Reference no: EM132301874

Lauren’s balancing Act

DeMarco’s Department Store manager Lauren Brewster’s “Wow” moment came when she observed a Chicago restaurant staff ’s gushing treatment of an international celebrity. “Everyone dreams of that kind of star treatment,” Lauren told her assistant, Jack Klein. “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 department stores, suffered the double whammy of a slumping economy and increased competition from discount retailers and online shopping. How could the store, the “box,” compete, retain its old customers, and build a strong future customer base? “We’ve always known that it’s all about customer service,” Lauren said. “But what’s so great about 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? That is not a shopping experience.” “And what isn’t great about being treated like Oprah from the moment you knock on the door until the sales associate swipes your card and hands over something lovely that you just purchased?” Jack asked. Lauren’s idea was that store customers receive that personal, upscale, “you’re somebody special here” treatment at DeMarco’s. Sales associates would raise 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 service 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. As expected, the new plan created a minor exodus among those who wanted the assurance of a “regular paycheck.” But as the program moved through its first year, both store and corporate management were pleased with the overall results. Marketing pushed the new image of elite, personalized customer service, and statements such as “Katherine at DeMarco’s helped me select this outfit” or “Damien always lets me know when something new arrives at DeMarco’s that he thinks is perfect for me” became the typical boast of savvy shoppers. Now, two years into the experiment, Corporate urged Lauren to submit a full assessment of the program as a potential model for implementation throughout the department store chain. Sales numbers vouched for the overall success, particularly over the last two quarters of the second year. Certain associates, including Katherine Knowles in designer dresses and Damien Fotopolous in women’s shoes, showed significant gains as a result of straight commissions, and sales associates and customers responded favorably overall, urging a continuation of the program. Reliance on commissions inspired these and other sales associates to treat their individual department 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 customer comment cards, all of which had been tracked since the beginning of the program. The downside 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. In addition, the managers and sales associates of certain departments, such as women’s accessories, complained of lower wages because, as one sales associate pointed out, “ My commission on a $50 belt is nothing compared to Katherine’s commission on a $2,800 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?” Lauren said to Jack. “How does it deal with the difference in pay scale? How does it assure us that the attitudes of our sales team and the culture of this store will not return to what we were before—just another store?”

What do you see as the advantages and disadvantages of the incentive system that DeMarco’s is using for sales associates? What impact do you think it’s having on the DeMarco’s culture? Explain.

Do you think the complaints of lower-paid sales associates are legitimate? Why or why not? How do you suggest that Lauren respond to these complaints, such as the gripe that the system offers few opportunities for large commissions in some departments?