Magoosh GRE

Walmart’s Key HR Functions Underperforming

| February 6, 2017

Introduction

The success of any organization depends on its strategic asset, the human capital. As pointed out by Lawler (1996), organization’s competitive advantage comes from its human capital. Efficient management of this resource can bring significant benefits to the company. It should be remembered that motivation is the epicenter of performance and an important factor ensuring the success of a company. Improving workplace productivity however remains a major challenge in most companies.
In this regard, this study explores the human resource management approach at Wal-Mart. It identifies the ways in which two HR functions (employee motivation and employee performance practices) are underperforming. This includes a brief account of how the functions operate within the organization, how they are applied and what the outcomes for the business are given that they are underperforming. The paper evaluates why these particular functions are considered to be underperforming using Herzberg’s motivator Hygiene Theory. Further the paper makes some recommendations for improvement of these HRM practices and the benefits to the company.

What is human resource management?

Human resource management encompasses all activities associated with management of the human capital and in ways towards achieving the corporate goal or objective. In any organization, the human resource department plays a crucial role. Not only are HR managers required to recruit and train employees, but they also have the obligation of motivating and engaging the workforce. Understanding what motivates the employee and ensuring good employee employment practices is key for talent retention and performance (Lockwood et al. 2010). Regardless of the economic environment, it is imperative for companies to create an engaged and motivated workforce.
Underperformance in the workplace has recently been a major concern in Wal-Mart stores. According to a new research report by Wolfe research, an equities research firm, Wal-Mart has been underperforming over the past years. The firm lowered Wal-Mart from a “market perform” rating to an “underperform” rating (Covert, 2014). Failure by Wal-Mart has been attributed to their poor employment practices especially low wages and lack of rewards. Whereas Wal-Mart may not be the only big store chain criticized for its poor employment practices and policies, it has come to the spotlight owing to its aggressive policies and low cost strategy which undermines the effort made by employees.

Just last year, a lawsuit was filed against Wal-Mart by the international Labour Rights Fund for requiring overtime, denying minimum wage and punishing union activity (Covert 2012). This is clearly a violation of worker’s rights. Wal-Mart which was initially a corporate fortress seems to be headed to a downfall. Even its operations in the US indicate the possibility of a failure in the giant retailer. More recently, Wal-Mart warned its investors that its comparable store sales may be slightly negative after the third quarter. This is also evident in the huge layoff of 2300 workers at Sam’s club, one of its stores. The layoff was attributed to their poor performance. Whereas Wal-Mart still remains the corporate fortress in the retail sector due to its massive size, its underperformance in the US and emerging markets indicate the possibility of a failure in the near future.

Walmart’s bad business practices

Wal-Mart has on several accounts been criticized for poor wages. Why should employees suffer in one of the giant retail stores that make billions of profit annually? Wal-Mart is ranked among the best 100 corporations by Forbes magazine yet most of its employees take on average less than $250 a week. Full-time employees are paid between $6 and $7.50 an hour. A further a third of the employees who are part-time are limited to working up to 28 hours a week and are not eligible for benefits. Such pay scale places them and their families below the poverty line. The lack of rewards demotivates and discourages them from performing well.
Perhaps Wal-Marts bad business practices are more evident with the Rana Plaza tragedy which led to the loss of over 1000 lives. The tragedy exposed some of the profound flaws in the industry. Rana Plaza produced private garments for some of the giant retailers including Wal-Mart. Evidence provided by the Bangladesh center for Worker Solidarity showed that Wal-Mart had been producing its garments in Ether Tex factory situated on the 5th floor of the building (Steven 2013).
Some documents were found in the rubble detailing purchase orders for certain garments which were to be delivered to Wal-Mart. Further, at the time of the tragedy, Wal-Mart was already listed in Ether Tex’s website as one of the main customer. Although Wal-Mart denied knowledge of their operations at the factory building, it announced its plans to put in place new safety measures at some of their factories in Bangladesh. The corporate fortress, however, promised to stop production if urgent safety problems were uncovered at some of its factories. The company further assured the Bangladeshi government of their support and commitment towards improving workplace safety. But the company stopped short of committing to these improvements and distanced itself from the Rana Plaza tragedy. This is a clear example of bad business practice.

Why these particular functions are considered to be underperforming

Last year, Wal-Mart reported $11 billion in net income yet it has not been able to remedy some of its questionable workplace practices. Wal-Mart has been filed in over 5,000 lawsuits for poor employment practices such as inadequate health care, wage law violations, worker exploitation and their anti-union retailer stance. Wal-Mart anti-union stance can be seen in their recent threat to close one of its stores in Quebec after workers successfully unionized. Citing ‘economic reasons’; Wal-Mart announced their plans on shutting the store. However, this argument was rejected by Quebec’s labor relations and Wal-Mart’s firings found illegal.
Further, the move to extend operations to overseas markets including setting up factories in emerging markets such as Bangladesh and China was driven by the desire to take advantage of cheap labour. For example, Wal-Mart pays much less its employees in China compared to those in the US and the UK.
A further criticism has been the lack of employment benefits. Part-time employees are limited to working up to 28 hours a week and are not eligible for benefits. While, workers who are eligible for benefits pay way over the odds to get health insurance and other benefits. The company has often come under criticism for not providing employees with affordable access to health care and employees are overburdened. For example, in 1999, 36% of the total costs were paid by the employees. In 2001, there was a 42% rise in employee burden.
The health of its employees has been deteriorating at a faster rate. According to the company’s internal memo discovered by New York Times, Wal-Mart workers were sicker compared to the national population. This begs the question: Why can’t such a giant corporation provide its workers medical retirement benefits given the huge profits that they make? This question was once raised by one of Wal-Mart’s managers only to be fired by the CEO and reasons of disloyalty cited as the reason for being quitted. (Jordan 2008).
As Michael Porter (1980) once pointed out that a company would rely on three basic competitive strategies to maintain their edge in the market: differentiation, cost leadership, and focus strategy. Wal-Mart has obviously taken the cost-leadership strategy by reducing the cost of recruitment, providing low pay, no rewards, requiring overtime, and cheap children labors. It currently faces a barrage of lawsuits for extensive violations of labour laws. Wal-Mart also faces law suits for extensive violations of state regulations that require time for breaks and meals. In some instances, minors are forced to work late for the performance appraising.

Outcomes for business

Wal-Mart may be headed for a downfall. Its customer service is already low and their low-cost strategy has led to many cut offs of employees. Since recession, Wal-Mart has been cutting down on their staff. Without enough manpower for their retail operations and with workers on site underpaid, its merchandize remains stacked on pallets in warehouses instead of the shelves where customers can reach them. What then is the value of offering lower prices if the products are not accessible to the customers?
Further, the check-out lines are painfully long and there seems to be a decline in the overall customer shopping experience. Customer shopping experience has been deteriorating due to the longer checkout lines, disorganization and less staff help. Last year, the giant retailer was placed last among in the American Customer Satisfaction Index, a six year in a row in which Wal-Mart has taken the last spot (Ungar 2013). Lessons must be learnt from the experience of the other low end retailers. McDonald’s earnings have fallen significantly due to their poor terms of employment. Similarly, Wal-Mart needs to consider the potential upside of their aggressive policies.
Despite the poor employment practices, Wal-Mart still remains among the leading retail giants. Its remains ahead of its competitors such as Target and JC penny. However, Wal-Mart faces a threat from Costco, its primary competitor. Costco has been experiencing a fairly healthy 8% growth in annual sales (Ungar 2013). In fact, a significant number of customers are moving to this retailer for their shopping experience. Could this be attributed to the good employment practices at Costco? Unlike Wal-Mart, employees at Costco get a decent living and are paid in excess of the minimum wage.
Given the aggressive HR policies employed by Wal-Mart, it begs the question: what then is the role of HR managers in this company? Since, as HR professionals, they are required to put in place strategies oriented towards the employees. To some point, however, employees seem to be encouraged to think of themselves as ‘servant leaders’. For example, employees are called “associates” showing that the company values their contribution. Such kinds of HR policies are employed in most of the best performing companies. These policies and practices serve to motivate employees to increase their performance and can aid in developing good corporate culture.
However, employees may not feel appreciated if they are paid less than minimum wages and denied rewards and opportunities for professional growth. There seem to be no opportunities for enhancement and professional growth. Wal-Mart does very little training and developments of its human resources and as such, opportunities for enhancement of professions especially for women are limited. In fact, several claims have been filed against Wal-Mart for discriminating against women in terms of employment positions and the lack of opportunities for advancement.

Improving employee motivation and employment practices at Wal-Mart

As HR professionals continue to seek bright, talented and highly engaged workforce, motivational theories can provide insights on how Wal-Mart can improve employee motivation and engagement. Several motivational theories have been suggested including the Expectancy Theory, Maslow’s Hierarchy of Needs theory, Herzberg’s motivator Hygiene Theory, Goal Setting Theory, and Equity theory (Lockwood et al. 2010)
Herzberg’s motivator Hygiene Theory is perhaps more applicable to the case of Wal-Mart. The theory suggests that two main factors must be met for employees to become satisfied with work. These are: the hygiene factors and motivator factors. The hygiene factors include meeting the basic needs such as adequate pay, comfortable working environment, effective supervision and good relationships with the core workers. On the other hand, motivation factors include advancement and professional growth, and rewards or opportunities for recognition (lockwood et al. 2010)
Wal-Mart needs to consider applying the two-factor theory of motivation if they are to improve on the performance of their employees. They need to revamp their policies, increase the salary of their employees, and the safety and security of the employees. Further, they need to consider motivators that are intrinsic to the job which include providing rewards for achievement and increasing their growth opportunities.
Pundits, policymakers and activists outraged by the company’s low wages have been calling for protests. According to Robert Reich, a professor at U.C. Berkeley, Walmart’s net income is estimated at $17 billion meaning that they can easily afford to give its workers a small pay-rise (Atner 2013). The Chancellor professor of public policy has in fact urged shoppers to boycott Wal-Mart since they do not want to share even a little bit of their income with their employees (Atner 2013).

Conclusion

In today’s highly competitive marketplace, motivation of employees and employing the best employment practices is key to success. Underperformance in the workplace has recently been a major concern in Wal-Mart stores. Several lawsuits have been filed against Wal-Mart for violation of worker’s rights including low wages, lack of employment benefits, being required to work overtime and denied to participate in union activity. Bad employment practices are clearly evident in Wal-Mart. This has affects employee productivity as it demoralizes and demotivates them.
Wal-Mart needs to consider applying the two-factor theory of motivation if they are to improve on the performance of their employees. Incentives are key to maintaining a motivated workforce and ensuring business success. Appraising and offering hardworking employee with incentives will motivate them to go the extra mile of putting the company first. Employee valuations need to be implemented and growth opportunities made plenty. HR managers at walmart need to understand the benefits of employee motivation and engagement. By sharing their profit, employees will feel appreciated and more passionate about their work. Ultimately, this will result in improved performance and greater customer satisfaction

Reference

Ciura, B., 2014. Is Wal-Mart’s empire about to fail? Viewed on 29th March 2014. Available from http://www.fool.com/investing/general/2014/02/01/is-wal-marts-empire-about-to-fall.aspx
Covert, B., 2014. Walmart’s labor practices backfire. Viewed on 29th March 2014. Available from http://thinkprogress.org/economy/2014/02/10/3271221/walmart-downgraded-understaffing/
Gusdorf, M.L. and Reed, S.M., 2009. The role of mission and values in strategic human resource management. Society for Human Resource Management.
Jordan, T., 2014. The good, the bad and Wal-Mart. Workplacefairness
Lockwood, N., Anderson, C., Fiester, M. and Samers, K., 2010. ‘Motivation in today’s workplace: the link to performance’. Research Quarterly. The Society for Human Resource Management
Rasouli, R., 2013. ‘Modelling the impact of HRM practices on knowledge workers’ job satisfaction and intention to stay: re-examining the Herzberg’s two-factor theory of motivation’. World of Sciences Journal
Steven, G., 2013. As firms line up on factories, Wal-Mart plans solo effort. Viewed on 29th March 2013. available from http://www.nytimes.com/2013/05/15/business/six-retailers-join-bangladesh-factory-pact.html?pagewanted=all&_r=0
Thomasson, E., 2014. Bangladesh factory inspections highlight safety risks as anniversary of Rana Plaza tragedy looms. Retail & Marketing.
Ungar, R., 2013. Wal-Mart pays workers poorly and sinks while Costco pays workers well and sails-proof that you get what you pay for. {Viewed on 30th March 2014} available fromhttp://www.forbes.com/sites/rickungar/2013/04/17/walmart-pays-workers-poorly-and-sinks-while-costco-pays-workers-well-and-sails-proof-that-you-get-what-you-pay-for/

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Category: Business & Management, Essay & Dissertation Samples, Human Resources