February 27, 2011

Nordstrom and the SAS Institute

Posted in BADM 720 tagged , , , at 11:53 am by Sarah

This week’s readings were about two companies taking very different approaches to employee compensation and incentives.  Nordstrom’s sales per hour system of compensation sounds very unfair to me, especially having experienced the pains of working in the retail industry.  The big difference at the SAS Institute is that the sales system emphasizes customer retention rather than first-time sales.  Instead of a convoluted commission system like Nordstrom’s, the SAS Institute employees earn a flat hourly wage and enjoy tons of perks that benefit their families as well.  In short, Nordstrom employees perform well in order to get rewarded, while the SAS Institute employees perform well as a result of being made comfortable.

So which system is better?  One would think that the multitude of lawsuits against Nordstrom would answer that question, but I think it’s a little more complicated than that.  Certainly the SAS Institute would be a much better choice of environment for the average worker, someone who just wants to support their family without being on their feet all day and to feel like the employer actually cares about them personally.  But there is a small part of society that might actually choose Nordstrom’s environment, namely those who are already confident in their ability to outperform others and are willing to step on a few people on their climb to the top.  And I am all for keeping those kinds of people confined to the retail industry.

The problem is that they are not confined.  The SAS Institute’s philosophy of fairness and trust is a rare one in business.  The majority of companies can only see as far as their bottom line, and their company culture teaches employees that they have to be cutthroat in order to prosper.  I think this view of business is so widespread because it is the easy and cheap way.  It is short-term, low-investment, instant gratification.  But then there are a precious few companies like the SAS Institute and Southwest Airlines from the reading a few weeks ago, who favor a more long-term, nurturing, reap-what-you-sow approach to business.  These exceptions to the rule show that you don’t have to sell your soul in order to succeed in business or in life.