Organizational Effectiveness at Walmart

In the intensely competitive and highly dynamic business era of today, few organizations survive and manage to garner sustained public support. Organizational Excellence (OE) is the framework that spells out measurable amount of high quality in the organizational processes and systems. OE is an effective strategy for survival in the market amidst competition. In 2004, Wal-Mart was the largest retail chain in the world. Founded by Sam Walton (Walton) in 1962, Wal-Mart had grown into a global company with more than 1.3 million associates worldwide and nearly 5,000 stores and wholesale clubs across 10 countries.

The "most admired retailer" according to Fortune magazine had just completed one of the best years in its history. In 2004, Wal-Mart generated revenues of $256.3 billion and a net income of $9 billion. The retail chain had a distinctive culture shaped by Walton and subsequently by his successors. In 2003, Wal-Mart, the largest retail chain in the world was also the world's largest company with a turnover of $245 billion. Each year, roughly 80% of American households made at least one purchase at Wal-Mart.

Starting off in a small way, under the leadership of the legendary Sam Walton (Walton), Wal-Mart had emerged as a global player with operations in North America, Asia, Europe and South America. Wal-Mart symbolized operational excellence and cost leadership. Some economists even argued that the 'Wal-Mart effect' had reduced inflation and improved productivity in the US economy year after year. After Walton's death, a new leadership under David Glass (Glass) had taken charge. In October 1995, Glass had made way for Lee Scott. By all accounts, the succession planning at the top level had taken place smoothly.

CORE VALUES AND CORPORATE AFFAIRS: The core of Wal-Mart's strategy is equally about creating lean, cost-effective, and efficient operations as it is about helping the environment. The core of Wal-Mart culture consisted of three basic beliefs: •Respect for the individual

•Service to the customers and •Striving for excellence. Research shows that the major reflections of operational excellence in organizational entrepreneurship revolve around the care of customers, constant innovation, committed people and managerial leadership. Wal-Mart's business model is based on selling a wide variety of general merchandise and marketing, at "always low prices."[19] The company refers to its employees as "associates."

All Wal-Mart stores in the US and Canada also have designated "greeters", whose general role is to welcome shoppers at the store entrance, and play a role in loss prevention Unlike many other retailers, Wal-Mart does not charge a slotting fee to suppliers for their products to appear in the store. Alternatively, they focus on selling more popular products and often pressure store managers to drop unpopular products in favor of more popular ones, as well as manufacturers to supply more popular products. More than 70% of the goods sold in Wal-Mart are manufactured in China

Three critical elements in Wal-Mart's approach to customer service are •The Sundown Rule, •The Ten Foot Rule, and •Every Day Low Prices. The Sundown Rule means Wal-Mart sets a standard of accomplishing tasks in the same day that the need arises ¾ in short, responding to requests by sundown on the day it receives them. The Ten Foot Rule promises that if an employee comes within ten feet of a customer, the employee must look the customer in the eye and ask if the person would like to be helped. Every Day Low Prices is another important operating philosophy.

Wal-Mart believes that by lowering markup, they will earn more because of increased volume, thereby bringing consumers added value for the dollar everyday. WAL-MART'S strategy of operational excellence allows it to offer low prices, when customer come by choice that allows Wal-Mart to promise larger volumes to suppliers, who voluntarily agree to lower the price to make more stuff on an absolute basis even though relative profit margins may go down in growth mode, this can be a positive, specially if you are buying something like solar prices that need scale to drop the prices.

WALMART also have just in time inventory management system that maintains an optimum inventory level to meet true customer demand. Also to maintain good relationship with their customers they are using customer management system. They are using ERP based system fro enterprise resource planning. WAL-MART exhibits competitive operational excellence as:

•Outstanding performer against competitors •Clear-cut criteria of performance •Clear-cut goals and strong management commitment •Tight control over operations and coordination of activities through team work. WAL-MART exhibits institutional operational excellence as: •Sustained high achievement over a long period of time •Distinguished track record over decades •Institutionalization of good management practices


It can incorporate VERSATILE OE, where it lacks right now, using following suggestions:

Leverage the size to help its 1.6 million employees: Walmart is viewed as resisting health insurance benefits because of being cheap. If walmart's ruthless cost cutting skills is applied on Health Management Organizations, they will crumble under the margin pressure the same way as it does to its vendors. Walmart using their operations to test alternative health-care approaches would result in positive perceptions.

Walmart should negotiate discounted, bulk mortgage, insurance, and home heating-oil rates, support the communities it does business in by using its infrastructure and purchasing sophistication to help local school districts pool their buying and save on textbooks and other merchandise.

Support mom and pops. Walmart makes it impossible for many small retailers to compete and has hurled thousands of them into bankruptcy. But it can help them in several ways. Start a referral network. Walmart is never going to carry the kind of items that the local, niche retailer does. So why not letting your customers know where they can find them. Walmart is not going to lose a sale, but will make a friend. Also, its customers will appreciate the generosity. It should also be reaching out to local mom and pops with free consulting advice.

Expand your vendor base. It's no secret that it can be difficult for small and mid-size companies to do business with Walmart, because it requires all sorts of sophisticated enterprise software and other technology solutions. But it should relax those standards for entrepreneurs. Actively seek out small, innovative companies with exciting new products, and help them grow. Help these new vendors get stronger — either by extending credit to help them secure the inventory they need to work with you, or by starting a new vendor program that introduces them to partners like Microsoft, Oracle, and SAP with whom Walmart has deep relationships.

Stop treating employees like commodities. No one thinks of Wal-Mart as a place to get a first or a second job, stay on, and build a career. Walmart needs to create a culture that is as obsessed with finding, cultivating and promoting talent. Get people out of the minimum wage sinkhole. Become known as an employer that is committed to discovering talent and creating amazing personal and career success stories. Walmart should also encourage its employees in entrepreneurship. Hold regular seminars and advice on its Website for starting a business. Even invest in their businesses, give them micro-loans to get launched.

Open up your business. Walmart should become less impenetrable and act like it has nothing to hide. Install 'factory-cams' at its captive manufacturing plants around the world, so anyone can check out the conditions 24/7 on its Website. Let management and store personnel blog. And it should talk to reporters. Walmart has announced that it is running a big holiday TV campaign, using celebrities for the first time It can't afford health care benefits but can afford to pay over-priced celebrities. Instead, run advertising that shows how Wal-Mart democratizes the holiday for real people. Taken together, initiatives like this can make Walmart not just a feared company, and a targeted company, but an admired company.