Summary of Case Situation
In this case, Raleigh & Rosse, Simons and Mahoney (2011) report that Raleigh & Rosse, a retailer for luxury goods, is dealing with a class of action lawsuit from its own sales associates. R&R had established loyal customer relationships, and good reputation by providing high-level service. In fact, to build an entrepreneurial and responsible working environment, R&R began to use a new strategy called “Ownership Culture” in 1987. The central idea of the Ownership Culture was SPH (Sale-Per-Hours), the way to evaluate sales performance.
However, the SPH program put a lot of pressure on store managers and sales. Consequently, a large group of the R&R associates sued it for “working off the clock” in 2010. This lawsuit might cause reputation damage, and the settlement could be up to $200 million. In 2008-2009 before the case, there was an economic recession. The whole luxury goods industry in the U.S. dropped over 14%, and R&R revenues declined 10%.
Although R&R suspended new-store opening, and hiring, still the business not good as before. So, now the CEO of R&R, Linda Watkins, not only has to cope with the SPH lawsuit, but also fix the reputation damage during this hard time.
Central Issue
How CEO of R&R, Linda Watkins fix inappropriate, controversial regulation of the Ownership Culture (SPH program) during economy depression.
Recommended Course of Action
Linda should revise the R&R Ownership Culture partly. For instance, set a fair minimum SPH and working hours to ensure sales’ rights, or enhance employee benefits to satisfy sales associates.
Basis for Recommendation
R&R should revise the Ownership Culture partly, because it an ultimate solution. It not only eases intense relationship between the company and sales associates, also it lead R&R to sustainable development. If R&R keep using the old Ownership Culture to run company, then this lawsuit situation will happen again, and even cause more damage. R&R sales associates are dissatisfied and feel less confident with the company because SPH program force them to working off clock. They actually need more encouragement than stress. Adjusting the Ownership Culture is the only way to unite R&R sales associates, and to make them feel respected and important.
References
Simons, R. & Mahoney, M. (2011, October 10). “Raleigh & Rosse: Measure to motivate exceptional service” HBS NO.4353. Boston: Harvard Business School Publishing. Retrieved from http://hbsp.harvard.edu/
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