solution

Case

Human Resource Strategy and Productivity at Walmart

Walmart has one of the most productive workforces of any retailer. The roots of Walmart’s high productivity go back to the company’s early days and the business philosophy of the company’s founder, Sam Walton. Walton started off his career as a management trainee at JCPenney. There he noticed that all employees were called associates, and, moreover, that treating them with respect seemed to reap dividends in the form of high employee productivity.
When he founded Walmart, Walton decided to call all employees “associates” to symbolize their importance to the company. He reinforced this by emphasizing that at Walmart, “Our people make the difference.” Unlike many managers who have stated this mantra, Walton believed it and put it into action. He believed that if he treated people well, they would return the favor by working hard, and that if he empowered them, ordinary people could work together to achieve extraordinary things. These beliefs formed the basis for a decentralized organization that operated with an opendoor policy and open books. This allowed associates to see just how their store and the company were doing.
Consistent with the open- door policy, Walton continually emphasized that management needed to listen to associates and their ideas. As he noted:
The folks on the front lines— the ones who actually talk to the customer— are the only ones who really know what’s going on out there. You’d better fi nd out what they know. This really is what total quality is all about. To push responsibility down in your organization, and to force good ideas to bubble up within it, you must listen to what your associates are trying to tell you.

For all of his belief in empowerment, however, Walton was notoriously tight on pay. Walton opposed unionization, fearing that it would lead to higher pay and restrictive work rules that would sap productivity. The culture of Walmart also encouraged people to work hard. One of Walton’s favorite homilies was the “sundown rule,” which stated that one should never put off until tomorrow what can be done today. The sundown rule was enforced by senior managers, including Walton, who would drop in unannounced at a store, peppering store managers and employees with questions, but at the same time praising them for a job well done and celebrating the “heroes” who took the sundown rule to heart and did today what could have been put off for tomorrow.
The key to getting extraordinary effort out of employees, while paying them meager salaries, was to reward them with profit- sharing plans and stockownership schemes. Long before it became fashionable in American business, Walton was placing a chunk of Walmart’s profi ts into a profit- sharing plan for associates, and the company put matching funds into employee stock- ownership programs. The idea was simple: reward associates by giving them a stake in the company, and they will work hard for low pay because they know they will make it up in profit sharing and stock price appreciation.
For years, this formula worked extraordinarily well, but there are now signs that Walmart’s very success is creating problems. In 2008, the company had a staggering 2.1 million associates, making it the largest private employer in the world. As the company has grown, it has become increasingly difficult to hire people that Walmart has traditionally relied on— those willing to work long hours for low pay based on the promise of advancement and reward through profit sharing and stock ownership. The company has come under attack for paying its associates low wages and pressuring them to work long hours without overtime pay. Labor unions have made a concerted but so far unsuccessful attempt over time to unionize stores, and the company itself is the target of lawsuits from employees alleging sexual discrimination. Walmart claims that the negative publicity is based on faulty data, and perhaps that is right, but if the company has indeed become too big to put Walton’s principles into practice, the glory days may be over.