Case Study: Kimbel’s Department Store



|ATENEO GRADUATE SCHOOL OF BUSINESS |

|Case Study: Kimbel’s Department Store |

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|Submitted by: |

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|Katrina Angelica Marañon |

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|October 4, 2013 |

|Submitted to: |

|Dr. Naomi Martin |

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|PRIMAN – S50 |

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I. Key Facts

Kimbel’s Department Store is a regional chain of upscale department stores based in St. Louis, USA. It faces the challenge of losing its share of overall retail sales to discount store chains. Its CEO, Frances Patterson discovered that in some of her stores, the salespeople weren’t actively engaging with their customers. In fact, finding a salesperson when a customer needed them was difficult. Because of this, Frances tried out a new payment scheme in two of her stores for all employees in the hopes that it will motivate them to do their jobs better. All employees would now earn a 7 percent commission on sales as compared to their hourly wage and 0.5 percent commission that they were being paid.

Under the new scheme, Frances observed that while the overall sales in the two stores have increased modestly, and so has employee turnover. When examining the sales-by-manager figures, it was obvious that some associates had thrived and others had not. Most fell somewhere in the middle.

II. Problem Identification

If Frances declares the straight commission experiment a success on the whole and roll it out across the chain over the next six months, the employee turnover will continue to increase and employees in departments that sell cheaper items will remain demoralized. If Frances goes back to the previous salary scheme of an hourly pay and 0.5 percent commission, employees may also go back to being unmotivated and refuse to pay attention to customers.

III. Objectives

To find the best salary scheme that will motivate employees enough to provide excellent customer service so that Kimbel’s Department Store will no longer lose its share of overall retail sales to discount store chains and maintain its profitability in the retail industry.

IV. Alternative courses of action to motivate employees

Provide Physiological, Safety and Belongingness Needs

Physiological and safety needs according to Maslow’s theory need to be met in order for a person to function properly. Kimbel’s Department Store should be able to provide employees with the basic items needed to be able to accomplish their goals. A basic and fair pay that is enough to provide them with their fundamental needs and a safe work environment is important for employees to be able to concentrate properly at work. The work environment should also provide the employees a sense of security and belonging for them to be able to function properly in their work environment.

Employee Recognition

Employee recognition may come in the form of customer feedback. Encouraging customers to provide feedback via surveys or feedback forms on the type of service they encountered during their shopping experience could be used to fulfill the employee’s esteem needs.

Similar to Maslow’s Hierarchy of Needs, Herzberg believed that employee motivation could be served by recognizing employee motivators. Through assigning recognizing their efforts and achievements, employees will most likely attain the level of high satisfaction towards their work.

Explore other salary/bonus schemes

• Commission based salary – Since retail department stores are part of a highly competitive sales industry, commission based salary may still be able to motivate employees. Ramped commission is a rewards scheme where the percentage of commission rises as the employee hits certain set targets. For example, the an employee may earn a 5% commission if he is able to sell $10,000 worth of goods or services, a 10% percent commission if he reaches $20,000 and a 15% percent commission on anything above $30,000.

• Performance based rewards – Kimbel’s will still provide its customers with a basic hourly pay but also provide a rewards scheme for employees who perform well. SMART (specific, measurable, attainable, relevant and time-sensitive) goals will be created per department, and only employees who are able to hit the target will receive the 7 percent commission. This way, the company will be rewarding profitable employees but still be able to provide a basic pay for everyone.

Coaching, training and motivational talks

To be effective, employee motivation must be promoted by the management on a regular basis. In doing so, Frances should consciously try to do everything in her power to provide top-rate sales and industry training. A thorough education is essential in order for employees to close sales more successfully.

A motivational speaker who is preferably an expert in the retail industry could provide insights to employees and allow them to ask highly specialized questions regarding their daily tasks.

Coaching will also be observed to guide employees on what areas they need to improve. During the coaching sessions, management should be able to keep track of an employee’s progress and provide proper advice that will inspire employees to perform even better.

V. Analysis

Two important reasons that employees should be motivated are to achieve their own personal goals and the organizational goals. It is important that these two goals tie up so that the employees will feel connected to the organization. The more motivated an employee is, the more likely they are to have organizational commitment and identify themselves as part of the organization.

A commission-based salary scheme is beneficial to employers because it means that employees only get paid if there is a sale by actual money that is a result of that sale since system an employee contributes directly to company revenue. This also means that employers will not have to pay for work that does not result in sales.

A pay that is based on commission is also beneficial to employees because they receive pay based on their skills and the work that they do. Employees who put in more effort will be rewarded more than those who don’t. This can motivate employees to go above the minimum requirements, knowing that their efforts will result in higher pay. The downside of a commission-based pay is that employees will be primarily focused on earning a sale rather than providing excellent customer service this may lead them to become persuasive and forceful.

On the other hand, paying employees by a fixed wage can be beneficial in a business where customer support is needed. Giving employees a fixed salary fulfills their physiological and safety needs, removing the burden the pressure of having to sell a product to a customer just for the sake of selling. Employees will no longer be motivated to simply sell products without taking into consideration the customer’s needs. Having salaried employees may, compared to commission-based employees, lead to better customer satisfaction.

VI. Recommendation 

In order to increase employee accountability, Kimbel’s should still provide all of its employees a basic hourly pay but at the same time establish a rewards scheme for employees who perform well. Performance based rewards in the form of an extra payment on top of the regular salary may encourage employees to work harder. Rewards could be given to an employee who has exceeded the goals that were set in his/her department. Likewise, an employee who emerges as the most accommodating and helpful employee in the customer surveys should be rewarded as well. The rewards, in the form of a bonus, are meant to motivate the employees and to help them understand exactly what the organizational goals are and tie these up with their own personal goals. This way, the company will be rewarding effective and profitable employees and at the same time still be able to provide a basic pay for everyone. This ensures that employees who do not emerge on top do not become discouraged or jealous of others who do. And more importantly, the employees’ personal needs are met and to motivate them, to perform well, they are given the opportunity for achievement and recognition.

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