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Writer's picturePrince Sharma

How Did Lands' End Revise Its Reward System to Boost Employee Engagement and Performance?

In today's competitive business environment, companies must continuously evolve their reward systems to attract, retain, and motivate top talent. This case study explores how Lands' End, an international catalog retailer, proactively revised its reward system over a four-year period to enhance employee satisfaction, performance, and organizational effectiveness.

The Context of Lands' End

Lands' End Direct Merchants employs a seasonal workforce ranging from 5,500 to 8,500 full- and part-time staff. Known for its participative culture and strong employment practices, Lands' End has consistently been recognized as one of the best companies to work for. The company's philosophy of "doing the right thing" has underpinned its efforts to create a rewarding work environment​​.

Emergence of Performance Challenges

To stay ahead in the competitive retail market, Lands' End identified several areas for improvement in its reward system:

  1. Perceived Inequities:

  2. The existing reward system led to perceived inequities among employees, resulting in dissatisfaction and complaints.

  3. Traditional Compensation Model:

  4. The previous system rewarded a job population rather than individual performance, which did not adequately recognize high performers​​.

The Role of Reward System Overhaul

To address these challenges, Lands' End implemented a comprehensive reward strategy based on several key principles:

  1. Clear Communication:

  2. The company maintained direct and clear communication channels regarding employment practices, encouraging the free exchange of information, ideas, and suggestions.

  3. Employee Involvement:

  4. An employee job-evaluation committee, composed of a variety of employees, annually reviewed and analyzed pay rates in different organizations and industries. This participative approach ensured that wage levels were perceived as fair and equitable​​.

  5. Shift from Job-Based to Person-Based Rewards:

  6. Lands' End transitioned from rewarding a job population to rewarding individual performance. Each job was assigned an annual-incentive-plan target expressed as a percentage of base salary. Payouts were based on both corporate and business-unit performance, linking individual effort to organizational results​​.

  7. Gain-Sharing Plans:

  8. The company piloted a gain-sharing-style bonus plan designed by a departmental task force. This plan was progressively deployed across operations, linking employees' efforts and knowledge to business-unit results in both cost and quality terms​​.

Implementation and Support

Lands' End implemented several additional strategies to support the new reward system:

  • Performance Standards:

  • An individual's ratings were based on achieving jointly set personal goals tied to four performance standards: service, quality, quantity, and reliability. These standards were reviewed during performance evaluations with immediate supervisors throughout the year​​.

  • Work-Life Benefits:

  • The company repackaged work-life benefits to suit individual preferences, including health care plans, child-care leave, on-site daycare, health promotion facilities, and flexible working hours. These benefits aimed to enhance overall employee well-being and satisfaction​​.

Outcomes and Reflections

The revised reward system at Lands' End led to several positive outcomes:

  • Improved Equity and Fairness:

  • The participative approach and regular reviews ensured that wage levels were fair and reflective of industry standards.

  • Enhanced Employee Engagement:

  • By linking rewards to individual performance and providing comprehensive benefits, employee satisfaction and engagement significantly increased.

  • Operational Efficiency:

  • The gain-sharing plans and clear performance standards led to improved operational efficiency and better alignment with organizational goals​​.

Implications for Organizational Development

The Lands' End case highlights the importance of evolving reward systems to meet changing business needs and employee expectations. Key takeaways include the value of clear communication, employee involvement in decision-making, and aligning rewards with both individual and organizational performance. Organizations looking to enhance their reward systems can learn from Lands' End's approach by fostering a culture of participation and continuous improvement.

Conclusion

The comprehensive overhaul of Lands' End's reward system demonstrates the transformative potential of strategic compensation and benefits management. By implementing thoughtful and inclusive reward strategies, organizations can achieve substantial improvements in employee engagement, performance, and overall organizational effectiveness.

Connect with OrgEvo Consulting

At OrgEvo Consulting, we specialize in helping organizations implement effective reward systems and other organizational development interventions. Our services include strategic planning, performance management system design, and employee engagement programs designed to enhance operational efficiency and satisfaction. Contact us today to learn how we can support your organization in achieving excellence.

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