RALEIGH ROSSE MEASURES TO MOTIVATE EXCEPTIONAL SERVICE COMPANY

RALEIGH & ROSSE: MEASURES TO MOTIVATE EXCEPTIONAL SERVICE

COMPANY BACKGROUND Founder Michael Raleigh & Conor Rosse in 1903 Beginning Import 1903: Start selling saddlery and equestrian goods Expansion 1920: began importing of leather goods 1950 to 1980: Expand retail store

Continued……. Recruitment Downturn 2007: R&R recruited Linda as CEO who was the first nonfamily member Labor Lawsuit 2008: economic downturn has hit R&R hard compared to other brands 2010: Class action suit filed against R&R over SPH issues

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

About the Company Ø Besides selling exclusive items, R&R used its exceptional customer service to differentiate among other companies. Ø Main competitors were high end departments stores: Neiman Marcus, Saks Fifth Avenue. Ø Due to European luxury houses opening their own stores in the USA, department stores started to struggle. Ø 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.

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

Procedure and suitability of the SPH system: Procedure Ø 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. Ø If 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. Ø Good: meeting the SPH target meant better and busier hours as well as better chance for promotion. Ø Bad: less hour and termination for the failure who did not meet the target Suitability Ø R&R‘s strict measure that was not accepted by the majority. Ø Managers had created competitive environment by given sales contests, honors called “client all stars. Ø But these created employee competition called“ sharking”. Ø Employees were in dilemma because of vague distinguishing between “selling time” and “non-selling hours”. Ø Backfiring to company; fatigued employees, bad reputation, law-suits and decreasing sales due to the loss of brand loyalty.

Problems in R & R

Hourly Wage and SPH Commission Ø 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 Ø 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 Ø Employees failing to reach target SPH several times meant reduced working hours or even termination.

System Manipulation Ø Apart from selling, sales associate had to do other non-selling tasks such as merchandising, attending meetings, restocking etc. Ø 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. Ø 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 Ø Due to 2008 -2009 recession, sales dropped. Most sales associates were not able to achieve their target SPH. Ø Not counting the non-selling hours meant even less pay Ø Some sales associates were fired for not reaching the target SPH Ø The 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 Ø Improving the SPH program Ø Changing the current management system Ø Encouragement than stress Ø Respect and importance Ø Implementing annual bonus plan Ø More accountable store manager Ø An open environment Ø Culture of trust and team building Ø Training and counseling

Limitations of the solutions Ø Additional responsibilities for the company Ø Introducing formal training brings more costs Ø Employee empowerment is unhelpful at times Ø More Responsibility for managers

Recommendation Ø Organizational commitment: Organizational commitment and support will help the employee to get § "affective commitment"-affection for job, § "continuance commitment”- fear of loss, § “normative commitment Ø 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. Ø 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.