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Expectancy Model

Nordstrom's incentive compensation system aimed to promote extrinsic motivation but broke the expectancy model. The model depicts effort leading to performance and then outcomes. For Nordstrom employees, effort like sales activities sometimes did not result in higher sales per hour performance ratings due to factors like non-sales tasks. While performance was supposed to lead to outcomes like pay and promotions, unhealthy practices like employees stealing credit from each other broke that link at times. Employees valued rewards but flaws in how effort did not always translate to appropriate rewards according to the model.

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592 views3 pages

Expectancy Model

Nordstrom's incentive compensation system aimed to promote extrinsic motivation but broke the expectancy model. The model depicts effort leading to performance and then outcomes. For Nordstrom employees, effort like sales activities sometimes did not result in higher sales per hour performance ratings due to factors like non-sales tasks. While performance was supposed to lead to outcomes like pay and promotions, unhealthy practices like employees stealing credit from each other broke that link at times. Employees valued rewards but flaws in how effort did not always translate to appropriate rewards according to the model.

Uploaded by

jayj
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Nordstrom: Expectancy Model

The expectancy Model can be depicted as Effort (E) Performance (P) Outcome (O).
The three main elements of Expectancy Model are Expectancy (E P), Instrumentality (P O),
and Valence1.
Nordstroms incentive compensation system was instituted with an aim to promote
extrinsic motivation in its sales staff. The incentive compensation system was driven by sales per
hour (SPH). Nordstroms incentive compensation system was not in accordance with the
expectancy model that promotes extrinsic motivation as the EP link was mainly broken. The
Expectancy (EP) is based on the belief that higher effort results in higher performance.
Nordstrom employees Efforts (E) included selling activities and non-sell activities. The selling
activities involved directly interacting with the customers on the floor and selling merchandise. It
was common practice for a sales clerk to perform non-sell activities such as: drive to another
Nordstrom store to retrieve an out-of-stock item; drive to customers home to deliver
merchandize, write thank you notes to customers for their purchases. Sales clerks also spent time
performing so called heroics: changing a customers flat tire in the store parking lot, taking a
customer to lunch, etc. In addition, Sales clerk spent a great deal of time in routine tasks such as
merchandise stocking, store display activities or attending numerous sales staff meetings. The
sales clerks SPH determined his or her performance levels (P) for Nordstrom. The reason is
that Nordstrom carefully evaluates salespeople on their sales per-hour ratio2. A sales clerk can
put in a tremendous level of effort but he or she may not receive higher SPH depending on the

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Brian Francis Redmond, https://wikispaces.psu.edu/display/PSYCH484/4.+Expectancy+Theory


Hilary Weston, Nordstrom: Dissension in the Ranks? (A), HBS Case 9-191-002, Page 4

busy/non-busy store hours shift. The (EP) was also broken because the sales clerks non-sell
activities effectively lowered the sales per hour ratio.
Instrumentality (PO) is based on the belief that an individuals higher performance
results in an outcome (reward). The Outcome (O) or reward included commissions pay,
better/busy shopping hours, promotions, Customer Service All-Star status, discounts, customer
praise, customer loyalty, and not being terminated. Failure to meet the target SPH often results
in decreased hours or, in some cases, termination. Meeting or surpassing the target SPH means
more working hoursincluding better hours when the shopping is heavierand a better chance
of promotion to a department manager job.3. The Instrumentality (PO) link was strong as the
employees who met the measurable performance goals, which in this case is the SPH ratio, did
receive the promised rewards. However, the (PO) was broken in situations where Nordstrom
employees engaged in insidious practice called Sharking. Many sales clerk felt the Nordstrom
compensation system created a competitive work environment which promoted group
recognition and peer pressure. As a result, competition arises among the sales professionals, and
there was no teamwork culture. The pressure to become an All-Star, however, could result in
undesired behavior, such as sharkingthe term Nordstrom employees used to describe
stealing credit for sales made by other staff4. This unhealthy work environment not always led
to the Outcome (reward). The third component Valence refers to the desirability for the
outcome/rewards. Nordstroms employees valued the rewards but the flaws in the system didnt
always translate their high efforts to the appropriate rewards.

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Hilary Weston, Nordstrom: Dissension in the Ranks? (A), HBS Case 9-191-002, Page 4
Hilary Weston, Nordstrom: Dissension in the Ranks? (A), HBS Case 9-191-002, Page 7

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