Nordstrom Versus Walmart: Differences in Compensation and Benefits and the Effect on Organisational Performance Essay

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Pages: 13

A Tale of Two Pay Packets
Pat works in the men’s clothing section of a well-known department store. He has been in that position for more than 20 years, and his hourly wage is $11.25 per hour. Across town, Lucy is working in another highly successful retail chain and earns slightly less, around $10.75 per hour. She will make $19,000 a year, calculated over an average working week. Pat will make over $90,000. Pat works at Nordstrom, Lucy is from Walmart, and both are employed at successful companies that offer vastly different compensation and benefits. What is the impact of these differing compensation policies on employee behaviours, and what link (if any) is there to each company’s organisational performance?
Nordstrom: Incentivising
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The company was one of the first large retailers to offer profit sharing and stock options to all full-time employees. Walmart also pioneered a system of performance-based incentives, with a bonus structure tied directly to the profitability of each individual store. In fact, Walmart has an expansive benefits package, which includes a health care savings plan, dental insurance, contributions to employee 401k (superannuation), and company discounts for family members of employees. These benefits do not extend to the 30% of Walmart’s workforce that is made up of parttime and casual staff.
Walmart has a policy of internal recruitment, with over 70% of managerial positions offered to current sales associates (Lichtenstein, 2007). Similar to Nordstrom, Sam Walton originally gave his department managers the authority and freedom to run their areas as if they were mini-businesses (Collins and Porass, 1994). In recent years, however, Walmart has implemented much tighter organisational controls; the company’s state of the art back office operations now administers much of the inventory and sales processes. By some estimates, 98% of all pricing, promotion and stocking decisions are made at Walmart corporate headquarters rather than at the local store level (Lichtenstein, 2007).
Above all, Walmart’s everyday low price (EDLP) strategy has been the defining core of the business. Walton’s focus on delivering value to the customer has resulted in a