In our system, employees must have a competitive spirit because we start comparing them the day they walk in the door. That's one of the best ways we know how to improve. If we have competitive people, we can accomplish something.

—James F. Nordstrom

Competition means striving to gain or win something by defeating or establishing superiority over others who are trying to do the same.

Like competitive athletes, Nordstrom salespeople are motivated in a variety of ways to give extraordinary service because great service produces extraordinary sales volumes.

Nurturing goes only so far. Monetary compensation must be part of the equation. Nordstrom believes in paying people according to their achievements, to put them in a position to be able to earn as much as their talents and efforts can generate.

The company has survived and thrived since 1901 because of its culture of service that attracts competitive goal‐oriented people and treats them with respect and rewards them for their hard work and results—both as individuals and as members of teams—store, individual departments, product categories, and regions within the company. Nordstrom has always emphasized service because the better the service the better the sales, and the more loyal the customers.

“The single most important reason we try to provide great service is this: It enables us to sell more,” said Blake. “The best way for our company to achieve results is to do what's best for the customer.”

While that may sound simple, it's easier said than done. It's inevitable that most companies and individuals get caught up in the day‐to‐day activities and do not focus on outcomes.

Is customer service quantifiable? People often ask what kind of metrics Nordstrom uses to measure the effectiveness of its customer service strategy. The answer: “Are sales up or down?” Customers vote with their hard‐earned dollars. As they say at Nordstrom, “Sales are the truth.”

Employees are evaluated through performance metrics, by what they bring to the bottom line, not who they know.

Nordstrom is about selling. You don't rack up more than 15 billion dollars in annual sales by just smiling and being nice.

New hires are told that they can make as much money as they want to make. Nordstrom doesn't put a cap on their earning potential. The company gives them all the tools they need, so all they have to do is sell.

It's important to have veteran salespeople, particularly Pacesetters, on the floor with new salespeople so that they can learn from each other. A young salesperson could teach a veteran how to use social media and texting tools to communicate and sell.

Everett, Elmer, and Lloyd, who bought the business from their father, John W., in the late 1920s, knew that the best way to attract and retain motivated self‐starters was to create a sales‐driven entrepreneurial culture, and to pay their salespeople according to their ability, as we saw in Chapter 2. They did it as a matter of survival.

“We were all a bit retiring and weren't particularly strong salesmen,” Elmer wrote in A Winning Team, the privately published family history. “In fact, others could sell rings around us.”

Aware of their own selling limitations, they hired people who could move the product. In so doing, they established a culture where outstanding employees would be rewarded for achieving sales goals. They recruited “fiery producers, tough guys, men who had to work hard to put bread on the table,” Elmer said. Hiring these self‐described “shoe dogs,” who were attracted to the Nordstrom system where employees earned commissions on each and every shoe sale, “was usually a shot in the dark. In most cases, we just looked them over, gave them a shoe horn, and watched how they performed.”

That philosophy still holds true today. A college degree is not important at Nordstrom because it can't replace a can‐do attitude, a positive personality, and a strong work ethic.

All Nordstrom salespeople are paid an hourly wage, but where they make their real money—and their long‐term careers—is on the commission they make on everything they sell. Commission sales and bonuses give them added incentive to work harder, and by working harder, they are able to build a loyal customer following.

To motivate salespeople and managers, Nordstrom constantly runs sales contests. From their earliest days, the Nordstroms (all of whom are intensely interested in sports and are big boosters of the University of Washington's athletic department) initiated sales competitions to promote rivalry among salespeople. If the store was overstocked in red pumps, for example, they would have a red‐pump‐selling contest, with the top sales performers rewarded with cash, flowers, dinners, or trips. “In a sense, every day was a contest,” Elmer recalled. “Everyone tried to do their best, so that they wouldn't be stuck at the bottom of the list.”

To this day, all managers know how their peers are doing. They see the numbers. It's common for department managers and store managers to create a network and learn from each other. For example, if one store is doing well selling a particular item, that manager will tell the others how they did it. The friendly competition makes everybody work harder. It lights a fire.

“Every employee's performance is their resume,” said Blake. “Everything we do is performance‐related. We are constantly looking at the numbers and competing. We are all frustrated athletes. It's fun to be in this business because there are opportunities every day.”

Nordstrom is not just another department store. Many people think of a department store as a place where you hang out for a while before you get a real job. At most other department stores, employees are clerks—powerless functionaries, who slavishly follow the rules, don't make waves, and aren't motivated to give good service. At Nordstrom, the worst thing you can say about a salesperson is that he or she is just “clerking” it.

Nordstrom's top sales performers wouldn't change the commission‐oriented, goal‐oriented system because competition—both external and internal—stokes their competitive fires. That wouldn't happen if they were paid only an hourly rate. Knowing that their commission reflects how hard they work instills a different kind of drive, based on what they produce.

Nordstrom is looking to hire entrepreneurs—empowered self‐starters, who seize opportunities to create and build their own businesses, to be franchisees within the larger Nordstrom franchise. To help them take ownership of their business and to build it up into a thriving enterprise, the company gives them the necessary tools, such as inviting stores, ample merchandise, state of the art inventory and replenishment systems, electronic tools to do business in today's retail world, and thank‐you notes.

Nordstrom management is keenly aware that every employee will eventually have an impact on the customer experience—whether they're on the front lines or in a support position. Because the company empowers employees to treat the business as if it were their own, it seeks entrepreneurs who create excitement and passion around their business, and who can also build strong relationships, both with the customer and with other team members throughout the entire company. In the words of Niccolo Machiavelli, the Italian author and historian of the fifteenth century, “Entrepreneurs are simply those who understand that there is little difference between obstacle and opportunity and are able to turn both to their advantage.”

New employees are put out on the sales floor and expected to grasp the values and expectations of the culture. They either catch it or they don't. They have to prove to management (and to themselves) that they believe in helping others and that they like to give customer service. They must have a thorough knowledge of the products and services because it is through those products and services that relationships with customers are created, nurtured, and maintained.

In the employee areas (hallways, elevators, stockrooms, and so on), reminders of selling are constant. Signs are posted that ensure that everyone understands the same philosophy of service and selling. There is a “How Much Can You Sell?” bulletin board with advice on how to improve one's results.

Commissions

Commission rewards the extra effort and it encourages the behaviors and outcomes you want. You want repeat customers. You want raving fans. You want customers to tell others that's where they should shop and that's the salesperson you should see. Commission aligns with that. Commission sales are a prime reason why Nordstrom salespeople embrace the empowerment that the company affords them. Two‐thirds of employees have a variable pay component to their total compensation. That means they have the opportunity to increase their pay when they achieve results against defined targets or milestones. This philosophy of pay for performance motivates frontline people to challenge themselves and their teams to greater achievements.

The standard commission at Nordstrom is 6.75 percent on apparel sales. Commission rates vary according to product category.

Each salesperson has a designated draw, which varies with each department and is determined by dividing the hourly rate by the percentage of commission. That hourly rate varies, depending on the prevailing rate in each region. At the end of each pay period, sales‐per‐hour performance is calculated by taking the gross dollar volume of items sold, subtracting returns, and dividing that figure by the number of hours worked. For example, a salesperson rings up $22,000 in sales in an 80‐hour pay period. Subtract $2,000 for returns, and the net total sales are $20,000, or $250 per hour. That salesperson's commission for the pay period is 6.75 percent of $20,000, or $1,350.

Top salespeople can make more than $200,000 annually. The average department manager's salary is $49,500 per year, but a manager can earn six figures depending on several factors including individual performance, sales volume, and whether the manager is opening a new store or supporting an existing store.

Like all top Nordstrom salespeople, Nader Shafii feels that he is running his own business, with the support of every level of management, and “If you are willing to go above and beyond the call of duty, Nordstrom is 100 percent behind you. You have all the support and all the tools. It's up to you to see where you would like to go with it.”

If salespeople fail to make enough in commissions to cover their draw, Nordstrom makes up the difference between commissions earned and their hourly rate. Employees who fail to regularly exceed their draw get special coaching by their department manager. If it doesn't appear that a career in sales is for them, they are either assigned to a nonsales area or are let go.

One of the most important performance barometers is sales‐per‐hour, or SPH, in the Nordstrom mother tongue. Each employee's semimonthly sales‐per‐hour figures are posted clearly in a back room of the store for everyone in the department to see. Therefore, you know how I'm doing and I know how you're doing. Needless to say, the bottom of the standings is not where you want to be.

Nordstrom's nonstop emphasis on sales creates a dynamic tension among employees, all of whom have ready access to sales figures from all departments and stores in the Nordstrom chain; they can compare their performance with that of their colleagues throughout the country. Every top salesperson in each store is recognized by performance rankings that reflect the previous day's sales, the number of newly opened credit accounts, or how the store performed on a company‐wide initiative. There is constant benchmarking, recognizing exceptional results, and sharing useful information to help employees produce. Bulletin boards have photos of top performers, laudatory customer service letters, and stories of legendary customer service.

When individuals and departments have a successful day or are on target to meet their sales goals, they are praised over the store intercom during the morning announcements before the store opens. The company announces group and individual awards for categories such as outstanding sales‐per‐hour and sales‐per‐month performances.

“We look for competitiveness,” said executive Greg Holland. “We want nice people who love to serve, but the frosting on the cake for the perfect applicant is to be competitive. For salespeople, we're going to give you the environment, the merchandise, the tools for you to do the job. You're a shop within a shop. Make hay and we'll pay you.”

Nordstrom has always been a home for ambitious immigrants. Blake points out that a large portion of Nordstrom employees who reach sales of $1 million or more are of foreign extraction. “These people remind my dad Bruce of his grandfather [founder John W.], who came to this country with nothing and could barely speak English.”

Although all of these top salespeople arrived in the United States with far greater academic credentials than John W., they do share his entrepreneurial spirit.

Van Mensah, a native of Ghana, who sells men's suits in the suburban Washington, D.C., Pentagon City, Virginia, store, is often asked to speak to new employees at Nordstrom. One of the top‐performing salespeople in the chain for almost two decades, Mensah doesn't sugarcoat the demands of the job.

“Demands and expectations are high, but if you like working in an unrestricted environment, it's a great place to work,” he explained. “Nordstrom provides you with great merchandise and the freedom to do what you want. I always tell people that if you're interested in retail, this is the best place to work. But you have to understand that this is not for everybody. It's a tough job, but if you have the discipline and you are willing to work hard and take the initiative, it's not that tough. After a while, it becomes easy, because you get used to so many things. It becomes a habit. With the tools and resources the company provides, there's no reason for anybody not to make it.”

Top Performers

The top‐performing salespeople at Nordstrom achieve the designation of Pacesetter. Pacesetter used to be determined by meeting or surpassing a pre‐determined annual goal of sales volume. But, over the years, the company has tweaked the plan, to make it more easily accessible for newly hired employees and part‐timers. The company now uses a sales‐per‐hour goal to better recognize all top‐performing salespeople.

Every year, Nordstrom raises the target goal figures, depending on how many people achieved Pacesetter the year before. Generally, 8 to 12 percent of the salespeople in each division make Pacesetter. Pacesetters are given a personalized certificate of merit, business cards and note cards emblazoned with the Pacesetter designation, a 33‐percent store discount credit card (13 percent more than the regular employee discount) for one year, and cash, which varies, depending upon how many years the individual has achieved Pacesetter status.

After 10 years with the company, Pacesetters receive a Nordstrom stock award, which varies depending upon how many years they have achieved Pacesetter status. Employees who achieve this status 15 or more times during their career and have at least 15 Retiree Discount years of service, regardless of their age, receive a 33 percent discount through the remainder of their employment and throughout their lifetime.

Each year, Pacesetters and other top sellers and their guests are treated to a little rest and relaxation as a thank‐you for all their hard work. For example, they might be given an all‐expenses‐paid trip to Las Vegas or Miami Beach that includes a reception and dinner hosted by the Nordstrom family.

Becoming a Pacesetter takes dedication, hard work, and a feeling of ownership of their own business, which comes about through empowerment.

“When you have star salespeople, they ought to get paid like stars because they earn it,” said Bruce.

Nordstrom compensates those who reach specific sales volume goals with additional commission, stock, and other perks. Because it's given out quarterly instead of yearly, this reward is put within reach of new salespeople. Offering newcomers an obtainable goal makes starting with Nordstrom a better initial experience.

Customer Service and Commission Selling

Some might feel that there is a dichotomy between giving spectacular customer service and earning commission sales. It's true that, in some cases, salespeople are happy to get the immediate sale and are even happier to move on to another customer. They don't see themselves in a long‐term relationship with a customer because they don't see themselves in a long‐term relationship with their job.

“Competition is a key element of our culture,” said Blake. “If done right, a commission system encourages better service and team play.”

Because they are entrepreneurial, the top Nordstrom salespeople develop, build, and nurture a clientele of regular, loyal, trusting customers who are a treasure trove of referrals. They don't look for the one spectacular sale that will make their day. Instead, they are committed to planting the seed for an ongoing business relationship and to do what's necessary to regularly nurture that seed. They would argue that, because their compensation is linked to satisfying the customer, it's in their best interest to act responsibly. The best Nordstrom salespeople know that if they take care of the customer, the dollars will follow.

Salespeople can't look at the customers with dollar signs in their eyes. With Nordstrom's liberal, virtually unconditional, money‐back return policy, if people aren't happy with what they've purchased, they are going to bring it right back. So, just trying to make a sale for the sake of selling something is a waste of time for both the salesperson and the customer.

“A happy customer will refer me to her friends,” said a Nordstrom salesperson. “She won't do that for someone she feels doesn't have her best interests at heart.”

A Customer Service All Star and personal stylist in a store in the southeastern United States said: “I try to find out everything I can about my customers and get to know their family, too. If a man doesn't like to shop, I try to get him in the fitting room with a few things, offer him a cup of coffee, then keep bringing him stuff to try on. Meanwhile, I'm asking questions, ‘Do you wear a tie to work? Do you have kids? What kind of hobbies do you have?’ When the customer leaves, I make notes in my personal book. So, when I follow up or they come back in, they feel like they're dealing with a friend.”

“It starts with us taking care of each other,” said chief innovation officer Geevy Thomas. “The only way we can deliver service to the customer is if our people take care of each other.”

Trust among coworkers is essential in a commission‐based culture.

“When I'm helping a customer in the fitting room, and one of my other customers needs to get rung, I trust that my coworker will ring the customer for me so I get credit for that sales. They know that I'm going to do the same for them,” said a salesperson. “When you have that level of trust and respect, the customer can sense our teamwork and camaraderie on the floor. That's a huge incentive for wanting to shop here.”

The best salespeople become fashion authorities. A creative salesperson's social media presence is not just about the product but also about establishing herself or himself as a social media presence with a following on platforms such as Instagram and Pinterest. The best salespeople and stylists, in essence, become their own brand, where they can spark and facilitate conversations among friends/customers about fashion.

Cross‐Selling

Salespeople can depart from their departments to sell merchandise to their customers in any department throughout the store. Nordstrom believes that once a salesperson has established rapport and a relationship with a customer and has helped that customer put together the right look, the salesperson wants to make sure all of the customer's needs are met in order to complete the package. This freedom to sell throughout the store gives go‐go salespeople greater opportunity for higher sales. The most driven salespeople do store walks, talk to department managers, and pick out their favorite two items on every floor—their favorite hat or favorite tee shirt.

When finishing up with a customer in their department, a salesperson who wants to do a little cross‐selling might ask: “Where are you going next?”

For example, if a customer is buying a suit in the menswear department and realizes he needs some shirts and underwear, his suit salesman can sell those items to him, even though they are in a different department. That salesman could even sell his customer a sweater for his spouse or a watch for his daughter.

That's why top salespeople learn about products in other departments. Product knowledge is power. You can't develop a relationship with a customer if you don't know your product. The more you know, the better you can serve your customer.

“My business is one‐stop shopping,” said a salesperson. “If it's not nailed down, I'll find it for the customer. A customer once wanted a case of hangers, so I ordered them from our distribution center. Another customer wanted to buy some of our long plastic garment bags. I don't make commission on those things, but it's part of the service I provide. I sell service, not merchandise.”

Other Compensation

Company literature tells employees “It's your business: Our employees have a personal, financial, and professional stake in the success of our company. You're encouraged to take ownership of your career.”

The company has a generous 401(k) plan as well as profit sharing and an employee stock‐purchase plan. Like everything else at Nordstrom, the profit‐sharing plan has built‐in financial incentives that encourage industriousness, teamwork (don't ever forget teamwork!), customer service, and expense savings. Some long‐time employees retire with profit‐sharing totals in the high six figures. All employees who work more than 1,000 hours per year and are still actively employed at the end of the year participate in the plan.

Because contributions are made to the plan directly from the company's net earnings, employees have an incentive to be productive and cost‐conscious. (Nordstrom's shrinkage rate—losses due to employee theft—is only 1 percent of sales, which is half the industry average.) That also promotes loyalty because employees share ownership.

“If you are part of our team, you bring your integrity, character, and reputation,” says Blake. “You have a vested interest in the success of this company. So, if you see that something is not right, you will speak up and make it right.”

“When I worked at Nordstrom, I felt that I was one of the owners. Everything we do as employees pays us back in profit sharing,” said a retiree.

With Nordstrom's parental leave benefits, eligible birth mothers can receive up to 12 weeks paid at 100 percent (with up to six weeks enhanced maternity disability pay and up to six weeks paid bonding leave). All other eligible parents (including nonbirth, adoptive, or foster parents) are able to receive up to six weeks bonding leave, paid at 100 percent.

Team Contests

Nordstrom has always used both internal and external competition to move the organization forward. The second generation of Nordstrom brothers—Everett, Elmer, and Lloyd—didn't want to merely run a shoe store; they wanted to run the biggest and the best shoe store there was, which they did. By the mid‐1960s, Nordstrom was the biggest independent shoe retailer in the United States.

“We wanted to be successful,” Elmer wrote in his book A Winning Team. “We wanted to be the best we could. There was a good spirit of competition among the three of us. Each of us merchandised our own particular areas and we all knew how each area was doing. So if one brother was doing better than the others, it was apparent to all. We had no prizes, and we didn't boast about it, but we always knew which brother was doing the best. Knowing it only made the other two try harder. In a sense, every day was a contest because in the stockroom there was a list of salesmen ranked in order of their performance There's a fine line between competition and cooperation, and we always watched to make sure that no one crossed that line.”

Over the course of the year, individual departments, stores, and regions are recognized for outstanding sales and customer service. Again, these awards—fueled by the performance and success of individuals—help to foster the importance of the team.

But these contests require constant vigilance because, as one might expect, Nordstrom's emphasis on generating high sales occasionally tempts a handful of employees to try to find ways of rigging the system or outmaneuvering their teammates.

Teamwork

Also honored are departments that have sold the most of that particular month's featured item. Nordstrom loves to use intercompany competition as a tool for motivating the troops.

When it comes to building positive team relationships, employees are expected to know, understand, and support team goals, and to cooperate with—and show respect for—their coworkers throughout the company.

For example, every year, the President's Cup is awarded to the full‐line stores that rack up the largest increase in comparable sales over the previous year. The competition is divided into three categories, depending on the size and sales volume of the stores. The categories are named after founder John W.'s three sons: Everett, Elmer, and Lloyd. One of the Nordstroms makes an appearance in the winning store, and presents the employees with a cash prize of as much as $100,000. A President's Cup is also awarded to the new (open two to five years) stores with highest sales increases in their category.

The hoopla around winning the President's Cup is quite the scene, with a check hand‐delivered by a Nordstrom brother and a marching band.

No wonder Nordstrom has more stores that generate $100 million in annual sales than any other retailer.

The Rack stores have their own competition in three categories, based on sales volume, named for Bruce, John N., and Jim of the third generation.

Each division runs monthly Make Nordstrom Special contests, where good ideas or suggestions for improving sales, systems, or other facets of the operation are rewarded with cash. The winners are honored at the Recognition Meeting. Over the course of the year, individual departments, stores, and regions are recognized for outstanding sales and customer service. Again, these awards, which are fueled by the performance and success of individuals, help to foster the importance of the team.

For nonsales personnel, Nordstrom runs White Glove Contests, which enable employees in housekeeping and maintenance to earn cash awards for keeping their stores clean and inviting to customers. A store can't win this award unless everyone who works in the store is involved.

That's how Nordstrom ensures that every employee participates in competition and compensation.