Raleigh & Rosse :

1. Raleigh & Rosse: Measures to Motivate Exceptional service

2. company Background Founder Michael Raleigh & Conor Rosse in 1903

3. Continued…….

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

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

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

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

8. Problems in R & R • Sales Per Hour (SPH) • Sales Per Hour is the sales generated by each sales associate in one hour. • SPH = • Each sales associate had a SPH target, for example $412 per hour • An employee working 40 hours a week had to make a minimum sales of $412 x 40 = $16,480

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

10. System Manipulation • Apart from selling, sales associate had to do other non-selling tasks such as merchandising, attending meetings, restocking etc. • 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. • 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.

11. Breach of Federal Wage and hour laws • Due to 2008-2009 recession, sales dropped. Most sales associates were not able to achieve their target SPH. • Not counting the non-selling hours meant even less pay • Some sales associates were fired for not reaching the target SPH • 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

12. 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

13. Possible Solutions • Improving the SPH program • Changing the current management system • Encouragement than stress • Respect and importance • Implementing annual bonus plan • More accountable store manager • An open environment • Culture of trust and team building • Training and counseling

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

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