Raleigh & Rosse - PowerPoint Presentation

Raleigh & Rosse: Measures to Motivate Exceptional service

Founder Michael Raleigh & Conor Rosse in 1903 company Background

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In January 2010, U.S. Luxury goods retailer R aleigh & R osse is being sued by its employees for encouraging "off the clock" hoursThe system uses a sales-per-hour model to reward salespeople for time well spent on the floor,Company growth, Decentralized management, & Unrelenting pressure to perform which distort performance measurement systems and lead to undesirable consequences. Topic of the Case

Besides selling exclusive items, R&R used its exceptional customer service to differentiate among other companies. Main competitors were high end departments stores: Neiman Marcus, Saks Fifth Avenue . Due to European luxury houses opening their own stores in the USA, department stores started to struggle. The hiring of Linda Watkins was the main driving force behind R&R’s international expansion until the 2008 financial crisis put these goals to a halt. About the Company

R&R’s Customer Service “a calling, a vocation to serve our clients at the highest level of devotion” Impeccable customer service and loyalty was a core value.Managers at R&R were meant to hire, train and continually motivate sales associatesSales associates were vital in this companyIn many occasions, they were more than a sales associates. Organizational Culture R&R were shifted focus from experienced sales professionals to college graduates & company invested heavily in ‘R&R University’ to train them. They maintained internal promotion system by improving the experience level of its middle management team. Revamped sales associate’s commission system. They invested in IT system that provides extensive analysis of their store operations. Greater autonomy on staffing, scheduling and other aspects to their sales manager. The strategy of R&R was “Own your business, own customer relationships

Procedure and suitability of the SPH system: Sales associates and store managers used a dashboard of 11 matric which included weekly store revenues, gross margin per square foot, revenue target of different product. I f the actual SPH is higher than the target ,then the associates would pay 7.35% commission on net sales. If it is lower than the employee would be paid hourly wage. Good: meeting the SPH target meant better and busier hours as well as better chance for promotion. Bad: less hour and termination for the failure who did not meet the target Procedure Suitability R&R‘s strict measure that was not accepted by the majority. M anagers had created competitive environment by given sales contests, honors called “client all stars . But these created employee competition called“ sharking ”. Employees were in dilemma because of vague distinguishing between “selling time” and “non-selling hours ”. Backfiring to company; fatigued employees, bad reputation, law-suits and decreasing sales due to the loss of brand loyalty. 

Problems in R & R Sales Per Hour (SPH)Sales Per Hour is the sales generated by each sales associate in one hour. SPH = Each sales associate had a SPH target, for example $412 per hour An employee working 40 hours a week had to make a minimum sales of $412 x 40 = $16,480  

Hourly Wage and SPH Commission Sales associates who exceeded their target SPH were paid a 7.35% commission on the net sales they generated. Example : $ 16,480 x 7.35% = $1,211 Sales associate who were below or equal to the SPH would be paid accordingly to their hourly wage , $14-18. Example: $18 x 40 = $720 Employees failing to reach target SPH several times meant reduced working hours or even termination.

System Manipulation Apart from selling, sales associate had to do other non-selling tasks such as merchandising, attending meetings, restocking etc . If those non-selling hours would be counted in the SPH calculation, then the employee’s SPH would decrease. So managers excluded those hours from SPH calculation . But even after that if employees failed to reach target SPH, they won’t be paid for the non-selling hours they have worked for.

Breach of Federal Wage and hour laws Due to 2008-2009 recession, sales dropped. Most sales associates were not able to achieve their target SPH . Not counting the non-selling hours meant even less pay Some sales associates were fired for not reaching the target SPHThe sales associates filed a class action lawsuit under the Federal Fair Labor Standards Act (FLSA) for R&R repeatedly violating wage and hour laws

Competitive Work Environment and Employee fatigue Competitive work in R&R led to unethical behaviors Frequent contests such as “Dinner for two” and “Client All Star” status put a lot of pressures on employees to achieve those This led to unethical behaviors such as sharking, where sales associates stole other ones credits and also false accusations. sales associates had to do lot of other out of the clock activities such as delivering products, writing thank you cards etc. These led to employee fatigue

Possible Solutions Improving the SPH program Changing the current management system Encouragement than stressRespect and importanceImplementing annual bonus plan More accountable store managerAn open environment Culture of trust and team building Training and counseling

Limitations of the solutions Additional responsibilities for the company Introducing formal training brings more costsEmployee empowerment is unhelpful at timesMore Responsibility for managers

Recommendation Organizational commitment:  Organizational commitment and support will help the employee to get "affective commitment"-affection for job, "continuance commitment”- fear of loss, “normative commitment Measuring job satisfaction: If the employee is satisfied with the job it will increase the productivity of the company and helps the company to gain its prominence . Motivation: The most significant factors for “Raleigh and Rosse “s are:Manager’s needs to control the relationship with each employee and Manager's ability to motivate employees.