Reference no: EM131726087

Case study

Wal Mart, the largest retailer in the world, is currently facing major challenges concerning how to motivate its workers. For years, the company used a relatively easy and straightforward method to maintain motivation and loyalty. Specifically, the firm relied heavily on stock incentives to motivate otherwise low paid employees. To illustrate the power of stock incentives during Wal Mart's history, consider that if someone had paid $ 1650 for 100 shares of Wal - Mart in the original public offering of the firm's stock in 1970, that stock would have been worth $ 3.5 million in 1993.

Throughout the late 1970s and 1980s, Wal - Mart stock rose significantly every year. The company funds its pension plan through a profit sharing program, with most of the money invested in its own stock. Beyond this, Wal Mart encourages employees to buy stock in the company directly by offering it for sale at a 15 percent discount. Purchases can be arranged through payroll deductions.

Employees have long believed that their contributions are paying off, not only for Wal Mart but also for themselves, in continuous growth in both the pension fund and their own personal portfolios. They have tended to be highly motivated and very loyal to the company. This loyalty and motivation were reinforced by Sam Walton himself, the folksy founder of the company, whose good-natured approach and fair business practices created one of the most loyal and dedicated workforces in the retailing industry.

In the 1990s,however, things have begun to change. First, although the company is still highly profitable, the firm's growth, revenue, and profit increases have level off. As a result, Wal - Mart's stock price has begun to decline. In 1993,the firm's stock price was slightly over $30 a share. By the end of 195,it had slid to around $20 a share. This decline has significantly reduced the value of both the pension fund and individual portfolios people have amassed through the payroll deduction plan. Consequently, The motivation and loyalty that the firm enjoyed for so long have begun to slip.

The problems have also been magnified by a subtle shift in corporate culture that has emerged since the death of Sam Walton in 1992.The firm's new management has attempted to maintain the same way of doing business and the same personal relationship with its employees, but many executives lack the charisma and the personal touch that Sam promoted. Moreover many newer employees of the firm never had a chance to meet or see Sam Walton.

Aside from the general sense of declining loyalty and motivation, Wal - Mart faces other problems resulting from its economic woes. For example, the firms have always been relatively successful at avoiding unionization. Because of growing disenchantment with pension plans other incentives, however, unions have had more success in recent times. For example, from 1991 to 1993,there were only three union organizing efforts in the entire company. But there were four organizing campaigns in 1994 alone.

What lies ahead, of course, is anybody's guess. Even though the image of Wal - Mart as an employer has perhaps been sullied a bit, most experts would still rank it among the best in the industry from an employee's standpoint. And indeed the firm remains profitable and its managers are confident that the stock price will again begin to go up. When this happens, they believe, workers will again become more satisfied with the company and more motivated to contribute to the bottom line. Some, however, believe that the damage has already been done and that Wal - Mart will never again regain the lofty image it once presented.

1. Which motivation theories best explain what has happened at Wal - Mart?

2. If you were running Wal - Mart today, how would you convince your employees to remain motivated?

3. Is it possible for an organization to provide too many rewards and too much positive reinforcement? If so, how might this affect an organization?