Wal Mart Future HR Recommendations
The majority of Americans have a love-hate relationship with Wal-Mart Stores Inc that at times is difficult to comprehend. The creation of Sam Walton ("Wal-Mart", 2006) has morphed into today’s leader of discount retailing. The organization has faced, and is still facing, a significant amount of controversy over a number of different issues. However, none of these have done much more than lightly graze the exterior of this gigantic operation of 1.2 million associates in the US alone. This report will focus on Wal-Mart’s staffing practices, namely alleged cases of sexual discrimination. Analyses of the environment, company, competition, as well as related key issues in the company’s human resources management will also be given. It will conclude by offering recommendations on future action that should be undertaken by management in order to produce sustainable competitive advantage via its human resources.
Wal-Mart’s overall strategy is one of cost leadership, evident in its slogan of “Always Low Prices”. It seems that Wal-Mart is intent on providing low prices holistically, including the salaries of its employees. According to PBS, “Wal-Mart employs more people than any other company in the United States outside of the Federal government, yet the majority of its employees with children live below the poverty line ("Wal-Mart Wages and Worker Rights", n.d.).
Analysts regard Wal-Mart as a force to be reckoned with; many hypothesizing that life for other retailers looks grim as the empire continues to expand and dominate the retail industry. Wal-Mart’s (Brent, 2005) strategic plan includes:
Expansion of its SuperCenter format from 1,700 to more than 3,100 stores
Moving into non-retail businesses including financial services, telecommunications, publishing and travel
Retail experiments such as convenience stores, freestanding drug stores, healthcare superstores, freestanding apparel units and small footprint general merchandise stores.
Its key competitors are Target and Costco, who are both discount variety stores (Anon., n.d.-b).; also deploying a cost leadership strategy but differentiating themselves via the experience customers receive in the respective stores. Target is affiliated with many well-known brands such as Stella McCartney and Proenza Schouler, offering consumers a ‘cheap but chic’ image whereas Costco charges customers an annual membership fee. Its affiliation with American Express gives them the ability to offer customers a percentage of their money back when dining and traveling ("Costco The True Earnings Consumer Card", 2007).
An unavoidable external force which affects the business practices of Wal-Mart and organizations in the same industry are legislation requirements. Wal-Mart must abide by many federal Equal Employment Opportunity laws and regulations (Mathis & Jackson, 2006) such as the Equal Pay Act, Immigration Reform and Control Act, and the Civil Rights Act of 1991 to name just a few. This paper will determine Wal-Mart’s adherence to these laws.
Competition against Wal-Mart comprises of similar discount retail stores as well as grocery supermarkets. Its key competitors are Target, Costco and to a lesser extent companies such as Sears and Kohl’s (Robbins, 2004).
The three largest discount chains, Kmart, Target, and Wal-Mart, have adopted the supercenter format for expansion (Graff, 2006). Wal-Mart has the greatest number of supercenters and is the driving force behind the supercenter format. Both Kmart and Target have clustered their supercenters in a small number of metropolitan markets. In contrast to Wal-Mart and Kmart, Target has focused on a middle-class rather than a blue-collar clientele; Kmart is struggling following a declaration of bankruptcy. Wal-Mart has largely defeated its supercenter competitors and is now competing against the major grocery chains. The creation of the supercenter has created a whole host of new competitors for the company. Major grocery chain competitors are Vons, Ralph’s, Stater Bros, Albertson’s and Food 4 Less.
Wal-Mart needs to examine and modify its HR practices in order to maintain dominance in the industry. Rewarding employees, recognizing achievements, encouraging input, offering incentive programs, treating employees with respect, and giving employees some decision-making power will create a loyal, dedicated and productive workforce, resulting in superior customer service that is second to none. A table showing comparisons of the number of female managers in competitors and Wal-Mart’s stores is included in the Appendix. Wal-Mart is positioned well behind its competitors in terms of equal numbers of male and females in more senior positions.
Wal-Mart has many assets at its disposal, reporting a net income of $8.03 billion in the 2003 (Anon., 2003c) financial year. In terms of profitability Wal-Mart performed behind retailers Home Depot, Dell and Target, and ahead of Costco and Kroger (Anon., 2003b). It has thousands of stores not only in the US, but also wholly owned operations in Mexico, Argentina, Canada, Puerto Rico, Brazil, China, United Kingdom, Japan, Germany, South Korea, Costa Rica, El Salvador, Guatemala, Honduras and Montenegro (Anon., 2003a). The company approximately 1.8 million employees (Jerry, 2003), whom should be from a variety of different cultures and backgrounds, and has strong links with charities, organizations and schools; spending more than $106.9 million in 2003 (Featherstone, 2005).
The intangible resources Wal-Mart has are just as strong as the obvious ones outlined above. These are its reputation for everyday low prices, the large customer base, corporate culture and its massive buying power which it holds over its suppliers. It is the largest customer of many of America’s largest and most well known companies such as Revlon, Gillette and Proctor & Gamble (Jerry, 2003).
A SWOT analysis outlining internal strengths and weaknesses and external threats and opportunities is included in the Appendix. From the SWOT analysis, it appears Wal-Mart is in a position to take advantage of the opportunities identified because of the resources it has at its disposal. Being not only such a key supplier, but consumer, in the US retail market brings with it great bargaining power and the co-operation of many entities that are dependent on it to make profits.
Human Resource Issues
Wal-Mart proudly states on its website that its culture is guided by the 3 Basic Beliefs, Sam’s Rules, and the Sundown and 10-Foot rules. The company has consistently appeared on Fortune’s 100 Best Companies to work for in the United States. However, it has appeared just as consistently in the tabloids for questionable human resource practices such as the alleged discrimination against women.
Unlike its competitors in the retail industry Wal-Mart has remained non-unionized. Its alternative is an open door policy (Anon., n.d.-a) which aims to encourage employees to take their complaints beyond management. The policy is rumored to do little to help employees, giving the business leverage to terminate unwanted non compliant help. Wal-Mart employees commence at lower wages than unionized corporations, quitting by the end of the first year. Reports ("Wal-Mart Wages and Worker Rights", n.d.) surfaced that Wal-Mart prohibited employees from talking to union representatives. This is unethical behavior as the National Labor Relations Act states that employers should not discourage employees from forming a union.
The average Wal-Mart associate makes between a paltry $12,000 and 17,000 annually ("Wal-Mart Wages and Worker Rights", n.d.). Various articles and literature ("Wal-Mart Wages and Worker Rights", n.d.) suggest that the company cares more about keeping its prices low than to increase employees’ wages and thus, in turn, their standard of living.
Discrimination against Women
Wal-Mart has been accused of discriminating against women by its actions of denying training and promotion opportunities that are generally offered to men. Men are also paid more than women. In June 2001 a group of six current and former female Wal-Mart employees filed a sex discrimination lawsuit (seeking to represent up to 500,000 current and former Wal-Mart workers) against the company (Anon., 2003d). The suit was filed because Wal-Mart failed to provide equal employment opportunities for women.
Women comprise 72% of the workforce but only small percentages are in supervisory or managerial positions. By applying an external metric for disparate impact, namely the 4/5th rule (Mathis & Jackson, 2006), a first glance at the calculations appears Wal-Mart has not sexually discriminated against women. Should the 4/5th rule be applied to senior management positions, the outcome is disturbingly different as disparate impact is evident.
In addition, “Wal-Mart is the nation's largest employer of women, but unfortunately they are being treated without dignity and respect." (Cookson, 2001). The data also shows that women are rated higher in performance evaluations across all positions except cashier.
Summarizing the research of Richard Drogin (Anon., 2003d) are that:
Women are disproportionately employed in lower paying hourly jobs
Total earnings paid to men is about $5,000 more than paid to women
Women are on lower hourly rates but have been employed longer than men
Women scored higher in performance ratings
Over 95% of Store Managers and Co-Managers change stores at least once upon entering the position
80% of Support Manager promotions did not appear in job posting data
Wal-Mart's (Anon., 2003d) treatment of its female employees is characterized by a sexually demeaning atmosphere, where female employees are told that "women do not make good managers", that "a trained monkey" could do their jobs, and that women with kids couldn't be managers.
Wal-Mart has the well-being of over 1.2 million US workers (Anon., 2003b) and their families in its hands. It should ensure the 4/5th rule is applied to not only women, but protected class citizens as well. The ‘glass ceiling’ can be demolished by establishing formal mentoring programs, providing opportunities for career rotation into other areas, increasing memberships of top management and boards of directors to women and individuals of color, allowing flexible working arrangements and by establishing clear goals of retention and progression (Mathis & Jackson, 2006).
Factors contributing to the discrimination and disparate impact are centralized workplace policies, unsupervised local managerial discretion and gender bias. Local store managers have been given free reign in handling HR issues such as hourly workers’ promotions and raises; these managers were not equipped with the necessary knowledge and skills to act equitably and efficiently. Noted previously in conclusions drawn by Richard Drogin, women in hourly positions earned $5,000 less per year than their male counterparts, salaried positions earning an average of $14,500 less. This disparity cannot be explained by factors not relating to discrimination.
Wal-Mart must improve its HR practices in the areas outlined above. By making more of an effort to take better care of its employees, the company could stand to save millions in legal fees, and costs associated with recruitment and training. Admittedly, the barrage of bad press about Wal-Mart’s practices (Rathke, 2005) have not driven consumers away, it seems no one has found a way to beat “low prices”. This is not a substantial reason to continue current behavior. This paper applauds the initiatives Wal-Mart has introduced to revolutionize its image and reputation and encourages even more radical programs and changes.
Workshops, Training & Seminars
This paper recommends that the CEO address managers and the HR department, emphasizing that Wal-Mart is serious about its strategic initiatives to promote and hire more women to managerial and supervisory positions. From the data and research collected, it appears that the key people in charge of promoting and hiring of staff are male. In order to change their perspectives and beliefs regarding women in the workforce, we believe it is imperative that these people realize the benefits, experience and knowledge that women can bring to the organization. We realize it will be a gradual and at times seemingly slow process, but many psychology studies (Bentham, Veltman, & Vebrugge, 2004) confirm that a change of beliefs is possible via avenues such as sensitivity training and workshops.
Diversity Task Force
The creation of a Women’s Group which actively promotes, supports and brings attention to women’s rights in the company will help increase equality. Other organizations have implemented diversity task forces to great success, such as Napa Valley College, Kodak, Wells Fargo and AT&T (Cole, 2007) – who report that turnover has decreased whilst staff morale and job satisfaction has increased. The CEO of the Diversity Advisory Board (DAB) Eric Beresford states that “If a company is willing to say diversity is a business imperative, then a diversity advisory board [or diversity council] is a terrific way to make that a reality ... But if diversity is three layers deep in an organization, the diversity council may get frustrated. But if diversity is a business imperative, then a diversity council can provide tremendous value."
Clearly posted job openings/promotion opportunities and abolish implied ‘relocation’ for Management positions
Wal-Mart should ensure advertisements for any managerial or supervisory positions are easily viewable by all staff, and that there are no conditions attached to the job, ie. Relocation, non-flexible hours, which may result in women being hesitant to apply.
The diversity initiatives have managed to salvage what was left of its reputation and continues to slowly change the community’s perception of the company for the better. Wal-Mart must also be extremely diligent when navigating international markets due to cultural differences in human resource practices. Potentially damaging misunderstandings may occur which will be reported and hyped up by the media, resulting in a loss of faith, trust and revenue.
The ever-changing market presents ongoing challenges to retailers. First and foremost, retailers must recognize the strong implications of a 'buyers' market' (Lewison, 1994). Customers are being offered a wide choice of shopping experiences, but no one operation can capture them all. Technology, demographics, consumer attitudes, and the advent of a global economy are all conspiring to rewrite the rules for success. Success in the next decade will depend upon the level of understanding retailers have about current values, expectations, and needs of both the internal and external customer.
In November 2003 Wal-Mart took a step in the right direction by the introduction of workplace diversity initiatives (Anon., n.d.-a) to prevent further gender bias. Their tactics seem to be effective, judging from the sudden influx of positive articles. Amongst those posted on Walmartfacts.com are the headlines Wal-Mart Stores, Inc. Recognized As Top Company For Executive Women By The National Association For Female Executives and Wal-Mart Receives American Bar Association Award for Outstanding Achievements in Promoting Diversity.
If the company continues to improve its image and increase the diversity of its workforce, there is a very real chance that Wal-Mart could appeal to nearly every consumer in its target market.
Anon. (2003a). Setting a Global Standard [Electronic Version]. Retrieved April 12, 2007 from http://www.walmartstores.com/Files/annual_2003/ar2003_pg10.htm.
Anon. (2003b). Wal-Mart [Electronic Version]. Retrieved April 11, 2007 from http://en.wikipedia.org/wiki/Wal-Mart.
Anon. (2003c). Wal-Mart 2003 Annual Report [Electronic Version]. Retrieved April 12, 2007 from http://jobfunctions.bnet.com/whitepaper.aspx?docid=61998.
Anon. (2003d). Wal-Mart Stores, Inc., the Nation's Largest Private Employer, Sued for Company-Wide Sex Discrimination [Electronic Version]. Retrieved April 11, 2007 from http://www.cmht.com/cases_cwwalmart1.php.
Anon. (n.d.-a). Employment and Diversity [Electronic Version]. Retrieved April 11, 2007 from http://www.walmartfacts.com/featuredtopics/?id=3.
Anon. (n.d.-b). Wal-Mart Stores Inc. [Electronic Version]. Retrieved April 11, 2007 from http://finance.yahoo.com/q/co?s=WMT.
Bentham, J., Veltman, F., & Vebrugge, R. (2004). Changing Minds: Cognitive, computational and logical approaches to belief change. Paper presented at the Conference Name|. Retrieved Access Date|. from URL|.
Brent, F. (2005). Wal-Mart Continues to Roll. Home Textiles Today, 26(37), 1.
Cole, Y. (2007). Diversity Councils: Task Forces for Change [Electronic Version]. Retrieved April 20, 2007 from http://www.diversityinc.com/public/99.cfm.
Cookson, B. (2001, November 9, 2001). Wal-Mart's labor practices spur NLRB to schedule a court date. Business Journal.
Costco The True Earnings Consumer Card [Electronic (2007). Version]. Retrieved April 12, 2007 from http://www.costco.com/Browse/Productgroup.aspx?Prodid=11172036&whse=&topnav=&browse=.
Featherstone, L. (2005). Wal-Mart Charity Evaluated [Electronic Version]. Retrieved April 12, 2007 from http://www.reclaimdemocracy.org/walmart/2005-06/charity.php.
Graff, T. O. (2006). Unequal Competition Among Chains of Supercenters: Kmart, Target, and Wal-Mart. Professional Geographer, 58(1), 54-64.
Jerry, U. (2003). One nation under Wal-Mart. Fortune, 147(4), 65.
Mathis, R., & Jackson, J. (2006). Human Resource Management (11 ed.). Ohio: Thomson South-Western.
Rathke, W. (2005). Organizing Wal-Mart. Social Policy, 36(1), 4-5.
Robbins, C. (2004). Risk-Free Retailers. Chain Store Age, 80(5), 82.
Wal-Mart [Electronic (2006). Version]. Retrieved April 11, 2007 from http://en.wikipedia.org/wiki/Wal-Mart.
Wal-Mart Wages and Worker Rights [Electronic (n.d.). Version]. Retrieved April 11, 2007 from http://www.wakeupwalmart.com/facts/.
Article name: Wal Mart Future HR Recommendations essay, research paper, dissertation