Organizational Behavior Concepts Of Wal-Mart - Essay Example

In the Industrial Age employees were expected to merely follow orders and little attention was paid to their individual needs. They were viewed as machines and efforts were laid to speed up production, mechanizing human movement and ensuring consistent product (Frazee, 2004). Today human beings are viewed as powerful resources on whom depends the organizational success. This shift in the approach has brought about a change in the organizational culture, communication, human resources practices and motivation. This paper will discuss how this have been applied in Wal-Mart and to what extent it has contributed to their success. Wal-Mart the brain-child of Sam Walton started in 1962 as a family-owned discount store with an innovative business strategy. By 2004, it had grown to be the largest retail chain in the world with more than 1.3 million associates worldwide and nearly 5,000 stores and wholesale clubs across 10 countries (ICFAI, 2005). Incredibly efficient and focused on the principle of low-prices, Wal-Mart transformed the retail industry. It is sheer size, growth and profitability of Wal-Mart that it is in a position to define corporate trends. It is now in a position that it can dictate and perfect the nature of discount stores. Wal-Mart has the image of a friendly, all-American company employing happy workers and smiling greeters who are eager to help and grateful to work at Wal-Mart (Bianchi & Swinney, 2004). As a globalizing force, Wal-Mart exerts influence on the regional, local and national economy. It has restructured the American workforce and consumer behavior (Lavallee & Boyer 2006). Its basic strategies revolutionized the global retail industry and led Wal-Mart to unprecedented heights. Human resource practices All employees at Wal-Mart are known as associates and the company’s relations with the associates are based upon respect, high expectations, close communication and effective incentives (Grant, 2004). Human resource management is a stronghold of Wal-Mart as right from the inception they did not believe in allowing or forming a union (Levy & Losch, 2002). They felt it was detrimental to the interest of the company and the union only fed itself from both the management and the labors. They believed in exhorting their own people, motivating them through incentives and awards such as company stocks by which they could also make up for the low wages. Wal-Mart employs immigrant workers so labor is cheap. They also take in independent contractors who cannot organize unions under labor law. It is able to control labor costs, hires temps, part-time workers. Wal-Mart is vertically integrated and it employs its own workers for all major operational functional including warehousing. When criticisms have been raised against its high-turnover of employees, Wal-Mart counters that if jobs were bad, why would so many people apply for them in the first place? Wal-Mart serves as a huge reservoir for low-wage workers. No doubt Wal-Mart monopolizes labor and retail markets but through this it is able to keep worker compensation and retail prices low (Heyer, 2005). Wal-Mart’s associates and employees have full access to management to exchange ideas and concerns freely and hence the need for unions is not felt necessary (Johannson, 2005). In fact other organizations are taking a cue from Wal-Mart and are trying to justify that unions are not necessary. Wal-Mart is not breaking any law to stay unions-free. They have a open door policy where workers can comfortably relate with the managers. National Right to Work Committee and Foundation also discourages workers from joining a union. Wal-Mart has a systematic method of tracking employee grievances and taking immediate action to attend to them in order to prevent them from seeking the help of a union. This amply demonstrates its concern for its workers as well as manages to keep the organization free from unions. Employee wages at Wal-Mart are as much as 31% lower than competitors (Nester, 2006). It pays practically no benefits and very often employees have to work overtime without any additional compensation. It discriminates employees based on gender and disabilities. It pays a wage on which people cannot survive. Despite this, Wal-Mart manages to get people for its stores. Its sheer size makes its impossible for people to ignore it. Besides, in the industry known for low wages and hard working conditions, Walton created a unique feeling of motivation and involvement. He believed in giving people responsibility, trusting them and also monitoring their performance. Associates enjoy a high degree of autonomy and receive continuous communication about the company’s performance ands store operations. They believe that money and perks have a limitation whereas true appreciation and gratitude for what employees contribute to the organization stretch much further (Frazee, 2004). They believe in frequently telling the employee how important they are to the organization. Money and incentives are not the only motivating factors and at Wal-Mart motivation also includes switching their jobs so they did not get stale. They do not believe in withholding information from employees which demonstrates distrust (ICFAI). The employee turnover at Wal-Mart is very high by industry standards. According to company reports, it has stood at 50% for several years (Brenner, Eidlin & Candaele, 2006). This means the company has to hire and train 70,000 employees every year just to stand still. Wal-Mart spends much less on healthcare per employee than other retailers. If the employees want health insurance they have to pay more than a third of the premium. Corporate culture A company’s culture determines the organization’s behavior. A corporate culture was set which encouraged the employees and managers to consider the customer the focus of business. The customer is the king was the policy at Wal-Mart. Wal-Mart symbolised operational excellence and cost leadership (ICFAI, 2005). The core values of Wal-Mart had been shaped by the founder Sam Walton. He believed that the secret of successful retailing was to give the customers what they want. The core culture of Wal-Mart consists of three basic beliefs – respect for the individual, service to the customers and striving for excellence (Grant, 2004). ‘Our people make the difference’ – is a reality at Wal-Mart. While the associates come from different backgrounds, color and beliefs, Wal-Mart believes that every individual should be treated with equal respect and dignity. Because of their diversity of their associates, they are able to provide customer service as expected from each individual customer. Wal-Mart strives for excellence and always tries to find new and innovative ways to push boundaries and constantly improve. The founder also believed in the ‘sun-down rule’ which means things have to be done today before the sun goes down. Whether it is servicing a request from a store across the country or a call from down the hall, every request has to be fulfilled by sun-down. This principle was based on Sam Walton’s, twist on that old adage “why put off until tomorrow what you can do today.” In line with his core beliefs, Walton inculcated the “10-foot attitude” pledge amongst the store employee which meant that: “I want you to promise that whenever you come within 10 feet of a customer, you will look him in the eye, greet him and ask if you can help him.” Wal-Mart’s number one value is commitment to business, which means bring passion to work. Sam Walton conveyed to his employees that his passion for work had helped him to overcome many of his shortcomings and mistakes. Communication is another important part of the culture at Wal-Mart as they believe that sharing information builds mutual trust. Besides, the more the associates know, the more they understand and then the more they will care. Information is power and empowering the associates more tan offsets the risks of informing the competitors. They also they believe in “aggressive hospitality”. The associates have been urged to offer a smile of welcome and assistance to all who have favored the store by entering it. Service is beyond the customers’ expectations. It is not good enough simply to be grateful to the customers; the gratitude is demonstrated in every possible way. At Wal-Mart success is celebrated and humor is found in failures. The essence of communications also lies in listening to everyone. The associates are the ones who are in direct contact with the customers and it is essential to listen to their experiences and observations. They would have something valuable to contribute and it could bubble up good ideas in the process. Power and politics Wal-Mart as the largest American retailer is experiencing public wariness regarding its business practices and role in the American economy (Courser, 2005). Whatever it does is on a massive scale and cannot escape public attention. Wal-Mart squeezes profits at each point in its supply chain and uses these to negotiate deals with the vendors. Wal-Mart kept a tight rein on finances right from the beginning and its managers too knew that they were working on low margins. They also sourced their purchases at very competitive rates. Because of bulk purchases they were in a position to dictate terms to the suppliers. They also sourced their purchases globally, picking up goods from countries with low-cost labor. Pressurizing for low prices has caused many vendors to outsource supplies from cheaper markets. This too has its own advantage. Wal-Mart serves as a vast pipe-line that gives non-US companies direct access to the American market. According to Paul Krugman, the Princeton University economist, "Wal-Mart is so big and so centralized that it can all at once hook Chinese and other suppliers into its digital system” (Fishman, 2003). Vendors have now come to accept that Wal-Mart transforms the companies it does business with. They become more efficient, leaner, focused and faster. It establishes collaborative and mutually beneficial relationships with its suppliers. Vendors admit that the entire approach to business undergoes a change in dealing with Wal-Mart. Its low price policy helps millions to buy more from their meager pay checks. They can even indulge in minor luxuries. This makes the entire economy more efficient and productive. In the micro level this translates into low prices with better product. At the macro level it means economic growth, more jobs and higher tax revenues. Wal-Mart has helped to hold down inflation in US. A McKinsey & Co. study concluded that Wal-Mart was responsible for about 12% of the economy’s productivity gains in the second half of the 1990s (Fishman, 2003). Doane (2005) reveals through a survey that consumers are more concerned with low price, taste, sell-by-date than ethics and the success of Wal-Mart is based on this very fact. Wal-Mart has a strategy of decentralization This strategy of decentralization leads to efficiency in terms of time and administrative costs apart from making the employees feel ‘associates’ and not wage earners. Each store of Wal-Mart had the discretion to place orders with the vendors directly and receive supplies also directly. While Wal-Mart started as an entrepreneurial company, the Wal-Mart’s Sam Walton, while constantly upgrading and expanding did not ignore the need to identify and groom a successor. It was their foresightedness and the decentralization of responsibilities which enabled them to manage over 2000 stores which such efficiency. It is not humanly possible for any CEO to take stock of all that happens at all the stores everyday. Responsibilities have to be shared but monitoring has to be done to ensure smooth functioning. Nevertheless, the situation today is one of distrust which has less to do with business practices and more with the relationship with the American public. Wal-Mart makes headlines practically every week and mostly it is bad news. Wal-Mart is criticized as having an adverse influence over the American and the world economy. The public has been demanding that government should step in to regulate the Wal-Mart business which has now become an important issue with Wal-Mart. If government regulated retailing, it would drive up costs for consumers and contribute to higher inefficiencies in the sector leading to lower purchasing power in the country. In the case of Wal-Mart it would hurt the Americans buying power who rely on discount retailing. Courser (2005) suggests that companies that fail to engage with the public and inform them how the consumer would benefit, endanger public distrust which leads to government intervention. Wal-Mart has 57 wage and hour law suits as per the company’s annual report of 2006. They have been charged with allegations of low wages, not paying for overtime and sex discrimination in employment. They do not provide meal breaks to hourly workers as required by law. Employees often have to work off-the-clock (UFCWIU, 2005). Thus it is evident that while the policy of low cost items is beneficial to the consumers, striving for excellence and servicing the customers has had a heavy toll on the associates. While they claim that the associates are in effect their partners, the high staff turnover and the numerous litigation cases against the company is sufficient evidence of how power is concentrated at the top. Organization culture should serve to strengthen the company and not impact it negatively. Wal-Mart may have a strong culture but it is most often imposed. If impose, it cannot be called culture because culture has to become a part of the workers once they start valuing it. Wal-Mart can be said to have a bureaucratic attitude as it knows it has the controlling power, especially as it opens up in rural areas or suburbs and employees mostly old people or immigrants who are willing to work at low wages. It even dictates terms to the vendors. The core values and culture of the founder were undoubtedly good at one point of time, it has even changed the retailing industry but can Wal-Mart be said to be a successful enterprise? Can Wal-Mart serve as an example to others in the industry because of its organizational behavior and trends? References: Brenner, A., Eidlin, B., & Candaele, K., (2006), Wal-Mart Stores, Inc., 02 June 2007 Bianchi, D., & Swinney, D., (2004), Wal-Mart: A Destructive Force for Chicago Communities and Companies, Center for Labor and Community Research, Special Report to The New Chicago School of Community Economic Development, 02 June 2007 Courser, Z., (2005), Wal-Mart and the Politics of American Retail, 02 June 2007 Doane, D. (2005), The Myth of CSR, Stanford Social Innovation Review, pp. 23-29 Fishman, C. (2003), The Wal-Mart You Dont Know, 02 June 2007 Frazee, B., (2004), Organizational Behavior and the Learning Process, Read More