Reference no: EM132102722

Case study of Strategic Human Resource Management in Wal-Mart Stores

Introduction

Sam Walton established Wal-Mart Store in 1962 on three revolutionary philosophies; respect for the Individual, service to our customers and strive for excellence. Walmart, Inc. is not only the largest discounted retailer in the world, it now also ranks as the largest corporation in the world. The retail giant dwarfs its nearest competition, generating three times the revenues of the world's number two retailer, France's Carrefour SA. Domestically, Wal-Mart has more than 1.2 million workers, making it the nation's largest nongovernmental employer. U.S. operations include 1,478 Wal-Mart discount stores (located in all 50 states. Its international operations commenced in 1991 covering Canada and Puerto Rico; Wal-Mart Supercenters in Argentina, Brazil, China, Germany, Mexico, Puerto Rico, South Korea, and the United Kingdom.

Walmart Company strives to maintain its competitive advantage through its satellite-based distribution system, and by keeping store location costs to a minimum by placing stores on low-cost land outside small to medium-sized towns, no matter in the US or in its abroad affiliations.

Corporate strategy and HR strategy at Wal-Mart

Walmart purchased massive quantities of items from its suppliers to form scale economy, and with the efficient stock control system, help in making its operating costs lower than those of its competitors. It also imported many goods from China, “the world factory” for its low cost.

Managers engage in three levels of strategic planning (Gary Dessler, 2005): the corporate-level strategy; the business-level strategy and the function-level strategy. The functional strategy should serve the overall company strategy so the corporate strategy could be implemented more effectively and efficiently.

The basic premise that underlying SHRM is that organizations adopting a particular strategy require HR practices that are different from those required by organizations adopting alternative strategies (Jackson & Schuler, 1995). Generally, there are two primary SHRM theoretical models the universalistic best practices and the contingency perspective of “best fit”. The contingency perspective of “best fit elucidates that the individual HR practices will be selected based on the contingency of the specific context of a company. As Wal-Mart has different corporate strategy with those retailers with differentiation strategy, which actually cultivates the primary contingency factor in the SHRM literature. What’s more, we should be reminded that the individual HR practices will interact with firm strategy to result in organizational performance, and this interaction effects make the “universal best practices” may not apply so well in a specific company.

The following part we’ll examine the “fitness” of HR practices in Walmart with this theoretical model, which is obviously also the integration process of HR practices with the contingency variables to some extent.

From the recruitment. For example, the New York Times (January 2004) reported on an internal Walmart audit which found “extensive violations of child-labor laws and state regulations requiring time for breaks and meals.” The cheap price of children labors and minors make it earn more cost competitive advantage over other companies. Walmart also faced a barrage of lawsuits alleging that the company discriminates against workers with disabilities, for the recruitment of these people means providing more facilities for them and the loss of efficiency to some extent.

From training perspective, through training on behavioral requirement for success and encouragement, Walmart tried to adjust the employee behaviors and competencies to what the company’s strategy requires, that is to low down cost more. This logic is also embodied in its “lock-in” of its nighttime shift in various stores. Through this enforced policy, Walmart tried to prevent “shrinkage” behavior of its employees, to eliminate unauthorized cigarette breaks or quick trips home.

From the performance management perspective, Walmart made very high demanding standards and job designs. The New York Times reported Walmart had extensive violations of state regulations requiring time for breaks and meals. There are so many instances of minors working too late, during school hours, or for too many hours in a day, for the performance appraising just force them to do so. In the Career management, Walmart also goes great lengths to reduce cost, there are many cases that women sued Walmart for its discriminated policy against women by systematically denying them promotions and paying them less than men did. Women are pushed into “female” departments and are demoted if they complain about unequal treatment just for more cost reduction against its competitors.

From the compensation management perspective, Walmart has also showed very aggressive HR policies and activities. Walmart imported $15 billion worth of goods from china, for not only the strategic consideration of supplier chain economy, but also Walmart has some factories in china, whose products are branded with Walmart name. With this method, Walmart pays much less to Chinese labors in this “world-factory” and earn some advantages, so we could just see how the Walmart corporate strategy is just intensely integrated with its HR policy. In 2002, operating costs for Walmart were just 16.6 percent of total sales, compared to a 20.7 average for the retail industry as a whole, which supported greatly the overall strategy. Walmart workers in California earn on average 31 percent less than workers employed in other large retail business. Actually, with other operating and inventory costs set by higher-level management, store managers must turn to wages to increase profits, and Walmart expects the labor costs to be cut by two-tenths of a percentage point each year.

From the employee benefit and safety perspective, workers eligible for benefits such as health insurance must pay over the odds for them. In 1999, employees paid 36 percent of the costs. In 2001, the employee burden rose to 42 percent. While in the US, large-firm employees pay on average 16 percent of the premium for health insurance. Unionized supermarket workers typically pay nothing. Walmart was frequently accused of not providing employees with affordable access to health care, but the top managers and HR managers know their focus was just to try their most to implement Walmart’s corporate strategy.

Finally, from the labor relations perspective, Sam Walton sought to bring great value through aggressive discounting to customers. Because unionized supermarket workers typically pay nothing, Walmart has strong anti-union policy. Allegations of firing workers sympathetic to labor organizations have been made, all new employees are shown a propaganda video tape, which said joining a union, would have bad implication for them, and the employees should never sign a union card. In the UK it was reported in the Guardian that Walmart is facing the prospect of a bruising legal battle with the GMB trade union in a row over collective bargaining rights, for the union would not accepting Walmart withdrew a 10% pay offer to more than 700 workers after they rejected a new package of terms and conditions, which included giving up rights to collective pay bargaining. Here there may be some doubt why Walmart has recently allowed unionization in their stores in China, where unionization is mandatory. But actually this mandatory rule is made a long time before Walmart walk into china, so why Walmart give up its persistence in not having a some unions, and its former reason to China government is that it did not have any unions in its global working. So how do we see Walmart’s compromise if that constitutes a “compromise”?

It has been argued that doing business in China is particularly difficult because of the higher relative importance of personal relationships (guanxi), as opposed to the specification and enforcement of contracts in the West (Davies et al, 1995). Walmart China has tried every effort to develop good relationships with China government and other influence groups. So Walmart made this exception of have unionizations is just in accordance with its corporate strategy and HR strategy. If it ignores the Chinese government’s firm rule, its cost would just outweigh what it would save by organizing no unions in its labor relations management as Walmart provides little power for Chinese workers as the unions are controlled by the state.

Conclusion:

Therefore, from all those above content we know the human resource management is of strategic importance to Walmart. Both the top managers and HR executives should pay more attention to the everyday employment management. They should play more roles that are positive in training and using their human resources, and maybe cultivating better organization culture, all of which may prove more cost saving, and correspondingly help realize Sam Walton’s simple philosophy of “bringing more value to customers”.

Can I have the answer to these questions;

Reference to the Six Component Model, describe the type of fit between HR strategy and the institutional context. Explain to what extent the labour relations practices (with special focus to its operations in China) of Walmart is aligned with the institutional context.

Based on the six-component model, analyze the four types of “Fit Approach” and support your answer with examples from the case study.