TO: EXECUTIVE TEAM OF CLUSTER CONSULTING AND PLACEMENT
FROM: TEAM 4 JUNIOR EXECUTIVES:
RYAN BIDLACK, THOMAS FISHER, BRIANA JENKINS, ANDREW
PHILIPS, AND ROBERTA WAINWRIGHT
SUBJECT: PROS AND CONS OF MANAGEMENT POSITIONS WITH MAY DEPARTMENT
STORES
COMPANY
DATE: 3/10/01
INTRODUCTION
The team of junior executives was asked to evaluate the pros and cons
of two companies, May Department Stores Company and Nordstrom Incorporated.
Then, the team was asked to determine which company was better suited to
work for in a management position.
In making its decision the team took many things into consideration,
including employee benefits, retirement plans, managerial responsibilities,
corporate culture, and company outlook. By conducting personal interviews
with several store managers, the team tried to assess what a manager’s
job was really like and how managers truly felt about their jobs. After
two weeks of research and discussion, the team has concluded that the May
Company is the superior company to work for. Our arguments are as
follows.
MANAGEMENT
May Company provides many opportunities for management positions.
With a variety of department stores ranging from Robinson May to David’s
Bridal, you can find a management position to suit your personal style.
MANAGEMENT REQUIREMENTS
May Company offers a college recruitment program to assist graduates
when searching for a job in the retail industry. Upon graduation, to become
an entry-level manager, May Company requires a B.B.A, B.S., or B.A. from
a four-year college or university and a cumulative grade point average
of 2.7 based on a 4.0 scale. You do not need experience in retail,
but it is recommended (May, 2000).
Promotion from within is also an option leading into management at May Company. Relocation is not required for promotion. However, being open to relocation will only increase your opportunities for advancement (Interview with John Burke at Kaufmann’s, Jan 8, 2001). More than 90% of mid-level and upper-level management positions are filled from within the company itself where the average age of these employees is approximately 50 years old (hoovers.com).
MANAGER’S DUTIES AND RESPONSIBILITIES
As a store manager for one of May Company’s department stores, you
are in charge of daily operations such as motivating sales associates,
selling merchandise when necessary, planning sales events, working as a
management team to make employee’s schedule, and controlling expenses to
remain within store budgets (Interview with John Burke at Kaufmann’s, Jan
8, 2001).
Work schedules are generally flexible and are made by the management team. Mangers are required to work one night per week, two Saturdays and one Sunday per month (Interview with John Burke at Kaufmann’s, Jan 8, 2001).
In regards to managing employees and running stores, managers have some freedoms. Corporate policies and guidelines must be followed when planning how to present new product lines. Stores are sent “Visual Directives,” a set of guidelines as how to present and display the new merchandise; however, it is up to the individual managers to work within those suggestions and use their creativity to cater to their customers’ needs (Interview with Ella Scales at Kaufmann’s, Jan 11, 2001).
POSITION EVALUATION
Management positions are evaluated by how well the department stores
are doing according to sales goals. Six criteria are used to evaluate
performance of managers and when considering employees for further promotion.
The six criteria are: get results, set challenging goals, energize others,
develop people, will to learn, and ability to analyze (Interview with Ella
Scales at Kaufmann’s, Jan 11, 2001).
CORPORATE CULTURE
Extending its arms into the community and embracing its employees is
the atmosphere that May Company attempts to create. May Company offers
a variety of scholarships to students in the community and contributes
to a variety of different non-profit organizations. In the last year,
May and its employees have contributed over $22 million to assist the less
fortunate (May, 2000).
According to May Company’s Statement of Corporate Responsibilities, May Company strives to maintain healthy relationships with its employees, suppliers, and cities in which they operate. (See appendix A.) To maintain these relationships, May Company is committed to equal opportunity employment, developing relationships with minority suppliers, and supporting organizations in the cities of operation (May, 2000).
May Company has received recognition from Fortune Magazine as one of America’s Most Admired Companies. Ranked number four in the general merchandiser industry, this prestigious recognition demonstrates that May Company excels in a variety of different categories. These include: quality of management, quality of products/services, innovativeness, long-term investment value, financial soundness, employee talent, social responsibility, and the use of corporate assets (Fortune.com, 2000).
LAWSUITS
Although May Company has been recently involved in the lawsuits concerning
the sweatshops in Saipan, they have volunteered to settle the dispute by
adhering to an independent monitoring system. “The settlement provides
that in future supply contracts, retailers will require factories to comply
with strict employment standards, including guaranteeing overtime pay for
overtime work, providing safe food and drinking water, and agreeing to
honor employees' basic human rights (sweatshopwatch.org, 2000, para 4).”
Despite these legal complications, May Company believes that this litigation has little impact on the future growth and success of the company. May Company states in its SEC filings, “There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which May or any of its subsidiaries is a party or of which any of their property is the subject,” (sec.gov, 1999, page 4).
May Company considers this lawsuit to be an incidental lawsuit and does not expect any kind of recurrent activities regarding sweatshop conditions. In May Company’s Statement of Corporate Responsibilities, May Company comments that they make a commitment to assuring its customers that their products are made under safe, non-sweatshop conditions (May, 2000).
BENEFITS PACKAGE
May Company offers a competitive benefits package that rivals that
of any in the retail industry. From medical coverage to business travel
accident insurance, the May Company leaves its employees confident that
they are being taken care of.
SALARY
May Company offers a competitive initial salary, and with hard work
there is opportunity for rapid increases (May, 2000). Initial salary for
a management position at May Company can range anywhere from $20,000 to
$45,000, depending on experience and education. There is a specific formula
used to calculate this initial salary, which can be different for each
employee (Interview with John Burke at Kaufmann’s Jan. 8, 2001).
INCENTIVES
While managers generally do not work on commission, there are opportunities for bonuses if sales goals and performance expectations are met. Bonuses are a percentage of your salary, but begin at the divisional manager level and, therefore, are not available to entry-level managers. All other employees receive recognition based upon different performance criteria in the following categories: top sales, top in customer service, and most new accounts started (Interview with John Burke at Kaufmann’s Jan. 10, 2001).
MEDICAL COVERAGE AND INSURANCE
May Company offers medical care coverage at group rates, with a choice
between individual and family coverage. These plans include: coverage in
hospitalization, optical, dental, and prescription plans. Long-term disability
insurance is provided for disabilities that require absence for more than
90 days. Group term life insurance is provided, with coverage adjusting
annually as compensation changes (May, 2000).
LEAVES OF ABSENCE
May Company offers paid holidays, sick leave, and personal days. Employees
are given two weeks of paid vacation, which increases to five weeks based
on length of employment (May, 2000).
OTHER BENEFITS
May Company offers a wide range of special benefits, many of which go
above and beyond the benefits packages that other retail industry companies
offer. These benefits demonstrate that May Company is dedicated to taking
care of its employees, and providing them with a bright future. These benefits,
along with the rest of the package, are what help attract the brightest
employees and set a standard for the rest of the retail industry to achieve.
For recent college graduates relocation assistance is provided to help
with moving expenses. Another useful benefit is the merchandise discount
offered in any May Company store, generally about 25 percent. May Company
also provides a credit union for its employees. After one year of
service, employees are eligible for tuition reimbursement up to $5,250
per year for approved job related graduate courses. If employees are traveling
on business and are injured or in an accident, they are covered by the
business travel accident insurance that May Company provides (May, 2000).
RETIREMENT PLAN
May Company provides an excellent retirement plan for its employees.
It includes several options that allow employees to choose how they invest
in their future.
401K
May Company's 401K, or profit sharing plan, allows you to contribute a portion of your compensation on a pre-tax basis. The company will then match a percentage of the your contribution with a contribution of their own, generally up to 5 percent of the your contribution. The percentage being matched by the company is based on a formula linked directly to the company’s performance for that year. You can then choose between four investment funds in which to invest your money. Employees are fully vested after seven years in the system (May, 2000). (See Appendix B.)
A disadvantage to this system is that the company’s matching percentage can vary from year to year depending on the performance of the company. If the company is doing poorly, employees will not receive as much money. However, if the company is successful, employees stand to make a great deal more than if the company matched a flat percentage, such as Nordstrom does. Also note that in recent years May Company’s matching contributions have been equal to or greater than 100 percent, including 113 percent in 1997 (May, 2000).
EMPLOYEE PENSION PLAN
The Employee Pension Plan is a separate retirement plan for employee’s that is totally funded by May Company. You become eligible after you have worked one year of at least 1000 hours and are 21 years of age. Employees are fully vested in the plan after five years of service (May, 2000). You are eligible to collect from the retirement fund when you are 65, or when you are 55 with five years vesting service. (See Appendix C.)
EMPLOYEE STOCK OWNERSHIP PLAN
Employee Stock Ownership Plan, also known as ESOP, allows you to purchase preferred stock in the company. The ESOP program is one of the most valuable options available to you, simply because employees only stand to make a profit. Employees can buy shares of the preferred stock at a certain price. The stock is guaranteed to always be worth the price paid by the employee. However, if the price of the stock goes up, employees can choose to sell the stock and gain a considerable profit.
COMPANY OUTLOOK
When determining which company to work for, it is important to take
an overall look at the growth of the company and how it is doing financially.
FINANCIAL INFORMATION
May Company just completed it’s 25th consecutive year of record sales
and earnings per share. In 1999 their earnings per share were $2.60,
up from $2.30 in 1998 and $2.07 in 1997. The company’s net earnings
were $927 million in 1999, compared to $849 million from 1998 and $779
million in 1997 (reportgallery.com, 1999).
May Company’s stock has recently been rising. Since April 2000,
the stock has risen from below $28 per share to above $35 per share. (See
Appendix D.) In comparison, Nordstrom’s stock, since April 2000,
has dropped from $34 a share to approximately $19 a share (quotes.nasdaq.com,
2001). (See Appendix E.)
For market share information see Appendix F.
GROWTH OF THE COMPANY
In 1999 May Company opened 18 department stores, which added 2.5 million
square feet of retail space. They also remodeled 23 department stores,
adding another 1.5 million square feet. Despite this increase in
retail space, May Company has increased its sales per square foot by 25
percent, from $168 in 1989 to $210 in 1999. The store plan for the
next five years will create an additional 83 department stores. The
increase in stores will be equal to about 13 million square feet of retail
space or a 4 percent annual increase (reportgallery.com, 1999).
May Company has a projected earnings decline of –1.2 percent for the
year 2001. However, according to top analysts, over the next five
years May Company will have annual earnings growth of 11 percent.
Nordstrom on the other hand, is projected to have a decline of –32 percent
in 2001, a competitive advantage for May Company (earnings.nasdaq.com,
2001).
Plunkett’s (2000) says, “After several record years, The May Department
Stores Company is confident that its future holds much promise, as it is
financially stronger than ever.” (p.387)
CONCLUSION
One of the most important things we considered when assessing the companies,
was what did the managers have to say about their jobs. Overwhelmingly,
managers at May Company conveyed the fact that they really enjoyed their
jobs. Ella Scales, a General Manager of Kaufmann’s, said, “I really
love my job. I enjoy the relationships I have with both my sales
associates and my supervisors. I couldn’t see myself working anywhere
else,” (Interview with Ella Scales at Kaufmann’s Jan. 11, 2001).
After evaluating all of the possible considerations that a potential
manager would need to assess before taking a position at either May Department
Stores Company or Nordstrom, Inc., we have determined that May Company
would be the better employer of the two. Factors such as, managerial
responsibilities, corporate culture, employee benefits, retirement plans,
company outlook, and personal interviews all have been considered in order
to make our decision.
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APPENDIXES
Appendix A: May Company’s Statement of Corporate Responsibilities
Appendix B: 401K
Appendix C: Employee Pension Plan
Appendix D: 12-Month Stock Chart: May Company
Appendix E: 12-Month Stock Chart: Nordstrom
Appendix F: Department Store Market Share
Appendix A:
STATEMENT OF CORPORATE RESPONSIBILITY
The May Department Stores Company has a long-standing commitment to responsible citizenship. That commitment applies to our role as an employer, as a buyer of goods and services from other businesses, and as a resident of the cities we serve through our department store business.
As the markets in which we operate become increasingly diverse, we want our business to reflect the cultural diversity of those communities. We believe that this makes business sense today and for the future.
We are working to build diversity and sensitivity to diversity into our basic fabric and culture. Our Diversity Development Committee, which includes several senior management executives, encourages and reviews our progress. The committee both leads and supports the store companies' and the corporate office's efforts to build diversity. Periodic reports to the Diversity Development Committee from the store companies and the corporate office track our progress in understanding and building diversity.
Affirmative Action and Equal Opportunity
One of the most important ways to build diversity into the company is to recruit and develop a diverse group of management associates. We maintain high standards of performance and excellence in all of our recruiting efforts, and we seek to attract an increasing number of minority candidates.
In addition to working through the traditional college placement offices, our representatives on campuses work with minority organizations to encourage candidates to consider a career with May. Increasing the diversity in the pool of available candidates enhances our ability to attract strong, effective management trainees.
To supplement these efforts, we participate nationwide with INROADS, a program that assists in preparing collegiate African-American, Asian, Hispanic, and Native Indian students for business careers. The program includes seminars on business skills such as résumé writing, interviewing, and business culture. In 1998, 42 INROADS students interned at our store companies across the country and at our corporate office.
We provide scholarships to minority students at campuses in the headquarters city of each of our store companies. In addition, we have supported college scholarships for African-American high school students since 1988 through the National Merit Scholarship Program. Our support of educational opportunities for minorities also includes contributions to the United Negro College Fund and to the National Hispanic Scholarship Fund (NHSF). Each year, we provide 25 NHSF scholarships to students in five states: Arizona, California, Colorado, Florida, and Texas.
We strive for a business environment that values all associates for
their individuality and talents, an environment that enhances the development
of all associates. Our policy is to provide equal opportunity for all associates,
without discrimination based on age, citizenship, color, disability, national
origin, marital status, race, religion, sex, sexual
orientation, veteran's status, or any other characteristic protected
by federal, state, or local laws. Our associates become eligible for promotions
on the basis of their job performance. We review the performance of all
of our associates annually, and many of our executives receive annual executive
development reviews. We fill more than 91% of our executive jobs with associates
who are promoted from within the company. Women account for over three-quarters
of our associates and for two-thirds of the senior merchandising executives
and department store managers. Minorities account for 34% of our associates
and for 16% of our officials and managers.
Our commitment and policy of nondiscrimination extend beyond our associates. We strive to ensure that our customers, vendors, and all others we come into contact with are treated fairly and with dignity.
We encourage recognition of the diversity of the communities in which we operate by the way we present ourselves and our stores. We include minority images among our store mannequins and in our print and broadcast advertising. We also use minority-owned and minority-targeted media.
Minority-owned and Women-owned Suppliers
We also recognize the importance of supporting businesses owned by minorities and women. To advance that effort, we established the Minority- and Woman-owned Business Opportunities Program to encourage those suppliers to do business with the company. In addition, we are a member of the National Minority Development Supplier Council and of local minority development supplier councils.
We established a line of credit with a syndicate of minority-owned and woman-owned banks across the country and have invested in each of those banks in the store companies' headquarters cities. In addition, a minority-owned investment manager invests a portion of the assets of The May Department Stores Company Foundation.
Sexual Harassment Policy
We prohibit sexual harassment in any form. Our policy is to respect the personal dignity of all associates. Unwelcome sexual behavior, either physical or verbal in nature, clearly interferes with and hinders performance and may be considered sexual harassment. Unwelcome sexual behavior violates our policy, and we do not tolerate it. No associate, either male or female, should be subjected to inappropriate or unwelcome sexual overtures or conduct, either verbal or physical. We will treat inappropriate or unwelcome sexual conduct as we treat any other form of associate misconduct. It is our policy to investigate each sexual harassment claim promptly and to remedy any violation of company policy.
Executives generally attend an annual training seminar on sexual harassment.
Each year we distribute a booklet companywide that describes our policy
and outlines what an associate should do if he or she has a complaint.
We forbid retaliation against anyone who has made a sexual harassment complaint
or who assists us in any investigation.
Americans with Disabilities Act Policy
We are committed to providing the levels of service that may be required
by our customers with disabilities. Every associate is expected to help
May provide consistent, courteous service, so that all of our customers
benefit from the highest level of attention, service, and respect. We also
seek to accommodate reasonably the known limitations of an otherwise qualified
associate with a disability if we can do so without undue hardship.
Vendor Responsibility Program
Our established program requires that all of our vendors (of brand-name
merchandise as well as private-label merchandise) meet certain standards
in the conduct of their businesses. All vendors must comply with applicable
labor laws, (including laws relating to child labor), and safety and health
laws. They must not use prison, convict, forced, or
indentured labor. We require all vendors to certify their compliance
with these policies each time they accept one of our purchase orders. We
inspect the production facilities of our private-label vendors before placing
an initial order and at least once a year after that. We will not purchase
products from factories that do not comply with our policies.
The May Department Stores Company Foundation
The May Department Stores Company Foundation's activities are a reflection of our commitment to the communities in which we operate.
We support a wide range of organizations that meet basic human needs for food, shelter, and health; that offer educational opportunities; that enhance local cultural life; and that strengthen our communities and make them attractive places to live and to work.
In fiscal 1998, the Foundation contributed $15 million to more than 2,000 nonprofit organizations, primarily in the communities where we operate.
United Way chapters received $4 million from the Foundation in 1998, and our associates across the country contributed another $5.5 million to the United Way. Our Matching Gift Program matches on a dollar-for-dollar basis associates' contributions to education, the arts, cultural institutions, and qualified hospitals. In 1998, the Matching Gift Program matched 3,587 gifts by 2,057 associates totaling $564,000.
In 1998, the Foundation continued to support people living with AIDS by contributing more than $120,000 to organizations that assist them in many cities where we operate. Since 1990, we have contributed more than $1.5 million to provide services for people living with AIDS.
In the arts, we have a long history of assisting cultural organizations in the markets we serve. Contributions in 1998 ranged from sponsorship of the Pittsburgh Civic Light Opera's young performers concert to support for the Colorado Springs Children's Museum to completion of a multiyear pledge to fund research programs at the Missouri Botanical Garden in St. Louis.
We also support other arts and civic organizations, such as the Metropolitan Museum of Art, the Avenue of the Arts in Philadelphia, the Oregon Symphony, the Boston Ballet, the Municipal Theatre of St. Louis, the California Arboretum Foundation, the Pittsburgh Opera, the Museum of Fine Arts in Houston, the John F. Kennedy Center for the Performing Arts, and the Indianapolis Zoo.
We recognize the value of preserving the economic health and viability of the cities where we operate. In 1998, we continued our participation in redevelopment and revitalization projects. For example, we provided support to the Cleveland Housing Network, the Denver Hispanic Chamber of Commerce, Neighborhood Housing Services of Phoenix, Hartford's Riverfront Recapture, St. Louis 2004, and the Urban League.
Older Adult Service and Information System (OASIS)
We continue to be a national sponsor of OASIS, whose over-age-55 members participate in educational, cultural, and wellness programs at centers located in our department stores.
Each of our store companies provides permanent meeting areas in its stores for OASIS. At year-end 1998, more than 340,000 seniors in 26 cities were OASIS members. In partnership with OASIS, we continued to sponsor the Intergenerational Tutoring Program, which now involves more than 6,400 students in 78 school districts. More than 4,400 OASIS members participate in this unique program that teams specially trained OASIS volunteers with elementary students for personal tutoring.
Our support for OASIS and its Intergenerational Tutoring Program totaled more than $1.2 million in 1998.
National Merit Scholarships
Through the National Merit Scholarship Program, we provide four-year college scholarships worth up to $10,000 each to high school students who are children of associates or who are associates themselves. Currently, 54 scholarships are awarded each year. In 1998, we awarded more than $380,000 to recipients of National Merit scholarships, including African-American high school students.
Summary EEO-1 Information
The chart below summarizes the information described on our EEO-1 forms
filed with the Equal Employment Opportunity Commission for the years 1993
and 1998. The numbers for 1993 are restated to exclude information for
Payless ShoeSource, Inc., which we spun off in May 1996. Full copies of
the EEO-1 forms are available upon request.
Contact Corporate Communications, The May Department Stores Company,
611 Olive Street, St. Louis, Mo. 63101-1799.
Source: http://www.mayco.com/may/about/investorSOR.html
Appendix B:
401K
401K plan employees can contribute between 2 % and 15 % of their compensation. Contributions can be made prior to federal and certain other income taxes, but must comply with section 401(k) of the internal revenue code.
The employer-matching rate is variable. The matching rate is determined as follows: In the event that May Company has earnings per share of its common stock for its most recent fiscal year resulting in a 6 % increase over the earnings per share for the year immediately preceding the current year, the matching rate will be 50 %. For each percentage point increase over 6 % or decrease below 6 %, there will be a 1.25 percentage point increase in or decrease from the 50 % matching rate. The matching rate formula may be adjusted at any time for unusual events including discontinued operations, accounting changes, or items of extraordinary gain or loss.
There are 4 investment funds in which an employee may place their contributions. The following is a brief explanation of each fund.
May Common Stock Fund- For investment in May common stock.
Money Market Fund- For investment in short-term obligations including banks, corporations, municipalities, the U.S. Treasury and other federal agencies.
Common Stock Index Fund- For investment in the common stock in corporations that make up Standard and Poor’s 500 stock Index.
Fixed Income Index Fund- For investment in corporate, U.S. government and federal agency securities that make the Lehman Brothers Intermediate Government/Corporate Bond Index.
Employees are eligible for the 401K plan after they have worked 1 year of at least 1000 hours and are 21 years of age. Employees are fully vested in the program after 7 years of service. The following is the vesting service schedule.
Less than 3 years
0%
3 years 20%
4 years 40%
5 years 60%
6 years 80%
7 years or more
100%
Source: www.sec.gov/Archives/edgar/data/63416/0000063416-94-000003.txt
Appendix C:
Employee Pension Plan
The following are the conditions of the employee pension plan.
Eligibility
Employees must work one year of at least 1000 hours and be 21 years of age. Once these conditions are met, membership is automatic.
Credited service before Jan 1, 1995- .7 % of average pay for 1989 through 1993 plus .6 % of average pay above 1995 average social security wage base; times credited service before Jan 1, 1995.
Credited service in 1995- .9 % of pay plus .6 % of pay above average social security wage base.
Credited service on and after Jan 1, 1996- .9 % of pay plus .6 % of pay above average social security wage base (for years after you are eligible for retirement).
Or
.7 % of pay plus .6 % of pay above average social security wage base (for years you are not eligible for retirement).
EARLY RETIREMENT FACTORS
Pension reduced by 7.2 % for each year (.6 % per month) between ages 60 and 65: reduced by 3.6 % for each year (.3 % per month) between ages 55 and 60.
Vesting schedule
Less than 5 years service- 0 %
5 years or more service- 100 %
Age 65- 100 %
Forms of payment are various annuities and lump sum.
Source: May Company Corporate Office
Appendix D:
12-MONTH STOCK CHART: MAY COMPANY
Source: http://quotes.nasdaq.com/quote.dll?chart=3&page=charting&mode=basics&symbol=MAY&selected=MAY
Appendix E:
12-Month Stock Chart: Nordstrom, Incorporated
Source: http://quotes.nasdaq.com/quote.dll?chart=3&page=charting&mode=basics&symbol=JWN&selected=JWN
Appendix F:
Department Store Market Share