Parisian Department Store

The Parisian Department store in Birmingham, Alabama clearly needs to rethink their sales strategies to maximize profits. The management specifically needs to take a look at whether the new pay program achieves its intended effect of cutting costs while driving sales and how this would affect the company as a whole. The company should look at whether this program would be enough fix the problem, or does Jones need to implement more drastic measures?

The first major issue was taking a look at HR issues and other related business issues that Parisian faced before they implemented the pay adjustments. As the case studies mentions, Parisian sold high merchandise, highly personalized service, high commitment to caring for its employees and communities of businesses. JonesÐ'Ѓf goal is to raise the performance of the store and restore it to its former reputation as an upscale retailer.

ISSUES:

1. Parisians payroll expenses in 2003 were 8.6% which was higher than those at comparable sister business within SDSG.

2. Hourly pay at Parisians was 12.18 and Carson paid an average of 9.54 an hour.

3. Selling costs buildup did not work because it only temporarily fixed the issue at hand.

A huge issue with Parisian is that their pay system is extremely complicated when it does not have to be. Currently there are three forms of pay: base pay only, base plus commission, and commission only. The cosmetics selling cost is also an issue because cosmetics only bring in 15% of sales, but they spend 22% on payroll sales because of the expertise needed as well as the need to have a body in the bay at all times when you sign the agreement with the vendor. Taking a look at Chart B should this very theory, Parisian shows a net sales of cosmetics of 100 M which is compared to CarsonÐ'Ѓfs 250M and there people at Parisian get paid more an hour (14 versus 12). It does not make sense for a store that brings in a lot less to pay their people more. The case further explains that the high volume salespeople are paid at high commission rates and sometimes that rate can exceed selling cost benchmark. The stores with the Ð'Ѓgsacred cowsÐ'Ѓh were costing them a fortune have- specifically 14% selling cost. Table C shows that there were certain stores that were not able to have as many employees cover the floor because they had large payroll expenses.

ParisianÐ'Ѓfs main objective to fix must be to reduce selling costs. The way to effective do this is to drive sales higher. How can a manager effectively figure out which reps deserve a raise and which are overpaid if everyone is one a different pay system? They also must standardize the payroll, so that it is easier to track which sales reps deserve a raise and which do not. The case study mention that the company will be taking a look at slashing jobs and cutting pay set management and staff on adversarial tracks. Unfortunately, this is what must be done to establish more profits in the future for Parisian.

Lastly, to fix the problem of the hourly pay, an assessment of the industry must be looked at to see if the sales reps are paid too much. CarsonÐ'Ѓfs reps are paid around 9.50 an hour. Parisians must consider lowering the average to 9.54 so it is around the industry average for upper class retail stores.

I feel the pay adjustments will achieve the attended affect of cutting costs as well as driving sales and that is what I suggest should happen. Another option is lay offs, which would save them money as well. However, I believe employees would rather deal with pay cuts rather than lay offs because everyone still has a job and benefits.

Unfortunately, as the case mentions,Ð'Ѓh they are taking away ParisianÐ'Ѓfs pay. Without the right culture, weÐ'Ѓfre surprising quite a few people, and I think there could be negative ramifications- negative in productivity and negative in our turnover stats.Ð'Ѓh The announcement needs to worded carefully to explain what ParisianÐ'Ѓfs new goal is and how they will reach that goal. They need to make the announcement with a positive and hopeful attitude with lots of new ideas and programs to reach their new goal.

Parisian needs to earn sufficient funds through the sales of its products to cover labor costs and other expenses. According to Cascio, Ð'Ѓgkey factors in the product and service markets are the degree of competition among producer and the level of demand for the product and services.Ð'Ѓh If the employer cannot change the price without losing

profits due to decreased sales, that employerÐ'Ѓfs ability to raise the level of pay is constrained. If the employer does pay more, it has two options: to try to pass the increased cost on to consumers or to hold prices status quo and distribute a greater segment of revenues to cover labor costs.

They can still maintain the Parisian image with out paying the Parisian price. For instance, for the top sales reps in the company, instead of paying up to 125,000 in commissions, they can send them all on an extravagant trip to Europe/Hawaii for a week.

Positive side effects that many result from the pay adjustments.

Ð'ЃÐ'Ñš As the HR manager mentions, turnover could be a good thing. Turnover makes sure the people that really want to be there are the ones that stay.

Ð'ЃÐ'Ñš If the company does pay cuts, Parisian will make more money and not have lay off any of the high performers that are overpaid.

Ð'ЃÐ'Ñš If they just reduce the pay, Parisian may not have to lay off that many people if anyone at all.

Ð'ЃÐ'Ñš Layoffs could potentially increase productivity.

Ð'ЃÐ'Ñš Layoffs may save more money than pay cuts, however I think more people would rather deal with pay cuts.

Negative effects:

Ð'ЃÐ'Ñš People could lose their jobs and whenever people are laid off, it hurts morale and integrity of the company. It makes others feel like it is possible for them to loose their jobs as well and causes additional stress.

Ð'ЃÐ'Ñš If they start cutting back on commissions and base pay they run the risk of losing

their top performers. Best workers are likely to quit when pay is reduced.

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