“All around the world, we save people money, so they can live better. That’s good news – in any language.” – Wal-Mart Stores Inc. Wal-Mart is the largest Discount Store in the United States. Its enormity is not only recognized domestically but also expanded to International Market. The company believes that one day this one will replace the United States position when the trend down (Molin, 2004).
Being number one in the United States does not always guarantee for being number one elsewhere in the world. There are many problems that Wal-Mart is now facing in this highly competitive business world. At the end of the day, many references demonstrate various Wal-marts problems cause of their HRM practices. 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.
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 problems and solution that can help company to improve their relationships with associates.
4.1 History of Wal-martWal-Mart’s milestones began in 1962 when the first Wal-Mart was opened in Rogers, Arkansas. Seven years later the company incorporated as Wal-Mart Stores, Inc. Then a year later they opened the first distribution center and home office in Bentonville, Arkansas, and also went public on the New York Stock Exchange. Several years later, in 1988, the first super center was opened. Then in 1991, the first international unit was opened in Mexico City. By the turn of the century, Discount Store News had named Wal-Mart “Retailer of the Century” and made Fortune magazine’s lists of the “Most Admired Companies in America” and the “100 Best Companies to Work For.”
They were also ranked on Financial Times’ “Most Respected in the World” list. In 2002, Wal-Mart became number one on the Fortune 500 list and was presented with the Ron Brown Award for Corporate Leadership, a presidential award that recognizes companies for outstanding achievement in employee and community relations. Wal-Mart Stores, Inc. operates retail stores in various retailing formats in all 50 states in the United States. The Company’s mass merchandising operations serve its customers primarily through the operation of three segments.
The Wal-Mart Stores segment includes its discount stores, Supercenters, and Neighborhood Markets in the United States. The Sam’s club segment includes the warehouse membership clubs in the United States. The Company’s subsidiary, McLane Company, Inc. provides products and distribution services to retail industry and institutional foodservice customers. It is now has more than 4,700 stores including some 1,475 discount stores, 1,750 combination discount and grocery stores and 538 membership-only warehouse stores (SAM’S CLUB) (Bianco, 2003).
With net income of approximately US$8 billion on sales of US$247 billion (“Income Statement”, 2004), Wal-Mart was the subject of countless newspaper features and journal articles praising its dominance and success. Nearly 75% of its stores are in the United States (“Wal-Mart International Operations”, 2004), but Wal-Mart is expanding internationally. The International segment includes all of its operations in Asia, Europe, and South America which are comprised of Argentina, Brazil, Mexico, Canada, China, Germany, Japan, Korea, Puerto Rico, and United Kingdom (“About Wal-Mart” 2004).
4.2 Human Resource Management Practices in Wal-mart With the world becoming a global village, highly visible international company like Wal-Mart is going to continue facing significant challenges as it is now dealing with social issues: fairly and unfairly in employment. Wal-Mart remained a unionized company, working continually to repel organizing attempts in the United States and around the world. Some say that it is a very big discount store which will do anything just about to get bigger. Wal-Mart employment problems are easily seen from the headlines: Illegal immigrants mopping its floors, Sex discrimination, Low wages lead worker strike, etc.
One of the biggest problems is likely to come from unions and community groups. Even though no one can force to have union in Wal-Mart, these problems still hurt the company itself. The unions complain that Wal-Mart stores take advantages from the stuffs. Only on their income, they were not being able to pay for health insurance andother benefits. Wal-Mart workers generally gave the company high performances, but they never get proper pay and benefits. In fact, they got a very low pay one. Moreover, employees did not get pay from overtime working. In February 2004, Wal-Mart was judge to pay workers for their overtime hours.
This ruling was brought by employees who were forced to work overtime between 1994 and 1999, without pay (“Wal-Mart Stores, Inc.”, 2004). Thus, Wal-Mart is trying to reduce the numbers of full-time employees to facilitate the workers in joining unions. This helps Wal-Mart to eliminate unions’ basis (Biddle, 2004). Due to rapid growth of Wal-Mart, the biggest problem is its lack of human capital. Wal-Mart was argued that it cannot claim to be an international company when the managers in the foreign countries do not even speak the language of that country.
The company solved this circumstance by decentralize management authority from headquarter to International operation. Individual country leaders were given more freedom to run the business, especially in the areas of operations and merchandising (Zellner, Schnidt, et al, 2001). However, Wal-Mart cannot maintain employees’ quality as in the United States. Local employees, including managers, lack of experiences in the company culture; they are slowly adjusted.
Last but not least, sexual discrimination is another eternal controversy topic of Wal-Mart. Women employees are often overlooked or ignored when it came time to promote. Available data showed that, the percentage of women employed by Wal-Mart decreased from 76 per cent to 64 per cent since 1996 (Rock, 2001).
Some of women stuffs about being told that they were unsuited to management because the working hours are too long, and they should be home with their children. Besides when employees were promoted to higher-level jobs, there was an expectation that they would be moved to other stores, districts or regions, as much as business need required (Rock, 2001). As a result, women employees are the first abandon choice since they are inflexible.
In his 1992 autobiography, Sam Walton discussed the changes he had made to his original management philosophy of requiring managers to be extremely flexible: May be that was necessary back in the old days (that one had to be ready to relocate on a moment’s notice to move into management), and maybe it was more rigid than it needed to be.
Now, though, it’s not really appropriate anymore for several reasons. First, as the company grows bigger, we need to find more ways to stay in touch with the communities where we operate, and one of the best ways to do that is by hiring locally, developing managers locally, and letting them have a career in their home community – if they perform. Second, the old way really put good, smart women at a disadvantage in our company because, at the time they weren’t as free to pick up and move as many men were. Now I’ve seen the light on the opportunities we missed out on with women
4.3 The Real Facts About Wal-MartWal-Mart has been subject to criticism by various groups and individuals. Labour unions, community groups, grassroots organizations, religious organizations, and environmental groups protest against Wal-Mart, the company’s policies and business practices, and Wal-Mart customers.
In 2005, labor unions created new organizations and websites to influence public opinion against Wal-Mart, including Wake Up Wal-Mart (United Food and Commercial Workers) and Wal-Mart Watch (Service Employees International Union). By the end of 2005, Wal-Mart had launched Working Families for Wal-Mart to counter criticisms made by these groups. Additional efforts to counter criticism include launching a public relations campaign in 2005 through their public relations website, [” [http://www.walmartfacts.com/ walmartfacts.com (official public relations website)] * Gender Discrimination
* Wage and Hour Law Violations* Wal-mart’s Anti-Worker Policies* Health Care at Wal-mart* Wal-mart’s Wages* Hiring illegal workers
1. Gender DiscriminationThe largest class action lawsuit in the history of the world alleges that Wal-Mart discriminated against women by systematically denying them promotions and paying them less than men Wal-Mart allegedly discriminates against women.
* In 2001, six women sued Wal-Mart in California claiming the company discriminated against women by systematically denying them promotions and paying them less than men. The lawsuit, Dukes v. Wal-Mart, has expanded to include more than 1.6 million current and former female associates, and was certified on June 21 2004 as the largest class action lawsuit ever. * In 2001, while more than two-thirds of Walmart’s hourly workers were female, women held only one-third of salaried positions and made up less than 15 percent of store managers.
This is all despite women having had on average longer seniority and higher merit ratings than their male counterparts. * In 2001, women managers on average earned $14,500 less than their male counterparts. Female hourly workers earned on average $1,100 less than male counterparts. * In 2001, for the same job classification, women earned from 5 percent to 15 percent less than men, even after taking into account factors such as seniority and performance.
2. Wage and Hour Law ViolationsAccording to The New York Times, the wage and hour law violation lawsuits include allegations Walmart forced “employees to work unpaid off the clock, eras[ed] hours from time cards and prevent[ed] workers from taking lunch and other breaks that were promised by the company or guaranteed by state laws There is a history of numerous class action lawsuits for wage and hour violations against Walmart. * Walmart reported in January 2009 that the company was involved in at least 73 class action lawsuits alleging wage-and-hour violations.
According to The New York Times, the suits include allegations Walmart forced “employees to work unpaid off the clock, eras[ed] hours from time cards and prevent[ed] workers from taking lunch and other breaks that were promised by the company or guaranteed by state laws.” Walmart’s settlement is worth little to workers and less to the company.
* In December 2008, Walmart announced it would settle 63 of the outstanding class action suits over wage-and-hour violations for an amount between $352 million and $640 million. * Walmart’s settlement represents the company’s 2008 sales for a mere 13 hours and 56 minutes. Walmart’s Minnesota settlement is a raw deal for local workers. * Walmart settled a Minnesota wage-and-hour lawsuit for $54 million.
Had Walmart continued with the penalty phase of the trial, they could have owed over $2 billion in penalties to the State of Minnesota. * One plaintiff, Nancy Braun, wasn’t allowed bathroom breaks while working as the only server and cook at an in-store restaurant. As a result, Ms. Braun “ended up soiling herself several times.” * Walmart’s $54 million settlement represents the company’s 2008 sales in 1 hour and 11 minutes.
3. Walmart’s Anti-Worker PoliciesInternational NGO Human Rights Watch calls Walmart “a case study of what is wrong with American labor law. Walmart closes down stores and departments that unionize. * Walmart closed its store in Jonquiere, Quebec in April 2005 after its associates received union certification. The store became the first unionized Walmart in North America when 51 percent of the associates at the store signed union cards. * In 2000, when a small meatcutting department successfully organized a union at a Walmart store in Texas, Walmart responded a week later by announcing the phase-out of its in-store meatcutting company-wide. Walmart has issued “A Manager’s Toolbox to Remaining Union Free.”
* This toolbox provides managers with lists of warning signs that workers might be organizing, including “frequent meetings at associates’ homes” and “associates who are never seen together start talking or associating with each other.” The “Toolbox” gives managers a hotline to call so that company specialists can respond rapidly and head off any attempt by associates to organize. Walmart is committed to an anti-union policy.
* Walmart’s labor law violations range from illegally firing workers who attempt to organize a union to unlawful surveillance, threats, and intimidation of associates who dare to speak out. International NGO Human Rights Watch calls Walmart “a case study of what is wrong with American labor law5.” According to the report:
* “Walmart’s aggressive campaign to prevent union formation also creates a climate of fear at its stores.” * “Walmart also has used an arsenal of tactics that violate US law and workers’ internationally protected right to freedom of association.” * “Even adjusted for its size, Walmart stands out for the number of its US labor law violations.”
4. Health Care at Walmart Walmart’s health care is not good quality or affordable. Thousands of associates qualify for Medicaid and other publicly subsidized care programs. Walmart has plan options with cheap premiums – but they come with high deductibles. * Walmart’s 2010 health care offerings include cheap premiums of $27 per pay period for family coverage, or $702 per year, however this plan has a high annual deductible of $4,400. * In addition, Walmart associates covered by the health plan face a $10,000 out-of-pocket maximum.
High deductibles mean high-costs for workers and their families. * With a $4,400 annual deductible, a family would have to pay $5,102 of their own money before Walmart’s insurance pays anything. * For a family whose only income comes from a Walmart associate making Walmart average of $11.75 an hour, this equals almost 25% of their annual income. * If you consider the $10,000 out-of-pocket maximum in addition to the $702 annual premium, that same family could pay almost 52% of their annual income before Walmart’s insurance begins to pay. Taxpayers are forced to step in to cover Walmart’s associates.
* Thousands of associates qualify for Medicaid and other publicly subsidized care. * In Ohio, Walmart had the greatest number of employees and employee dependents on Medicaid in the state, costing taxpayers $44.8 million in 2009. * A disturbing 41.4% of Walmart’s total workforce in Massachusetts used publicly subsidized health care, costing taxpayers $15.5 million in 2008. * According to a 2004 report, public assistance used by Walmart associates cost California about $86 million. Walmart’s health care plan fails to cover nearly 700,000 associates.
* Walmart’ health insurance covers only 54% of their associates. Walmart has nearly 1.4 million US associates. Walmart has admitted that public assistance is a “better value.” * Despite over $12 billion in profits, former President and CEO Lee Scott admitted in 2005, “In some of our states, the public program may actually be a better value – with relatively high income limits to qualify, and low premiums.”
5. Wal-mart’s WagesWalmart Associates make less than comparable retail employees. With some of the biggest profits in the world, Walmart can do better by its people Walmart’s entry into a market depressed wages and displaced better-paying retail jobs. * A 2005 study found that Walmart’s entry into a metropolitan area eliminates similar jobs that pay about 18% more than Walmart. In those areas, the total average earnings of retail workers fell by 0.5 to 0.8%. Walmart’s average wage is below retail industry standards.
* Walmart’s national average wage of $11.75 an hour2 is 2.5% below the average wage of $12.04/hour for Retail Sales persons, the largest retail industry occupation, as reported by the Bureau of Labor Statistics (BLS)3. Walmart’s average wage is below poverty level.
* Walmart’s average wage of $11.75/hour translates into annual pay of $20,7744. This is almost 6% below the Federal Poverty Level of $22,050 for a family of four. Walmart’s average wage is distinctly lower than the average wage for unionized competitors in key markets. * The average Walmart associate in California earns 26% less than the average wage of a UFCW worker at one of the three major supermarkets under the current master contract for Southern California. * In Massachusetts, a Walmart associate earns 19% less on average than a retail worker covered by a UFCW contract with a large employer. Walmart can afford to pay higher wages.
* According to a 2007 report, if Walmart started paying a $10/hour minimum wage, its workers could each earn $1,020 to $4,640 more per year, before taxes. If Walmart were to pass this cost directly to shoppers, the average consumer would need to pay only 36 cents more per shopping trip, or $9.70 per year. * In 2008, Walmart CEO Mike Duke received $12.2 million in total compensation8, or 587 times the annual income of the average full time Walmart Associate. Wal-Mart has a history of making taxpayers pay for the consequences of its low wages.
* According to a 2004 study9, public assistance used by Walmart associates costs California about $86 million a year. If Walmart associates in other states use public assistance at the same rate as those in California, the total taxpayer bill for Walmart public assistance could be up to $2 billion a year. Walmart wages: not designed to support a family.
* Wal-Mart spokesperson Mona Williams was quoted in 2004 for admitting that, “More than two thirds of our people… are not trying to support a family that’s who our jobs are designed for.” 6. Hiring illegal workers
Wal-Mart has been accused of allowing illegal immigrants to work in its stores. In one case, federal investigators say Wal-Mart executives knew that contractors were using illegal immigrants as they had been helping the federal government with an investigation for the previous three years. Some critics said that Wal-Mart directly hired illegal immigrants, while Wal-Mart claims they were employed by contractors who won bids to work for Wal-Mart.
6 Solution for Wal-MartWal-Mart is a giant company with giant Responsibilities. The truth is that Wal-Mart has let America down by lowering wages, forcing good paying American jobs overseas, and cutting costs with total disregard for the values that have made this nation great. Wal-Mart has needlessly exploited illegal immigrants, faces the largest gender discrimination lawsuit in history, forced workers to work in an unsafe environment, and broken child labour laws.
Wal-Mart has become much more than just a small corner store in rural America. In the past 10 years, Wal-Mart has grown into the largest retailer in the world — number 1 among the Fortune 500 — and is America’s largest employer. With more than 1.4 million employees and billions in profits, Wal-Mart is a giant company with giant responsibilities. What Wal-mart can change for the better.
In Wal-Mart: workers are paid poverty level wages even when they work full-time. What can be changed : workers are paid a living wage with proper health and retirement benefits. In Wal-Mart: wealthy companies shift their health care costs onto taxpayers like you and your families.
What can be changed: corporations live up to their responsibility and provide their employees with adequate and affordable health care coverage. In Wal-Mart: suppliers are forced to make their goods cheaper even if it means shipping U.S. jobs overseas. What can be changed: we value U.S. jobs and companies that buy and sell “Made in America.” In Wal-Mart’s America: women are paid less than men.
What can be changed: women and men are treated equally – fair pay for everyone.
What we can recommend to Wal-mart ?
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.
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 position. 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. However there are some areas that Wal-Mart needs to concentrate on to achieve its goal of making Wal-Mart a great place to work for its associates and provide them with a professional experience that will make them better.
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