Kimbel Department Store Case Study

Kimbel's Department Store


Table of ContentsTable of Contents


• Introduction to Kimbel’s Department Store• Situation

• Issue• Cause• Previous Approach• Strategy Taken

• New Approach• Overall Result• Detailed Result

• Questions

QuestionsQuestions


1. Should Frances declare the straight commission experiment a success on the whole and roll it out across the chain over the next six months?

2. What theories about motivation underlie the switch from salary to commission pay?

3. What needs are met under commission system? Are they the same needs in the shoes and handbag department as they are in lingerie? Explain

4. If we were Frances Patterson, would we go back to the previous compensation system, implement the straight commission plan in all Kimbel's stores, or devise and test other compensation method? If we decided to test another system, what would it be like?

Introduction to Kimbel’sIntroduction to Kimbel’s


• Kimbel’s Department Store: regional chain of upscale department store based in St. Louis

• CEO: Frances Patterson

SituationSituation


• Issue: Losing shares of overall retail sales• Causes: Salespeople were rarely actively

engaged with the customerGrowth of discount stores• Previous Approach: hourly wage + 0.5%

commission on total sales

ActionAction


• Strategy: • Motivation• Customer-oriented• Revival of great customer service on the floor

StrategyStrategy


1. Increase Motivation• Incentives• Attract customers• Improve sales

2. Customer-oriented• Relationship building• Satisfying customer’s needs

3. Revival of great customer service on the floor• Retain customer• Greater customer satisfaction• Greater sales• Cheaper in the long run

New ApproachNew Approach


• Sole commission (7% on sales)• Theory of Motivation: money is the primary

motivator



Trial Result – Organization Wide: • A salesclerk gained $35,000 as opposed to

previous of $18,000 from sales• Overall sales increased modestly• Increased employee turnover

To increase sale Increased employee turnover Resulting in inadequate number of employee



Observation – Shoes and Handbags Department: • Motivated by money• More commitment of time and effort to wealthy

customers• Increased pay

Shoes and Handbags Department

Shoes Handbags



Observation – Lingerie Department:

• Opposite result• More customer-oriented• Lower earnings• Worrying about meeting goals

Lingerie Deptartment Making end meets Poor customer handling

• Demoralized• Employee Turnover• Poor handling of

customer complaints

1. Should Frances declare the straight commission experiment a success on the whole and roll it out

across the chain over the next six months?




Pros• Overall sales increased• Salespeople are motivated• Become more customer-oriented






Cons• High employee turnover• Some departments were thriving• Some found it difficult to make ends meet• Declining standard in handling the complaints• Items with low prices have to sell more• Encouraged salespeople to focus on short term

goal






ConsPros




Salary• Losing share• Salespeople were not

actively engaged with customers

Straight Commission• Increase sales• Improve employees

motivation• Make employees

more customer oriented

• Attract better salespeople




Straight Commission• Assumes that money is a primary motivator• Content Theories: People are motivated by

their needs• Ex. Juan Santore is enthusiastic about the

change. He desires to make lots of money....




Straight Commission• Expectancy Theory: Employees are attracted

to the reward and can put forth effort necessary to achieve a level of performance that will lead to that reward.

• Ex. Juan Santore has put more time and effort into cultivating relationship with wealthy customers since the straight commission has been implemented.




Straight Commission• Equity Theory: Focuses on how employees are

compensated for their effort compared with others’

3. What needs are met under commission system? Are they the same needs in the shoes and handbag

department as they are in lingerie? Explain

3. What needs are met under commission system? Are they the same needs in the shoes and handbag

department as they are in lingerie? Explain


• Higher level of needs being achieved• Employees put more effort, and realize their

fullest potential• Self-Esteem and Self-Actualization• Better relationship with customers• Needs were similar in both departments but

rewards were differentLingerie Department• Lower level of reward• Lower price items

Shoes and Handbags Department•Higher level of reward•Higher price items

4. If we were Frances Patterson, would we go back to the previous compensation system, implement the straight commission plan in all Kimbel's stores, or devise and test other compensation method? If we

decided to test another system, what would it be like?




Previous Compensation Method• Fixed income and low commission• Fail to provide enough incentive to attract

customersNew Compensation Method• Based solely on commission• Worried about making ends meet• Different product in each department can

contribute to different income between each department






“Hybrid” Method• Mixture of some fixed salary and

adequate sales commission• Departmental commission• Implement promotions and

advertisements• Feedback channel

James T.

looks likeconclusion and Q4 is similaralso pg385 adresses "empowering employees" (they are able to choose their own task and creativity; they have freedom and power to make decision and exercise initiate and imagination) and " creating enviromment to promote employee engagement" (how to make employee deeply care about the organization: meaningfull, connected, learn, grow and develop)

ConclusionConclusion


• Salary system would provide better earnings for department with which products are moderately priced.

• Pure commission system would provide better earnings for departments with which products are highly priced. • Systems could also be used together to provide

synergy effect.• Suitable system should be implemented to

benefit the whole organization as a whole

BibliographyBibliography


List of diagrams :1. Department store2. Employees with no motivation3. Direction to strategy4. Increase in sales5. Employees leave job6. Company needs to recruit more people 7. Shoes and handbags department8. Shoe9. Handbag10. Lingerie department11. Reaching target

11. Reaching target12. Poor customer handling13. Increase in sales14. Lower Income15. Cons outweigh pros16. Motivation17. Paid according to the performance18. People are motivated by needs19. Employees are attracted to reward21. Synergy22. Choosing the best alternatives

BibliographyBibliography


Reference• Kimbel's Department Store from StudyMode.com. Retrieved October 01,

2012, from http://www.studymode.com/course-notes/Kimbel-s-Department-Store-1036619.html

• Kimbel's Department Store from StudyMode.com. Retrieved October 01, 2012, from http://www.studymode.com/essays/Kimbel-s-Department-Store-834625.html

• Compensating your salespeople from New Jersey Small Business Journal. Retrieved October 11, 2012, from http://www.leadtrac.com/compensating_your_salespeople.htm

• Why Straight Commission Plans Don’t Work from Clean Link. Retrieved October 11, 2012, from http://www.cleanlink.com/sm/article/Why-Straight-Commission-Plans-Dont-Work--13350

• Sales Commission from Reference for Business. Retrieved October 11, 2012, from http://www.referenceforbusiness.com/small/Qu-Sm/Sales-Commissions.html#b

• Sales Commission Plans from Sales Management Insight. Retreived October 11, 2012, from http://www.sales-management-insight.com/sales-commission-plans.html

• What does it mean to be more customer-oriented?. Retrieved October 22, 2012, from http://ultimate-website.eu/index.php?go=services&lang=en

• Why is customer service important to organization? Retrieved October 22, 2012, from http://smallbusiness.chron.com/customer-service-important-organization-2050.html

End of PresentationEnd of Presentation


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Kimbel Department Store Case Study