Retailing -- Nordstrom Gang Of 4 -- Retailer's Corporate Culture Calls For Team Decision-Making At Top

When the four new Nordstrom co-presidents tell the story of how they were offered their new jobs, the tale - now only 2 months old - already has the ring of family lore.

It happened on May 17, the Friday before the company's annual meeting. Though two of the future presidents had been summoned from out of state, they didn't know why.

"We got in cars and Darrel (Hume) and I rode with Mr. John to Mr. Bruce's condominium," said John Whitacre, who had been flown in from his job overseeing the Washington, D.C., stores. "Galen (Jefferson) and Ray (Johnson) had already arrived somehow, and we were all standing outside waiting for the elevator." Says Johnson: "We knew we were either in for something very good or very bad."

Brothers John and Jim and their cousin Bruce, all co-chairmen, and President Jack McMillan, related to the Nordstrom family by marriage, ushered the quartet of vice presidents into the condominium.

"When we sat down, Mr. John said, `Years ago, our fathers called us together for meetings and sat us down like this,' " recalls Hume. It was then the four were offered the newly created positions of co-presidents; McMillan was moving up to a co-chairman's position.

In the history of Nordstrom Inc., inarguably one of the success stories of modern American retailing, the moment was a milestone.

It marked the first time the family-run company had elevated so many non-family members so high up the corporate ladder, creating the possibility that the chairman's office might one day, for the first time, be filled with non-Nordstroms. Though the current Nordstrom co-chairmen won't say when, they admit they're looking toward retirement.

The move to create a new office of the president also underscored the retailer's unorthodox management style in which top officers practice team decision-making.

While filling the president's position with four executives, and creating a fourth co-chairman's slot for McMillan, the Nordstroms also named Robert Bender, a longtime Nordstrom family friend and a director of the company for more than 20 years, a vice chairman. That makes nine executives filling the two top offices, an unusual move considering that most large, successful companies are headed by one or two powerful executives who may seek advice from subordinates but ultimately cast the final vote themselves.

Along with specific areas of responsibility - Whitacre, for instance, oversees the shoe divisions and Jefferson is responsible for women's wear - the new presidents will take over day-to-day duties from the chairmen who used to oversee those merchandising areas.

"The five of us will not be involved in day-to-day things," said McMillan. "We'll be looking at real estate, financing, the big picture stuff."

Moreover, the new structure will test whether Nordstrom's consensus-style decision-making can be passed along as part of the corporate culture, or whether consensus works best when those involved are related by blood or marriage.

"At this point, I'd be willing to give (the new organizational structure) the benefit of the doubt," said Jeff Atkin, partner with Kunath Karren Rinne & Atkin, a Seattle investment firm. "The new presidents are a product of the culture; they've had successful careers."

The risk, Atkin added, "is that they're not family members. Since their names are not on the door, they don't have the same pressure to make it work . . . Obviously, they don't own nearly as much stock as family members do." Nordstrom family members control nearly 40 percent of the stock.

Though two fourth-generation Nordstroms were promoted to vice presidents during the round of May promotions, the pair - aged 29 and 30 - are still two rungs below the president's office. Speculation is that the chairmen's office may be occupied by non-family members for a time while the younger generation gains experience.

"In family companies, just because of the difference in age of the generations, there will often be non-family members sandwiched between the older ones and the ones coming along," said Harry Prior of Portland-based Prior/Martech Associates management consultants. "And it's not such a bad idea because the younger ones need to get training."

The Nordstrom chairmen say they are pleased that so many of their children have chosen to join the company. Seven sons and one son-in-law are working their way up the ladder.

"I think it is a good thing for a company to have owners in top management," said Jim Nordstrom. "We look around the country, especially in our industry, and the companies that are doing a little better are the ones like Wal-Mart and The Limited that are still run by owners."

The two new vice presidents who are Nordstroms say they are serious about their careers in the family business. James Nordstrom, 29, John's son, is regional manager of Northern California. Blake Nordstrom, 30, Bruce's son, is regional manager of Washington and Alaska.

The young men say that, despite their last names, they have had to work their way up the chain like everybody else. Blake says he started sweeping floors in Nordstrom stores when he was 10 and sold women's shoes while a student at the University of Washington. He went on to manage shoe departments in Bellevue and Seattle before moving to San Diego to be a regional shoe buyer. He also managed Nordstrom stores in Northern California and in downtown Seattle.

"Believe me, there's been no slack cut for those of us in my generation," he said.

Jim Nordstrom says the decision to fill the president's office with several equals was natural given that the company has always practiced management by committee. His father, Elmer, and his uncles, Everett and Lloyd, were co-chairmen until the late '60s, when they turned the reigns over to their sons.

"Really, we want the people doing the work on the sales floor and on the truck-loading docks to set the tone of the company," he said. "And if you have a group of people at the top, instead of one big shot, hopefully it takes away the impact of that one top office."

He said the decision to pick four presidents was made partly to mirror the job responsibilities that he and the three other Nordstrom family members have, for years, divvied between them.

But things were simpler then. In 1971, when the company went public, it had seven apparel stores and six shoe stores in Washington and Oregon and annual sales of $67 million. Today, the company has 64 stores in eight states, including a store in suburban Chicago opened in April. Sales last year were $2.8 billion; profits were $115 million. Analysts expect sales this year of about $3.25 billion.

"Doing business has gotten so much more complex," said McMillan. "There are so many things we didn't use to have to do. PR is a big one, the last year has shown us that," he said referring to the company's much-publicized battle with its labor union and a state investigation into charges that it forced some employees to work on their own time without pay. "Tomorrow, it might be some kind of environmental issue to deal with."

Perhaps the most difficult job for the chairmen will be to truly give the new co-presidents the autonomy to make critical decisions, right or wrong. Though the company is known for giving lots of authority to employees at all levels, the policy has sometimes backfired, as in recent years when inexperienced young buyers over-ordered and the company ended up slashing prices on heavy inventories.

"Our management style is not directive at all, it's supportive," said Jim Nordstrom. "It sounds simple but it's hard to do . . . Supportive management requires a lot of patience. You have to bite your tongue and allow a lot of people to make a lot of mistakes. (The new co-presidents) are going to make plenty of mistakes. But we have to be patient."

Management experts note that the consensus-style management Nordstrom practices - and the decentralization of decision-making that is part of it - is rare in corporate circles. It is even rarer in retailing, a troubled industry that is increasingly being run by large companies that centralize virtually everything from buying to credit operations.

"To make it work, you have to have compatible personalities and you also have to be willing to engage in free discussion," said Bud Saxberg, chairman of the management and organization department at the University of Washington Graduate School of Business. "(Top executives) have to be able to let their hair down, but also be able to respectfully disagree. I think that's what Nordstrom has been able to do."

Saxberg said, "A free give-and-take can generate more creativity and discussion than when there's just one executive who slowly bureaucratizes himself." But he also warned that appointing several equals in a job can stir up unhealthy competition if they all see themselves jockeying for a single position on the next rung of the corporate ladder.

The Nordstrom co-chairmen say that making decisions by consensus has always worked well for them. "Really, on 99 percent of our decisions, we all agree exactly," said Jim Nordstrom. Debates are quickly solved, he added.

The Nordstroms aren't saying specifically just who will eventually take over their chairmen's offices or when.

"We're getting older," said Jim Nordstrom who, at 51, is the youngest chairman. McMillan, at 59, is oldest. "We don't want to spend as much time putting out fires. We want to spend more time with customers. . . . I plan to get more into the stores. . . .

"We also think that in this business, it's good to get out (of the day-to-day business) when you're 60," he said.

As far as planning for the next generation of chairmen, he said, "we haven't thought that far. We're very anxious to see this (the new co-presidents' office) work first . . ." ------------------------------

WHO RUNS NORDSTROM: Nordstrom's management philosophy calls for team decision-making, resulting in a structure that includes four co-chairmen and for co-presidents. With the exception of the top officers, Nordstrom family members are several rungs down on the retailer's organizational chart. Top executives are each responsible for certain areas of merchandising and operations, though day-to-day responsibilities are handled by executives below them.

CO-CHAIMEN: Bruce A. Nordstrom. James F. Nordstrom. John N. Nordstrom. John A. McMillan.

VICE CHAIRMAN: Robert E. Bender.

OFFICE OF THE PRESIDENT: Darrel J. Hume: Men's apparel, financial, sales promotion and advertising, public relations, store planning.

Galen Jefferson: Women's apparel, Place Two division, merchandising support.

Raymond A. Johnson: Accessories, lingerie, cosmetics, children's, personnel, Rack stores, legal matters.

John J. Whitacre: Shoes, restaurants, operations.

EXECUTIVE VICE PRESIDENTS: Jammie Baugh -- Regional manager Southern California. John A. Goesling -- Chief financial officer. Jack Irving -- Men's apparel. Robert T. Nunn -- Women's shoes. Cynthia C. Paur -- Promotions and advertising.

VICE PRESIDENTS: R. Gary Baughn -- Operations. Gail Cottle -- Brass Plum. Dale Crichton -- Cosmetics. Joseph V. Demarte -- Personnel. Paul S. Hunter -- Rack stores. Barbara Kanaya -- Accessories. Cody Kondo -- Regional manager of the Northeast. David Lindsey -- Store Planning. David L. Mackie -- Legal and real estate. Blake W. Nordstrom -- Regional manager of Washington and Alaska. James A. Nordstrom -- Regional manager of Nothern California. Suzanne Patneaude -- Gallery, Savvy and Collection departments. Victoria L. Philipek -- Town Square department. Karen E. Purpur -- Corporate secretary. Marti Wikstrom -- Regional manager of the Washington, D.C. area.

Source: Nordstrom, Inc.