing compared to Katherine’s commission on a designer dress.
• Resentment was mounting among those who witnessed the extravagant wages of a few.
• If we change this program, if we keep straight commission for some and return to hourly pay for others, how does that fit with our new image?

ETHICAL DILEMMA:

• How do Lauren respond to the complaints, such as the gripe that the system offers few opportunities for large commissions in some departments?

OBJECTIVES:

• To achieve a high level of performance and high level of cooperation.
• To develop a compensation mix (hourly base pay plus individual and team incentives) that will rekindle the culture of cooperation and continuously promote the Elite Personalized Service.
• To improve the sales of the product with jealously and resentment.
• To resolve the complaint of lower paid associates.
• To evaluate the strengths and weakness of the straight commission compensation plan.

APPICATION OF CONCEPTS:

• Motivation the forces either eternal or within to a person that arouse enthusiasm and persistence.

• Individual needs and motivation

• Intrinsic rewards        - Lauren should recreate an online customer survey for the sales associates per department for performance evaluation of their service to customers.
• Extrinsic rewards        - Lauren as manager should motivate her team. She needs to help people enjoy their work and get a sense of accomplishment. Create a reward system within the department to encourage the members to work hard.

• Categories of Motives Managers can use

• Lauren uses Quadrant 1 and 2 approach of motivation. Negative, extrinsic method that causes the people to perform as desired.
• Lauren and the management lacks both intrinsic and extrinsic method of motivation.
• They redesigned the salary incentives. Before, they are hour based payment but they shifted to a straight commission scheme. People need to get sales and work hard to get higher commission. By doing that scheme, management benefits from it because sales are getting high and the level of service customer are doing well.

• Content Perspectives on Motivation
• Hierarchy of Needs

• Physiological needs        - Lauren must secure the salary scale of the sales member to still continue to their everyday living.
• Safety needs                - Lauren must secure that peaceful and orderly of the department. Lauren should explain thoroughly to the sales members the changes of the department.
• Belongingness needs- Lauren must conduct a team building to her team to build camaraderie. She must secure that even there is a competition to the department she must secure it to them that this must be a healthy competition for the benefit of the whole department.
• Esteem needs        - Lauren must formulate a checklist or a performance criteria for all the sales members that every month there will be “best sales of the month” to encourage all the members to work hard. The department must show appreciation and recognition to all the members who are performing in their extent.
• Self- actualization        - Lauren must challenge and motivate all her sale members to grow, to be creative, to excel in their craft and train in themselves.

• Lauren focuses more on esteem needs of the people. The need to the desire for a positive self-image and to receive recognition. Because of the new salary scheme “commission sales” employees tend focus in this aspect.
• In Maslow’s theory low-order need to take priority and satisfied before to higher order of needs.
• Lauren’s approach she gave less priority to physiological needs of the employees resulting to the less safety and belongingness of the employees. Lauren did experimental about the incentive scheme from hourly pay to straight commission base.

• ERG Theory        

• Existence needs        - Lauren should create a salary scale that will suits to the needs of her members.
• Relatedness needs        - Lauren must encourage her team to build team work and camaraderie to all the members. She must create a program that will help the members build and strengthen their relationship even there is a competition on sales. Monthly meeting is necessary for them.
• Growth needs        - Lauren must motivate her team to explore and create new ideas and things to improve their style in sales. She must appreciate and show recognition to each member who have a good records. She must send her team to some training if necessary to enhance their style in sales.

• In this approach Alderfer reduced the number of need categories but somewhat similar to Maslow’s hierarchy needs. There is a frustration-regression principle. If one cannot meet the higher needs it can revert to other needs.
• Lauren approach in this kind of theory was she focuses on the growth needs of individual and less with existence and relatedness needs.

• Two-Factor approach to motivation

• Hygiene factors        - Lauren must revisit the salary scale of their department and encourage the sales members to provide interpersonal relationships. She must conduct a quarterly evaluation of her team.
• Motivators                - Lauren must end her team to some training in regards of sales style to motivate them and enhance their techniques. She must award the member who will achieve the highest sales and to be called “Best sales of the month” given a corresponding reward on it.

• Lauren’s approach has a poor hygiene factor

• Because of the incentive scheme experiment and company policies.
• Interpersonal relationship is affected due to comparison of commission salary.

• Because of the experiment in salary scheme the employees are motivated to work hard and produce great numbers of sales.  Lauren challenged the employees and the effect was unexpected.
• In conclusion providing employees a good hygiene factor doesn’t guarantee that they will be motivated but giving them challenges, recognition and opportunities will certainly boost their performance.
• Acquired Needs Theory

• Need for achievement- Lauren should set a rules and guidelines about the salary scale and commission rate. She must have set a standards for all the sales member.
• Need for affiliation        - Lauren must allow a healthy competition within the department. She must be conduct a monthly open forum to address any indifference among them. Encourage them to be open to one another as much as possible.
• Need for power        - Lauren has a power to implement whatever she wanted to do. She has the responsibility to carry her team whatever direction she wanted to be.

• (-) for the need for affiliation, there is a conflict between the employees because some are getting low wages.

• Goal- setting theory                        - Lauren must set the department’s goal. What they wanted to go and what they wanted to achieve.

• Goal specificity        - Lauren must set a specific and concreate goal. Specific goal like “Sale associates must have $1000 sales a week per category” to motivate the members to work hard in return there will be reward for them.
•  In terms of goal difficulty – Lauren must challenge the department every month to feel them the eagerness of the goal. She must set a goal that are hard get so that the team will exert more effort to achieve it.
• Goal acceptance        - Lauren must set a customer service feedback or survey. She needs to get feedbacks from the customer if the members are performing hard. She need also to provide performance feedback on a regular or ongoing basis.

• (-) of goal specificity, Lauren didn’t set a target sales before conducting the experiment of incentive scheme.
• (-) of goal acceptance, some employees are not committed to the new incentive scheme.
• (-) for feedbacks of the employees.
• (-) for making progress of principle
• Equity Theory

• There is inequity in terms of compensation resulting to conflict.

• Lauren will reduce the inequity by changing her method by changing the work effort of the employees. She must define specific target of sales in each departments. Change of outcome, review again the experimental scheme about the incentives. Thus changing the work efforts and outcome will lead to changing of perception of the employees that causes them to stay to the company.
• Expectancy Theory        - depends on individuals’ expectations about their performance and desired rewards.

• Some employees have high E→P causing the sales number to be high.

They increased their selling effort that lead them to higher sales number.

• Some employees have high effort but low performance, leading them to low expectancy and low motivation in their job.
• Some employees have high P→O, causing them to be highly motivated and desired to have high reward or outcome.
• Some are with high performance but low outcomes causing to be low motivated.

• Direct Reinforcement                        

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