服务营销第八版英文教辅 CASE 12.docx

CASE 12RALEIGH & ROSSE: MEASURES TO MAINTAIN EXCEPTIONAL SERVICEOVERVIEWIn January 2010, the performance measurement systems and compensation policies of US luxury goods retailer Raleigh & Rosse (R&R) come under attack by employees and government regulators. The case describes the nsales-per-hour" (SPH) monitoring and compensation system, which many believed to be instrumental in R&R s phenomenal success. The case also illustrates how rapid company growth, decentralized management, and unrelenting pressure to perform can distort performance measurement systems and lead to undesirable consequences.TEACHING OBJECTIVES1. To analyze relationships among business strategy, HR strategy, critical performance variables, and compensation practices.2. To understand the potential for dysfunctional behavior induced by inappropriate or inadequate control systems.3. To recognize the need for a checks and balances architecture to counterbalance the performance pressures induced by metrics-driven control systems.STUDY QUESTIONS1. What is the cause of the problems described in this case? How serious are these problems?How would you quantify the potential financial risk to R&R?2. Are R&R employees pressured inappropriately by the sales-per-hour system or by management?3. How effective is the memo in Exhibit 4 in clarifying the distinction between "sell" and “non-sell" time?4. How would you redesign compensation and performance appraisal systems at R&R? Is the sales-per-hour system an effective measure of customer satisfaction? Are R&R's HR policies and practices fully aligned with its business strategy?© 2012 President and Fellows of Harvard College.HBS Professor Robert Simons and writer Michael Mahoney prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the narration.TEACHING SUGGESTIONSThe Raleigh & Rosse case will raise important issues - and should evoke energetic student discussion in at least two different curricular settings: in a course on human resources management or HR strategy, when discussing compensation, or in an accounting course that examines diagnostic control systems. Instructors in general management or strategy might also use the case effectively in a class devoted to the relationship between business strategy and HR strategy.CONCLUDING COMMENTS1) Diagnostic control systems are necessary to chart the progress of the organization against critical performance variables. Diagnostic systems focus scarce management attention, but may need to be adjusted from time to time to ensure that they are effective.2) Diagnostic control systems are fueled by linking formal rewards to outputs through explicit formulas. This link focuses the attention of organizational participants on critical performance variables.3) Incentive pressure can lead to potentially harmful "gamesmanship” in an attempt to bias diagnostic measures. Objectivity in measurement is important.4) The performance pressures of diagnostic control systems need to be counterbalanced by effective boundary systems (especially as organizations grow larger and more decentralized) and sound internal control systems.5) Failure of control systems can increase potential financial, reputation or operational risk to the firm.ANALYSIS1. What is the cause of the problems described in this case? How serious are these problems? How would you quantify the potential financial risk to R&R?The diagnostic systems in use at R&R are (1) Sales per hour system (SPH) and (2) Sales per square foot. R&R developed the "ownership culture” and the SPH system when CEO Brian Rosse collaborated with his HR executive, who was also his cousin (perhaps not providing the CEO with the most objective advice).At the heart of the case is the Sales Per Hour (SPH) system - a diagnostic control system. Diagnostic control systems typically include four criteria: ability to set ex ante targets or standards ability to measure outputs ability for individuals to influence the process the activity being measured represents a critical performance variable for the firm The Sales Per Hour system meets all these criteria, but seems to be out of controlThe SPH system satisfies the above four criteria for use as a diagnostic system, but note that the system is "diagnostic" from the perspective of management. Sales associates may receive and act on this data daily or even hourly.Before class, put up a list of the problems facing R&R as reported in the press on the left side board and the entrepreneurial quotation on the right side board."It's A Darwinian Culture Here" Employee class action lawsuit Complaint made by New York State Dept, of Labor FORTUNE magazine article“The Ownership Culturen highest sales productivity earnings> $63,000 compound growth in sales, earnings, stores sq. ft. highly educated, motivated workforceSide boardSide boardRefer to these problems and call on students to explain the reason for these problems. Students will quickly point to the ability of R&R employees to manipulate the SPH measure, specifically the denominator - hours worked - to achieve high SPH numbers.Refer to some of the challenges associated with linking incentives to diagnostic controls systems: Goal difficulty - set through SPH quotas Measurement relates to critical performance variable - yes Minimizes game playing - problem Objective - only partially Complete Completeness refers to the ability of a measure to capture all actions or behaviors relevant to task performance. The more complete a measure, however, the greater the likelihood that the measure is not responsive to the efforts or actions of individuals.In contrast, the main pressure by the management to report all hours worked is the increase in pay for the amount of overtime worked.See Exhibit 3 of the case study for the compensation examples to illustrate that reporting all time worked invariably results in higher cash compensation (which sales people may be willing to forgo to increase their SPH and thereby increase their future earnings potential) - yes Responsive - yesThe system is subject to manipulation since the denominator data - hours worked - are entered into the system by the employee, who may choose not to report all hours worked. The second problem is one of objectivity: the difference between a "sell" hour (which is paid by commission and affects SPH) and a nnon-selln hour (which is compensated separately and does not affect SPH) is unclear.The effectiveness of a diagnostic control system may change due to market conditions, and the same goes for the SPH system. Perhaps SPH worked during a high growth period, but changes might be needed in a declining market.The instructor should also be sure that students understand the mechanics of the system. Below a defined SPH switch-over point, sales people are compensated on an hourly wage basis; above the SPH switch over point, they are compensated on commission. For example, if the base wage is $14.42 and the commission rate is 7.35%, the SPH switch over point is $196.00 per hour calculated as:Sales * Commission Rate = Commission EarningsDividing by Hours:Sales/Hour * Commission Rate = Earnings/HourTo calculate the switch from salary to commission, divide each side by the commission rate and substitute the base hourly wage:Base Wage / Hour$14.42Sales / Hour = = = $ 196/HourCommission Rate.0735The SPH measure also is a productivity measure that influences assignments and promotions (i.e., managerial evaluation). Individual SPH performance does not influence how people are paid: they are paid either a base wage or a commission; they are never paid as a direct function of their sales per hour.2. Are R&R employees pressured inappropriately by the SPH system or by management?There may be objections to using the SPH system to motivate the critical performance variable of customer service/loyalty on the following grounds: Why not just use a straight commission system?1 Why introduce a ratio measure of performance (as a manager, do you want to differentiate between sales person A who generated $15,000 sales in 40 hours and sales person B who took 70 hours to generate the same amount of sales? What is the implication of these productivity levels for effective service delivery?) Could R&R simply pay higher salaries with no commission? How much would R&R have to offer to attract sales associates? Would sales associates remain motivated to perform heroic customer service on behalf of their clients? How does increased sales per hour reflect customer service? What are the levers for achieving customer service and what are the outcomes of high levels of customer service? What are the alternatives? Is it more effective to measure and reward the process rather than the outcome 一 i.e., letters written, customers called, packages delivered, etc.? Puts too much pressure on people; punishment-driven rather than reward-driven (would R&R sales associates perform "heroics" without measurement system? Does great R&R customer service depend on individual efforts or collaboration with other sales associates?)Below are some of the pressures by the SPH system for a sales person to increase SPH by underreporting hours worked:Implicit PressuresExplicit Pressures Be a team player Told by first-line supervisors not tosign-in during sales meetings More hoursassignedbetter shifts Managers erased hours Promotion Posting SPl£figures Termination3. How effective is the memo in Exhibit 4 in clarifying the distinction between “sell”To discuss the effectiveness of the memo in Exhibit 4 of the case study, use the analysis of the difference between "sell" time and nnon-selln time to highlight the ambiguity in the system and to reinforce the importance of these activities in delivering high quality customer service.Create two columns-sell and non-sell-and list some of the sales and service activities described on pages 3 and 10 of the case. For each, ask a student if they believe that the activity should be classified as selling or non-selling activity. The class will soon discover that anything that affects a customer directly is inextricably bound up in the selling process:SellUnclearNon-sellDrive to another store to pick up merchandise for a customerXHome deliveryXObtain merchandise from another department for customerXThank-you notesXMerchandise stockingXStore displaysXSales meetings9 *Inventory countXRecord keeping9 *Students should note that any activity that results in direct customer service (in support of R&R's strategy) will be recognized through increased sales and commissions.A critical point to drive home is that R&R management wants the sales people to be entrepreneurs to be creative and innovative in recognizing and anticipating customer needs and to do whatever is necessary to build customer satisfaction and loyalty.Students can also be expected to begin to identify potential inadequacies of beliefs systems, boundary systems, and internal control systems in contributing to R&R's problems.4. How would you redesign compensation and performance appraisal systems at R&R? Is the SPH system an effective measure of customer satisfaction? Are R&R's HR policies and practices fully aligned with its business strategy?Diagnostic control systems are powerful because they focus attention and typically link performance by formula to formal incentives. This pressure to focus on critical performance variables and achieve performance goals is generally healthy. Managers must recognize, however, that performance pressures may also cause participants to engage in undesirable behavior. These behaviors may include (1) attempts to maximize the measurement statistic in ways that do not further the interests of the firm and (2) attempts to willfully distort the measure.Several possible solutions to these tendencies include:1) making diagnostic system measures as objective ("bulletproof") as possible;2) ensuring that internal controls are strong to prevent willful manipulation of data;3) enforcing clear boundary systems to communicate that explicit pressure and gaming behavior is unacceptable and subject to detection and punishment.This case provides the opportunity to consider both the strengths and dangers of diagnostic systems, and an opportunity for students to understand how other aspects of the Levers of Control analytic framework see Exhibit TN-1) must be used to counterbalance the pressures that are invariably derived from important diagnostic systems.Exhibit TN-1 Levers of ControluServants99BELIEFSSYSTEMS.Thou shall not pressure people to work off the clock or change hoursBOUNDARYSYSTEMSRecognize incentive pressuresCoreValuesRisks toBe AvoidedBusinessStrategyUnparalleled customer service"quality-fashion-surrozmdingsPersonalized "heroics”UncertaintiesStrategic/ Critical、 Performance Variables Customer satisfaction & loyaltySales turnoverINTERACTIVECONTROLSYSTEMSDIAGNOSTICCONTROLSYSTEMSSPHSales per square footInternal ControlsEnsure individual cannot charge personal purchases against SPH quotaEnsure sales cannot be "stolen ”Protect access to dataEnsure returns are properly creditedRecommendations for ChangeEnsure that students understand that all the problems listed on the left side board result from manipulation of the SPH numerator (e.g., charging personal sales to increase SPH and then returning purchases to another store) or manipulation of the SPH denominator (under-reporting hours actually worked). Recommendations should affirm the positive aspects of the SPH system while at the same time minimizing the potential for abuse.Use the Levers of Control analytic framework to prompt students to consider the available types: Belief SystemsAs business expands and personal management oversight is diluted, it may become necessary to reinforce the core values of the business, including how employees should deal with each other and the business as a whole. The abuses described in the case would not likely have occurred in a store managed by one of the R&R family members.Boundary SystemsClear guidelines are needed especially for first-line managers to emphasize that no one is to be coerced to underreport hours. Pressure on the system is often intense at the first- line manager level. Offenders should be punished.Internal ControlsNeed to be reconfigur