Raleigh & Rosse : Measures to Motivate Exceptional Service

Prepared by: Abhishek Sharma  FT13300Arjun Choudhry FT13312Garv Sharma  FT13325Irene Eltham  FT13337Mrityunjay Arya  FT13350Ramachandran KS  FT13362Sonali Das  FT13374Vijaykumar Bale  FT13386 

About R&R:Raleigh & Ross’s Palm Springs – chain of stores in the luxury goods industry

Company Culture: High Customer Orientation ready to go out of way to service the clients.

Customers: High net worth Individuals (5% customers amounting to 53% sales).

Linda Watkins - appointed CEO in 2007. First non family member to head the business.

Problem Statements

Currently facing lawsuit from their associates to the tune of $200 million.

PR nightmare triggered by an article in Fortune magazine criticizing and accusing R&R for violating labor laws.

NYSD of Labor finds (based on a Fortune article) R&R violating state wage and hour laws ordering them to change their policies causing a loss of $50 million.

Dwindling sales due to economic downturn of 2008-09.

Sales per Hour system facing resistance (only 60% associates able to meet targets in the past week).

Situation Analysis:

This SPH clashed with the existing culture of customer service. To generate SPH, the associates had to be on the sales floor, selling but over the years, the customer had started expecting the associates to be available for them and being available for customers was a requisite.

If these non-selling hours were formally recorded, the SPH would decrease. Hence, the associates had to end up servicing customers in their personal time(after work) causing unrest among the sales associates.

Alternative Evaluation:

Risking a potential $200 million judgment against it by deciding to fight a prolonged lawsuit. This would also be combined with a reputational risk.

Settling the dispute outside the court by paying the associates and agreeing to their demands of making substantial changes to the “Ownership Culture” and SPH as a part of the settlement.

Recommendations:R&R should settle the lawsuit outside the court and agree on an internal evaluation of its policies and reiterating their objectives. A prolonged battle will only lead to bad publicity and a monitory risk. For e.g. Goldman Sachs settled the S.E.C lawsuit in order to save itself from the reputational risks and continued losses pertaining to it.

R&R should discuss the issues at hand with their employees, about the problems and suggestions made by them specially pertaining to the SPH system.

R&R should motivate their employees especially during the economic downturn by incentivizing and assuring the employees about the firm’s commitment towards them.

Recommendations (cont’d):

Should try to develop a pay plan enabling the employees to focus on the customers especially during the recessionary times as the number of customers are low which the organization needs dearly.

The new pay structure should be a combination of both 70% base salary and 30% sales incentive. The process should be easy to understand and open for continuous feedbacks, changes and improvisations.

Thank you