Every corporation has its challenges with running a business which is profitable, while being a good corporate citizen and treating employees, customers and suppliers fairly and with respect. No company is perfect, and every company has a bit of controversy surrounding it; the bigger the company the more controversy it tends to have. In the case of Wal-Mart, the world’s largest retailer, the controversy surrounding the way employees and suppliers are treated and what the retailer does to drive “Low Prices” is a big part of the corporate culture. This case study will look at the history and organizational structure of Wal-Mart, the controversy surrounding its business practices and how it has attempted to rectify the concern by its incorporation of CSR practices.
Get Help With Your Essay
If you need assistance with writing your essay, our professional essay writing service is here to help!
Before discussing the controversy behind the operations at Wal-Mart, it is important to understand its history and organizational structure and behavior. We must first look at the question of what is organizational behavior and how does understanding the concept impact corporations like Wal-Mart? Organizational behavior studies the people in an organization, how they work as a group; how the individuals and groups impact the organization (Nelson & Quick, 2010, 4). Now that we know the definition of organizational behavior, how does that help us look at operations at Wal-Mart? Every corporation operates with different types of people from the CEO down to the employees responsible for cleaning the floors and washrooms. Each employee brings with them a different set of life experiences, values, ethics, and biases; making each employee unique and creating an atmosphere unique to each corporation. Understanding that employees are all different and their experience can either help or hinder their performance and view of an organization helps leaders understand how to best utilize the people on their teams to benefit the customer and ultimately the organization.
Like many large corporations, Wal-Mart is a publicly held company and its stock is traded on the open market via the stock exchange. Wal-Mart has an executive leadership structure, lead since 2009 by current CEO, Michael Duke. Like many businesses, Wal-Mart did not start as a multi-billion dollar, globalized retailer, but instead as a small business started by an eager entrepreneur, Sam Walton. Sam Walton started his career as an entrepreneur in Newport, Arkansas, as the owner of a Ben Franklin general store franchisee on September 1, 1945 (Slater, The Wal-Mart Decade, 2003, 25). It was seventeen years later, on July 2, 1962 that Wal-Mart Discount City was born in Rogers, Arkansas (Slater, The Wal-Mart Decade, 2003, 28). In his time as a small business owner, Walton understood that he could make a profit by buying items in bulk and at a discount and reducing his margins; he could pass the savings on the customer. Although this sales strategy was revolutionary at the time, it has been copied and utilized by many other retailers since its inception in 1962. By 2002, what started as a small town general store blossomed into a retail giant. Wal-Mart saw annual revenues of over $219 billion and found itself at the top of the Fortune 500 list for both its annual revenues and also as one of Fortune’s Most Admired list (Slater, The Wal-Mart Decade, 2003, 28). But all this success could not be attributed to just the leadership of Sam Walton. Sam stepped down as chairman and CEO in 1992, shifting the leadership from owner/operator to outside executive. This leadership shift was a key turning point in the Wal-Mart organizational structure.
Sam Walton’s leadership style was one driven by respect and a deep understanding of the business. Sam would spend the majority of his time in his stores, talking to his to his customers and employees, leading his employees by example. The ongoing joke by the employees at Wal-Mart is “What would Sam think, or say, or do” (Walton & Huey, 2003, 179). This leadership style drove respect and encourages employees to make decisions.
When David Glass took over as CEO for Wal-Mart in 1988 through 1999, he had the task of leading one of the largest organizations through its biggest change in its history. With the new CEO, came a new leadership style and new priorities. When employees respect and understand the vision of the leader, the business will prosper. People tend to be afraid of and resistant to change in their environment. We like things “status quo”; we would rather not find our environment in an uproar or chaos. When there is a changing of the guard within an organization, resulting in change in the executive leadership, priorities inevitably change causing stress. This organizational distress causes a decrease in productivity, an increase in employee absence and turnover, which leads to increased cost within an organization (Nelson & Quick, 2010, 229). Glass had to tread lightly to ensure he could carry on the legacy that Walton had built, but incorporate his own ideas and vision to move Wal-Mart into the future.
The growth and expansion of Wal-Mart brought on its own unique set of challenges and started the ethical challenges that are still faced by Wal-Mart today. From 1991 to 2002, Wal-Mart began its globalization campaign, starting in Mexico. Globalization presents its own management challenges, and the leadership at Wal-Mart, starting with David Glass through current CEO Michael Duke have had to face the following: managing a diverse employee and supplier base, encouraging a uniform and cohesive culture throughout all countries of operation, and expanding and managing operations in each of the different countries where company is choosing to do business (Nelson & Quick, 2010, 38). Wal-Mart currently operates in nine countries and has operating profits of over $17 Billion dollars and expects to see its international expansion to equate for 30% of its annual sales in the next 10 years (Slater, The Wal-Mart Triumph, 132, 141).
Wal-Mart’s executives had to adapt to doing business in countries where there were very different cultures, customer expectations, and legislative considerations. As the company began its expansion, its customers and its critics became more vocal. For example, in Germany, Wal-Mart set precedence by opening its stores two hours earlier than the standard retail opening time of nine o’clock AM and positioning greeters at its doors (Quinn, 2000, 133). Although these simple changes do not appear to be a big deal for us here in the United States, it was a huge uproar in Germany. Most German stores do not open their doors until eleven AM, and when Wal-Mart instituted opening its stores at seven AM, other retailers were forced to follow suit to stay competitive. Adding an additional four hours to the work day increases the operations cost of many small and medium businesses and would not necessarily make financial sense; in order to avoid losing additional sales, German business owners quickly followed suit going against a long standing tradition to stay competitive. Germans were also not accustomed to being greeted and were initially offended by the Wal-Mart greeters positioned at the entrance. As customers became more accustomed to being greeted at German Wal-Mart stores, they began to adapt to the Wal-Mart shopping culture and began to appreciate the presence of these employees. These are two examples of how integrating culture into globalization efforts are important to Wal-Mart’s overall business strategy and organization.
In addition to incorporating its culture into international stores and with diverse customers and employees, Wal-Mart has had to work though ethical challenges here and abroad. Although Wal-Mart has done a good job of embracing its culture and the vision of founder, Sam Walton, as it has grown it has found itself more susceptible to ethical challenges. Labor practices have been a source of contention with unions and critics of Wal-Mart. Complaints about lower than average wages and number of work hours, higher than average costs for benefits, anti-unionization messages and treatment of workers are among the many lawsuits Wal-Mart has had to defend.
Positive ethical practices in a corporation are keys to the long term success of the business due to positive employee morale and longevity. Ethical practices bring in decision making based on positive moral values (Nelson & Quick, 2010, 130). When employees feel they are being treated fairly by their leadership, their productivity improves. Many people think that increasing employee compensation will drive ethical behavior and improved productivity. This is not an accurate assumption, based on the fact that not all employees are motivated by money and may not have the same value systems. Leaders must be careful to ensure they are making decisions by looking at both the financial impacts and the human impacts. Too often, middle management and senior leadership value financial performance over employee satisfaction and make unethical decisions.
In the case of Wal-Mart, many of these productivity decisions in order to drive “Low Prices’ involved unethical employee decisions. Although Wal-Mart tops the Forbes’ list of annual revenues and most admired company list, it is noticeably absent from the Forbes’ 100 Best places to work, as judged by the employees (Bianco, 2006, 82). Turn-over at Wal-Mart is among the highest in retailers at between fifty and seventy percent (Bianco, 2006, 82). With a change in leadership from Sam Walton, to the numerous CEOs that have led Wal-Mart since 1992, turn-over continues to sky rocket. Is it because of the diversity of the workforce, availability of better, more skilled jobs, or just a difference in culture between the times when Sam Walton ran the business to today? There is an obvious correlation between the high turnover and the employee morale and feeling that employees are unable to embrace the Wal-Mart culture.
A difference in Wal-Mart work culture and that of what most Americans experience and expect is evident in the following examples. Most American’s think of full-time employment as a minimum of thirty-five hours a week. Wal-Mart, on the other hand, defines full-time employment as twenty-eight hours a week (Quinn, 2000, 46). Well on the surface, this does not seem like a bad thing, as most of people would believe that they would be working at Wal-Mart full time, that is twenty-eight hours a week, and still getting full-time benefits; they would be wrong. Wal-Mart has long been criticized for its low wages and high employee health insurance premiums that are out of reach for most of its workforce. In order to qualify for retirement contributions, an employee of Wal-Mart must work at seven years to become fully vested and able to receive employer contributions. Almost one out of every seven employees who were enrolled in the retirement program left before their seven years were up, leaving their contributions in the account for upper level executives to benefit from (Quinn, 2000, 46).
Health care benefits are another source of friction between employees and their supporters. Although Wal-Mart continues to post record annual profits, its employees pay the price in terms of their availability to obtain health care. Since most employees only work twenty-eight hours a week and managers are pressured to reduce overtime, most of the seventy percent of full-time workers at Wal-Mart will not make over minimum wage, in fact, they will make on average thirty-nine percent less than the minimum wage, or about two dollars an hour less than their non-union supermarket worker counterparts (Quinn, 2000, 46). Most traditional full time workers that work at minimum wage fall well below the poverty line. At Wal-Mart, health care is only available to full-time workers with two years of tenure and will pay an average of fifty percent of the health care costs (Quinn, 2000, 46). Since these workers are unlikely to even be able to afford basic living expenses, health care is cost prohibitive for workers. Wal-Mart workers who are only working an average of twenty-eight hours a week are almost certainly dependant on government assistance to help pay for food and healthcare. At a time when the company is making record profits, to have more than half of their workforce on some type of government assistance seems unethical. It appears Wal-Mart has made a decision to put profits over employee welfare, as the company could easily afford to provide affordable health care benefits for its workers, but instead, chooses to allow the taxpayers to foot the bill.
Is it fair to blame Wal-Mart for the low income and low health care adoption rates of its workers? Wal-Mart says no. It does stand to argue that in order to justify higher wages, employees must bring more skills and experience to the table. Most of Wal-Mart’s employees are unskilled and entry level workers, who would not likely be able to earn enough of a wage to break above the poverty level. Wal-Mart contends it offers many benefits to its workers, including 401K, health-care, an opportunity for profit sharing, and career advancement, of which many of its employee take part in. Although it is turn-over is also quite high, lower wage unskilled jobs tend to have a much lower job satisfaction rate and a higher degree of turn-over.
Find Out How UKEssays.com Can Help You!
Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.
View our academic writing services
Some feel unionization in Wal-Mart stores would solve the employee morale concern and improve ethical treatment of workers. Over the years, Wal-Mart has taken a very anti-union, pro-employee stance on unionization. Wal-Mart trains their managers to discourage unionization by training and discussions with employees. Some feel unions would aid in lobbying for improved worker conditions, while others argue that unions interfere with the manager’s ability to coach their employees and advocate on their behalf. Additionally, union dues can be quite expensive and given the already low take home pay, would be out of reach for many employees.
Knowing that employee benefits and morale appear to be an issue for Wal-Mart, what can actions can the leadership take to overcome this challenge? Although Wal-Mart has been successful in remaining free from unions for over twenty-four years, Wal-Mart leadership must continue to keep an eye on benefits and ensure they are remaining in line with similar companies in the industry (Bianco, 2006, 113). Given the large profit margins posted by the company, it would benefit Wal-Mart morale to offer slightly more than minimum wage to encourage a higher quality of employee candidate and improve overall employee retention and morale.
Wal-Mart has made strides to improve its employee culture and morale though a more proactive outreach program, where executives are going into stores and meeting with employees. These employee meetings are generating valuable feedback that executives are gathering in a means to improve the working conditions of its employees and better ethical behavior from its management. Wal-Mart is further retraining its managers who may have been violating employment rules or fair labor practices, to ensure managers understand the impact of enforcing unfair or illegal or unethical practices.
When corporations understand that both the corporate culture of an organization, along with the manager’s background and their own value system play a part in the decisions made, training and hiring practices can be put into place to ensure the right people are put into supervisory roles. Executives need to ensure their values align with the businesses’ goals and that they themselves are making decisions that are not influenced by selfish reasoning, but instead are for the greater good of the people and the organization as a whole, which leads to ethical decision making (Nelson & Quick, 2010, 134). Once these leaders are making ethical decisions, they can insist on hiring and training people in leadership positions that also have strong values and align with the organization to further drive the company culture through ethical decision making.
In addition to overhauling its employee practices and driving ethical practices, Wal-Mart has also begun to incorporate CSR or Corporate Social Responsibility practices into its business model. Corporate social responsibility is a recent phenomenon in corporate America, where companies are implementing ethical business practices to make itself a better community citizen (Nelson & Quick, 2010, 60). Corporate social responsibility takes into account practices such as: reducing waste in the company, implementing “green” workplaces and initiatives and giving back to the community. Wal-Mart has strived to make itself a better partner in the neighborhoods where it does business. Wal-Mart has produced an annual CSR report since 2006, and continues to make strides in reducing its waste, converting its stores and warehouses to “green” building and operating practices, and improving its supply chain and transportation practices to reduce fuel and its carbon footprint.
An additional action that Wal-Mart has taken to be a better corporate citizen is to give back to the community. Wal-Mart has implemented an Emergency Operations Center, to aid in the company’s response to a natural disaster that could impact its stores. The EOC not only has come to the aid of the Wal-Mart locations devastated by hurricanes, such as Katrina in the Gulf Coast and New Orleans in 2005, but has also aided in providing transportation and distribution of emergency supplies to all residents of the community faster than the Red Cross, state agencies and FEMA were able to provide (Bianco, 2006, 273). Wal-Mart’s ability to understand logistics and supply management and aid in a timelier manner was lauded by residents, critics, and government officials alike.
Although it has made strides to implement a CSR strategy in its domestic locations, Wal-Mart still has a tremendous opportunity to transfer the practices it is putting into place in its international locations. One reason companies choose a globalization distribution strategy is to reduce the cost of labor and manufacturing due to relaxed labor standards oversees. Only after Wal-Mart standardizes its CSR practices across all its locations, domestic and international, and increases its own standards of employee and supplier working conditions above the minimum requirements, will it truly meet its goal to make itself into a pioneer for CSR implementations.
Given a recent survey that almost forty percent of Americans have an unfavorable view of Wal-Mart as a company or due to its employee or business practices; some say companies like Wal-Mart use ethics and corporate social responsibility as a public relations gimmick to reduce the negative attention the company receives from its pending legal actions, lawsuits and sanctions (Bianco, 2006, 272). Others believe that a competitive marketplace is driving companies to understand that their customers, employees, stakeholders, shareholders and suppliers are insisting on these changes and will start choosing to do business with companies who focus on more than just the bottom line. The key to ensuring that ethical changes and corporate social responsible plans are taken seriously by the public is to ensure all executives align with the action items contained in the plans, live the culture of ethical and responsible behavior and drive the culture down to the front line through their words and actions. Only after the company starts to perform on its actions and changes are visible to all within and outside the organization do these initiatives get taken seriously.
Companies who are as big and profitable as Wal-Mart will have their supporters and their critics, no matter what actions they implement or which CEO or executive is leading the company. It is important to remember that no company is perfect; there is always room for improvement. In order to determine where the areas of improvement exist for an organization, such as Wal-Mart, one must understand the history of the organization, the organizational structure and history, how the leadership things and makes decisions, and how topics such as ethics and corporate social responsibility play into the profitability and likability of a company.
In the case of Wal-Mart, executive leadership must continue to evolve the corporate culture to meet the needs of the customer, the employees and the business. Executives and managers must understand their own values and how those values relate to the organizational goals. Goals must be set that are attainable and ethical and communicated from the top down to the front line employees. Ethics must drive all decisions and Wal-Mart should continue to work to improve employee and supplier working conditions and incorporate corporate social responsibility practices into its stores and distribution centers here and abroad. Wal-Mart should strive to do business with other companies and suppliers that echo its company’s value structure and CSR goals. Only when all of these recommendations are met, will Wal-Mart truly be able to become an industry leader in all aspects, and not just profitability!
Cite This Work
To export a reference to this article please select a referencing style below:
