Wednesday, May 25, 2011

Wal-Mart, A Case Analysis


Brief Introduction of Wal-Mart
Wal-Mart is one of the nation's leading discount retailers, and its success is built on the vision of its founder, Sam Walton. With a strategy of locating in relatively small areas, the company built a loyal following by offering many products in a single location, and by selling at prices which met, or were lower than, prices available in cities located hours away. Broadly, Wal-Mart retail store is categorized into four types, Discount Stores, Super centers, SAM’s club Neighborhood Markets. Wal-Mart consistently appeared on Fortune’s list of the 100 best companies to work for in the United States. During the year 2002 it was ranked 94 in the list of Fortune 500.

Wal-Mart is the world’s largest company in terms of sales. It is the US’s largest private employer-second only to the federal government-with around million workers.                                                                                                                                                                                                                                                                                                                              Recently it has become the largest grocer in the US. Wal-Mart has 3,400 stores in the US and 1,400 abroad. It plans to open 1,000 Supercenters (combination supermarket/discount stores) in the next five years. In 2002 it posted revenues of $246.5 billion, a 12.2% increase over 2001 and made a net profit of $8 billion, or about $7,300 per employee on an annual basis. The five members of the Walton family who own a substantial portion of Wal-Mart are all on the list of the 10 wealthiest Americans and are collectively worth $100 billion dollars.
Because of Wal-Mart’s size, its enormous profitability, and its aggressive growth, it cannot help but be a leader in defining corporate trends. For instance, Wal-Mart pioneered the use of the Universal Bar Code and insisted that its suppliers do the same, laying the groundwork for its proliferation across the entire US. Similarly, although Wal-Mart did not invent the discount store, it certainly has dictated and perfected the nature of the market.
Wal-Mart Stores, Inc. has five levels of operations. They are Corporate, Division, Region, District, and Stores. Corporate level is described as the total Wal-Mart including domestic and international. Division level is described as division one stores (like discount stores, supercentres, Neighborhood Markets) and SAM’s Club make up Wal-Mart’s two key domestic divisions. There were 41 regions in the United States in which each region contained five to six districts on average and each districts contained ten to fifteen stores. Its culture is based upon the ideology of the founder, Sam Walton with three basic philosophies:
§  Respect for the individual,
§  Service to the customers, and
§  Strives for excellence.
In addition to this, the culture of the Wal-Mart is based upon the two basic rules formulated by Walton. They are:
§  The sundown rule and
§  Ten-foot rule
Sundown rule is basically tells how Wal-Mart responses to the customer complain and request.  Generally, Wal-Mart responses to the request at the same day as they were received from the customers or from any other party. And the ten-foot rule suggests the employees to offer greetings to their customers who were within 10 feet distance.
Major Facts Presented by the Case
Wal-Mart work force
In 2001, there are 930,000 people employed in the Wal-Mart in its domestic U.S. stores. And this employment figure is 50 percent more than that of the same employment figure which was in the 1996. Generally speaking there are two types of workforce employed by the Wal-Mart. They are:
§  Salaried workforce
§  Hourly workforce
Management employees also called salaried workforce earned exceptionally high salary than that of hourly workforce. In 2001, management employees earned about $50,000 on average while hourly employees earned $18,000.
Though the number of workforce increased dramatically from 1996 to 2001, the percentage of female workers decreased surprisingly over the same period of time. To be more specific, there were 67 percentage of women work force in Wal-Mart in 1996 but this figure went down by 3 percent. But Wal-Mart beliefs that the percentage employed in the Wal-Mart should reflect the community. It means, at least 50 percent of the total workforce in the Wal-Mart has to the women.
Human resource reporting relationship for domestic division
All Wal-Mart has similar human resources practices and policies across its Division one and SAM’s Club. All human resources functions are organized hierarchically. Following are the basic facts about Wal-Mart overall organizations:
§  In division one, there are over 2,600 stores which were organized into five or six divisional areas.
§  Each area consists of 5 or 6 regions.
§  Each region consists of 80 to 85 stores.
Reward and promotion
Wal-Mart increase the pay of its employee on the basis of performance evaluation ratings and it is guided by the home office. But the maximum increased in the pay is four to five percent and this increase but in pay is distributed to concerned employees no sooner than the 90 days. Wal-Mart often provides the training and development to its employees but if promotion is given to the particular employees then there was an implicit expectation that they would be moved to other stores districts or regions, as per the need of the business. But recently Wal-Mart changed the way of doing the business by gradually reducing such transfer and hiring locals for it different positions available.
While talking about the Job hierarchy at Wal-Mart, there is three broad category or hierarchy in the Wal-Mart. They are:
§  Above store management
§  In store management
§  Hourly
Above store management there is the top level management in Wal-Mart. In this level, Sr. Vice President is in top most level, District Manager in the bottom and Regional Vice President is in between them. In store management is just below the top level management. There is manager, Co-manager and Assistant Manager within the in store management.
Below the store management, there is Management Trainee and just below the Management Trainee there is Hourly work force. In hourly work force there is cashier, associate, support manager department manager, or team leader etc.  Problems
The main problem in the case is pay and gender discrimination. There is huge income disparity between management employee and hourly employees.  Hourly workforce is paid extremely low than that of the management employees. In 2001, management employees earned about $50,000 on average while hourly employees earned just $18,000. And gender discrimination within the Wal-Mart is also one of the major problems. Not only this, but also promotion related transfer is also one of the causes of the problem in the Wal-Mart. It is mentioned in the case that when employees were promoted to the higher-level jobs, there was an implicit expectation that they would be moved to other stores, districts or regions, as much as business need required.
In my opinion, the pay differences exist because almost all workforces of entry level hires are hourly workers. They are not salaried workers. Management pays them on an hourly basis. All cashier, customer service manager, department manager, associate, team leader are hourly workers and they all receives the pay on an hourly basis. Another reason for this, though not mention directly in the case is that Wal-Mart always try to minimize the  cost to sell goods in the cheaper price. Its like the mission of the Wal-Mart to reduce the cost and mention it cost leadership in the industry which in turn, is also responsible for the huge discrimination in the pay among its workforce.
Though the case provides pages of information about Wal-Mart but I don’t think these is enough to give the right solution to the problem. In my view, there should be some other information about the employee’s feedback and reactions towards the management.  How the women currently working in the Wal-Mart thinks about the pay systems of the Wal-Mart. Do they feel that they are underpaid by the Wal-Mart? What about the employee turnover in the Wal-Mart? What is women employee turnover ratio in the Wal-Mart? All these information is significant to make the right decision and solutions.
Although there is not enough information provided by the case, I think the solution to the problem is to provide equal pay to the every worker in terms of their contribution to the organization. It does not mean that Wal-Mart has to pay equal salary to the cashier and a manager but pay should be equitable. In addition to this, Wal-Mart has to ensure the job security and remove the burden of transfer associated with the promotions.
Following are the possible alternative solutions to the problems:
§  Ignore the problem and maintain the status quo
§  Manage equitable pay system to all as per their contribution and responsibility in the organization
§  Conduct the research among the employees to identify employees perspectives the level of employee’s satisfaction to take the corrective measure.
Emphasize the local hiring, prioritized the local women and equitable pay to all
Among these three solutions, first one never solves the problem though it still alternative to Wal-Mart. Probably Wal-Mart is applying these alternatives without anything to solve the problem of inequitable pay system. A second alternative somehow solves the problem but it does not create the win-win situation between the organization and employees. The third alternative is the best alternative among three because it results the win-win situations for employees as well as organization. In addition to the, Emphasize the local hiring, prioritized the local women and manage equitable pay to all employees whether he/she is hourly worker or the salaried worker. The reason behind conducting the research and understanding the employee’s real opinion and problems is to find the real cause of the problem to address them properly.
The general idea drown from the case is that human resource is the biggest wealth and resources of the any corporation. To be successful, one thing that every organization has to do is satisfy their employees to motivate them to do their best.


                                                                    march 25, 2004

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