“Top Ten Business Books For 2017” – Forbes

The fully revised and updated edition of the classic book about Nordstrom’s extraordinary customer service

In this new edition of the management classic, the authors explore in-depth the core values of the culture that have made Nordstrom synonymous with legendary customer service. These essential values have enabled Nordstrom to survive and adapt to dramatic market shifts regularly since 1901, and the new edition explains how the Nordstrom approach can be emulated by any organization—in any industry—in every corner of the world. This is not a book about selling shoes or clothes or cosmetics or jewelry. It is a book about how underlying values such as respect, trust, compensation and, even fun, are the building blocks of a culture where employees are empowered to consistently deliver a world-class experience to customers.

Nordstrom believes that the employee experience determines the customer experience, and that when you attract and reward people who are comfortable in a service-oriented culture, then everyone succeeds—both individually and collectively. No wonder Nordstrom is one of only five companies to make Fortune‘s “Best Companies to Work For” and “Most Admired” lists every year since those surveys have been taken.

With new interviews from senior Nordstrom executives and family members, the book explains how to successfully respond to today’s tech-savvy, time-crunched customers who demand a convenient, seamless, painless, personal experience across all channels. Nordstrom gives its frontline people all the digital tools necessary to satisfy the customer—and your organization must do the same, if it wants to adapt.

The authors show what it takes to earn brand loyalty, lead through change and uncertainty, and combine extraordinary brick-and-mortar with online experiences.

‘The single most important reason we try to provide great service is this: It enables us to sell more,’ says co-president Blake Nordstrom, great-grandson of the founder. ‘The best way for our company to achieve results is to do what’s best for the customer.’

In this book, readers will find:

• Suggestions for becoming the Nordstrom of your industry
• The ten values that define a customer-driven culture
• Lessons for providing superior service and experience across all channels

The name Nordstrom is synonymous with excellent customer service. Robert Spector and Breanne O. Reeves highlight what the Nordstrom department store chain does differently from its competitors to maintain its trademark reputation. This inside look is fascinating reading for anyone interested in the retail industry. You will learn Nordstrom’s history from its humble beginnings at the turn of the 20th century, as the Wallin & Nordstrom shoe store, to its current status as a retail powerhouse. Frontline employees will be able to use Nordstrom’s techniques, no matter where they work. In fact, people in every industry can draw from the customer-service practices described here. Anecdotal evidence of the success of these practices makes this book easy to read and enjoyable, but don’t expect to hear a discouraging word. Anyone in customer service or retail – and any Nordstrom shopper – will relish this portrait of what good service is and how to make money with it.

• Nordstrom gives employees the freedom to make decisions, and management is willing to live with those decisions.
• To succeed at Nordstrom, employees must be able to thrive in an entrepreneurial sales environment.
• Great customer service was the main sales message at the first Nordstrom store and remains the company’s priority today.
• Employees have the ability to accept returned merchandise, which adds to the service they can provide on the sales floor.
• Every person who works at Nordstrom starts his or her career on the sales floor (even people whose last name is Nordstrom).
• Starting employees on the sales floor sends a message from management about the importance of the salesperson’s role.
• Paying employees commissions helps Nordstrom attract self-starters.
• Every level of Nordstrom’s organizational structure is bound by goal setting.
• Nordstrom verbally and financially praises and recognizes top salespeople on a regular basis.
• When Nordstrom employees go beyond expectations in providing customer service, the store describes them as “heroes.”

Only One Rule

Managers give new employees a five- by eight-inch card on their first day at Nordstrom; it’s called the Nordstrom Employee Handbook. The handbook welcomes employees, encourages them to set high personal and professional goals, and outlines the company’s rules. Rule one is: “Use your good judgment in all situations.” That is the only rule.

“Nordstrom’s culture encourages entrepreneurial, motivated men and women to make the extra effort to give customer-service that is unequalled in American retailing.”

Nordstrom is different from most other companies because it gives its employees the freedom to make decisions, and its management is willing to live with those decisions. This attitude has helped the company develop an army of highly motivated employees who share an entrepreneurial spirit.

The company’s liberal return policy, and its decision to empower workers to accept merchandise returns and make independent decisions adds up to an unusually high level of service. These policies enable staffers to perform the “heroic” acts of customer service that add to the chain’s mystique. These principles separate Nordstrom from its competitors, but its managers readily admit that not everybody can handle its high demands and expectations. To succeed, employees must thrive in an unrestricted environment.

The Nordstrom Way

Nordstrom is a family business based upon strong traditions. In 1901, John Nordstrom and his friend, Carl F. Wallin, opened the first Wallin & Nordstrom shoe store. On the advice of traveling salesmen, Wallin & Nordstrom filled their inventory with medium-sized shoes. They quickly realized that these shoes were not large enough for their rawboned Swedish friends, and they re-prioritized, carrying a large variety of styles and sizes. Today the store is still known for packing its sales area with a high value of inventory per-square-foot.

“At a time when ’customer service’ is the buzzword of American business, Nordstrom has become the standard against which other companies privately, and sometimes publicly, measure themselves.”

Nordstrom established a reputation for its customer service, a traditional value. The company tells employees to make decisions that favor the customer over the company. Employees are never criticized for doing too much for a customer, but they are criticized if they don’t do enough.

Setting Employees Free

Van Mensah is a men’s clothing sales associate at Nordstrom’s store in Pentagon City, Virginia. One day he received a troubling letter from a customer. The man had purchased more than $2,000 worth of shirts and ties from Mensah, but had accidentally washed the items in hot water. Everything shrank. The customer readily admitted that the mistake was his, but his letter asked for Mensah’s professional advice on how to deal with the problem.

“The leadership has to make it clear that empowering workers is part of the ethic and approach of the organization.”

Mensah immediately called the customer and told him that the shirts would be replaced. He asked the customer to mail the ruined shirts back to Nordstrom’s – at Nordstrom’s expense. Van Mensah never got permission to react this way. He simply did what he thought was best. Nordstrom expects this from their employees. People on the sales floor are empowered with the freedom to accept returned merchandise, even if the customer causes the damage.

“Nordstrom gives its employees the freedom to make decisions. And Nordstrom is willing to live with those decisions.”

Because Nordstrom allows its salespeople and managers a wide range of operational and bottom-line responsibility, they can operate like entrepreneurial shopkeepers instead of minor players within a retailing giant.

Nordstrom’s corporate structure is an inverted pyramid. Customers sit on top of everything. Directly below the customers are Nordstrom’s sales and support staff. If you consider your customers the most important aspect of your business, it makes sense that your next most important asset would be the people who have the most direct contact with your customers.

“Nordstrom employees are instructed to always make a decision that favors the customer before the company. They are never criticized for doing too much for a customer; they are criticized for doing too little.”

Beneath the sales staff are the department managers. One level below are the store managers, buyers, merchandise managers, regional managers and general managers. At the bottom of the pyramid is the Nordstrom Board of Directors. The company’s structure aligns with its philosophy that all the tiers of the inverted pyramid should work to support the sales staff and the customer, not the other way around.

“Nordstrom has a policy of never hiring managers from the outside because Nordstrom believes that a person can only appreciate the culture by growing up in it.”

Salespeople at Nordstrom are free to sell merchandise to their customers from any department in the store. If it’s not nailed down, a salesperson will sell it. If a customer wants it, a salesperson will find it. This gives salespeople every chance to increase their sales.

Nordstrom’s Proving Ground: The Floor

All prospective employees start their Nordstrom career on the sales floor. Even John Nordstrom’s three sons, Everett, Elmer and Lloyd had to start on the sales floor, even though they eventually took over the business. Department managers begin as salespeople because it teaches them what they need to do to serve their customers. The policy of starting people on the sales floor sends the message from management that the store values the salesperson’s role more than almost anything. Everyone in the organization recognizes its importance.

“Nordstrom’s best salespeople will do virtually everything possible to ensure that a shopper leaves the store a satisfied customer.”

Nordstrom managers feel a sense of ownership about their departments. They are responsible for hiring, firing, scheduling, training, coaching, encouraging and evaluating their sales team. Managers don’t sit behind a desk. The company expects them to spend their time on the sales floor, meeting with sales staff and customers. Their primary responsibility is to set the tone for the sales floor. When sales staff members see their department managers rushing to a customer’s assistance, they see the company’s focus on customer service in action. Store managers are warned not to micromanage their sales staff.

“Salespeople must have a complete understanding of the product and its selling points.”

When accountability is shifted away from the salespeople, they become foot soldiers instead of lieutenants. Nordstrom believes that the frontline staff should act as lieutenants with control over their part of the business. Nordstrom’s leaders prefer to manage expectations – not people – and to encourage their employees to fulfill those expectations.

Decentralized Buying

Nordstrom’s decentralized buying structure allows regional buyers to focus on items that customers in their area want. Buyers are responsible for a small group of stores and have the freedom to purchase merchandise that reflects local tastes. Limiting a buyer to only a few stores allows Nordstrom to take fashion-forward risks without jeopardizing the bottom line.

“What sets Nordstrom apart is that, from department manager to co-chairman, all tiers of the inverted pyramid work to support the sales staff, not the other way around.”

Buyers receive feedback from salespeople and customers by spending several hours a week on the sales floor. While computer spreadsheets are great for showing you what’s selling, they don’t show you what is not selling because it is not in stock.

The best buyers at Nordstrom are the ones who do the best job of listening. Quite often, when Nordstrom enters a new market, their first buy is their worst. This is usually because they haven’t received any customer feedback yet. Once buyers receive feedback, they can quickly adjust their merchandise choices.

“The unconditional money-back guarantee is designed for the 98% of customers who are honest.”

Decentralized buying means that sales reps for major manufacturers have to sell to many different Nordstrom buyers. While this may be frustrating for the sales representatives, this structure gives small vendors who have a good idea an opportunity to get their foot in the door to become regular suppliers.

“Empowering the people on the sales floor with the freedom to accept returned merchandise (even when the damage was done by the customer) is the most noticeable illustration of the Nordstrom culture because it is the one that affects the public.”

The Nordstrom buying structure has been modified somewhat from a completely decentralized format because inexperienced buyers were making too many costly mistakes. Now, Nordstrom delegates 80% of final buying decisions to a few experienced “lead buyers.” Lead buyers can take advantage of Nordstrom’s purchasing power when negotiating with a vendor for large quantities of merchandise.

Commissions

Nordstrom attracts and retains good people by paying them what they are worth. The company wants self-starters who don’t require supervision. Commission and bonuses give these people the incentive to work harder. Standard Nordstrom commissions vary from department to department; for example, sales of apparel pay a 6.75% commission.

“Working at Nordstrom is not for everybody. Demands and expectations are high. The people who succeed enjoy working in an unrestricted environment.”

Each salesperson has a draw that the company calculates by dividing the commission rate into a predetermined hourly rate, which varies depending on “the prevailing rate in each region” of the United States where stores are located. Nordstrom makes up the difference for employees who don’t earn enough in commissions to cover their draw. If they continue to fail, their department manager targets them for special coaching. If, after coaching, their results still indicate that a career in sales is not for them, the company either lets them go or reassigns them to a non-sales position.

Goal Setting

Goal setting governs every tier of the inverted pyramid. Sales associates, buyers and managers continually strive to meet their personal, departmental, store and regional goals for the day, month and year. They try to improve on last year’s same-period results. When a department misses its target one day, the manager raises the next day’s target. Nordstrom’s most competitive employees push themselves toward higher objectives through personal commitments and peer pressure. Employees start their shifts with a reminder of the day’s goals. Managers quiz sales associates to make sure they are aware of their individual goals.

Praise and recognition

Top salespeople at Nordstrom are recognized as “Pacesetters.” To become a Pacesetter, employees must meet or surpass their department’s sales-volume goal for a one-year period. Each year, Nordstrom raises the target-goal figures depending on how many people achieved the rank of Pacesetter.

“The underlying Nordstrom culture and philosophy is not difficult to pass on to the next generation because it’s simple: Give great customer-service.”

Pacesetters receive a certificate of merit, business cards featuring the Pacesetter designation and a 33% discount credit card (20% is the regular employee discount). The store holds an event or outing to honor the Pacesetter. Employees who maintain Pacesetter status for five years, 10 years, and so on receive even more generous awards.

Store managers also select “Customer Service All Stars” each month based on individuals’ sales volumes and the level of customer service support they give their co-workers. Customer Service All Stars also get a 33% discount.

When individuals and departments have a successful day and meet their goals, the manager who makes morning announcements over the store’s public address system praises them before the store opens. At monthly meetings, managers read customers’ letters of appreciation and recognize individual achievements as co-workers cheer for each other.

Heroic Feats

“Heroics” are true stories of amazing customer service. When employees see a colleague giving customer service that goes beyond expectations, the company encourages them to write a description of the event and give it to their manager. Nordstrom prints up each week’s collection of heroics and distributes them among associates to give employees a standard to aspire to and even surpass.

The following example, while remarkable, is akin to the heroics Nordstrom employees perform regularly.

A customer who was about to catch a flight from the Seattle-Tacoma Airport had accidentally left her ticket at the counter in the women’s apparel department at Nordstrom. When the Nordstrom sales associate discovered the ticket she immediately called the airline to see if it was possible to track down the customer at the airport and print her a new ticket. It couldn’t be done. So the Nordstrom employee jumped into a cab and went out to the airport at her own expense (Nordstrom later reimbursed the cost). She managed to locate the customer and hand-deliver the ticket. Heroics like this have helped Nordstrom maintain its stellar reputation for customer service.

Robert Spector is a speaker, educator and consultant. He is also the author of Amazon.com: Get Big Fast and The Mom & Pop Store, and he wrote about Nordstrom for Women’s Wear Daily and other Fairchild Fashion Group publications. He and customer experience expert Breanne O. Reeves co-founded the RSI Consultancy.