Some posters have commented negatively about RSH’s lack of concern for the customer. That lack of concern is due largely to the commission system RSH uses to compensate its store salespersons. CEO Magnacca recently changed the compensation system so that salespersons now are paid a commission on every sale they ring up. I and others regard that change as unwise.
In 1981, Jum McIngvale moved to Houston and founded Gallery Furniture. It has been fantastically successful, and Jim attributes much of his success to the fact that circa 1990 he took W. Edwards Deming’s advice and scrapped the commission system he had been using. If you are interested in reading Jim’s story of the change, the logic behind it, and the effect it has had on his business, then do a Google search on “UK Deming Newsletter No. 7a & 7b 1 June 2000”. Then click on the first item that is returned.
Actually, the elimination of commissions was one of the many reasons for CC's downfall. They eliminated commissions, then eliminated their higher paid salespeople 'cause they didn't want to pay them upper wages anymore. Without commissions, and without further adequate pay to compensate, salespeople don't give a flip cause why should they?
You say, “Actually, the elimination of commissions was one of the many reasons for CC's downfall.”
I disagree with you. CC failed not because of the elimination of commissions but in spite of their elimination. Jim McIngvale replaced commissions with a straight salary for his salespersons, and his company has thrived. You should (1) read about and understand systems and their optimization and (2) read Jim McIngvale’s story about why he eliminated commissions and the positive results that followed their elimination. I pointed you to the story; you just didn’t read it. I know why you didn’t read it: you don’t believe in theory. How foolish!!
You say, “Without commissions, and without further adequate pay to compensate, salespeople don't give a flip cause why should they?”
I say: Few, if any, CEOs, CFOs, etc. are paid commissions, but they are paid an adequate salary. University professors are paid a straight salary—no commissions—and they (most of them) perform well and don’t gripe about their pay level. Jim McIngvale pays his furniture salespersons a straight salary, and his company has thrived. He compensates them well with a salary. Read his story and learn how the elimination of commissions can improve matters at a retail company (any retail company).