Introduction
Appropriate management of organizations incorporates a variety of domains, including the development of organizational structure, job design, and reward system that will enable goal attainment. Walmart is considered one of the biggest companies working in the contemporary retail industry. This paper aims to provide a brief description of Walmart, evaluate its structure and current issues, provide recommendations for improvement, and discuss compensation packages for employees and executives.
Company Description
Walmart is an organization operating in the retail industry, both online and offline, that sells a wide range of products at affordable prices. For an extensive period, this organization focused solely on operating its physical store locations, but in recent years, the shifting consumer demand urged it to explore online shopping. Efron (2017) describes the goal of the company in the following manner – “Wal-Mart improves its profit and loss (P&L) every time it is able to save customer money” (para. 10). Therefore, the focus of daily work for this establishment, which shapes its structure and people management strategies, is the ability to present essential products to their customers at convenient locations for affordable prices.
Being the largest retailer in the country, this company has to focus on managerial excellence in regards to organizational structure and human resources to ensure the retention of its competitive advantage. According to Efron (2017), approximately 1% of the US population is employed by this organization. Thus, millions of people work for Walmart and fulfill the daily tasks to ensure that customers at these supermarkets can receive desired products. The number of stores that operate under this brand name in 2019 is estimated at 4,769 locations (“Total number of Walmart stores,” 2019). The type of organizational structure that Walmart has is a functional hierarchy, which incorporates crucial components such as vertical authority structure and the ability to impact the entire company simultaneously. More specifically, this business has a structure that implies strict division for each domain of work, for instance, human resources or logistics. Additionally, apart from the CEO, each employee has a supervisor or manager who oversees the work and ensures that the current goals are reached. These regional and store managers can communicate with the head office and efficiently implement changes or new strategies on site.
It can be argued that the organizational structure chosen by this company, together with its culture, allows it to remain highly competitive and retain its leadership position for years. It is because managing over four thousand supermarkets across the world requires a cohesive workflow organization in which each employee knows what he or she has to do. Through this approach, companies can minimize the number of errors that may occur.
One issue that arises from the existing structure that Walmart applies to lack of flexibility. The organizational model and top-down approach do not allow this establishment to react to changes in its external environment quickly. This is reflected in the inability of the regional managers to offer and discuss changes rapidly, as the process requires approval and extensive communication with executives. This issue will be further explored in the following sections of this paper. Brickley, Zimmerman, and Smith (2016) argue that apart from the general description of the organizational structure, it is crucial to examine the architecture, which encompasses how Walmart assigns decisions, rewards its employees for excellent work, and evaluates the performance of both individuals and business units.
Agency Problem
It should be noted that despite the overall decline in sales in the industry, Walmart was able to retain and even improve its position, which is partially a result of appropriate managerial decisions. Efron (2017) states that the organization’s online sales increased by 63%, and earnings per share exceeded expectations by $0.04. The author suggests that the current strategy and adherence to the purpose of operations are the vital elements allowing Walmart to thrive in the declining market of retail.
The agency problem of Walmart is inefficient cooperation between the head office working in on the administrative matters and regional managers and employees. This is especially evident in the stores located overseas that require a significantly different approach to management. The cause of the issue outlined above is an outdated organizational structure that does not allow quick adoption of innovation and new strategies. Changes to this structure and investment in employee training can help control the problem better because smaller administrative units will have the authority to react to specific challenges of the retail industry in their geographic area without a need to obtain permission from the CEO.
Job Design
Due to a large number of employees working for Walmart, its job dimensions incorporate several essential skills, including the ability to resolve problems independently. Brickley et al. (2016) state that the aspects include two critical components – task variety and authority to make and carry out decisions. A variety of combinations for the mentioned elements exist, each presenting a specific organizational issue, while a general trend is to develop positions where individuals have both a large number of tasks to perform and an appropriate authority to fulfill them. At Walmart, the current structure does not allow staff to work in accordance with a proper combination of authority and tasks. Mourdoukoutas (2016) states that many in-store employees have a problem with a lack of training and power despite being challenged continuously to assist customers with a variety of matters. This indicates the absence of authority provided to these employees. Tasks variety, however, is sufficient at Walmart because individuals can sign up to work in different departments and choose their preferred areas of operations.
The job design incorporates a connection of work responsibilities developed by human resource managers and their correlation with the actual tasks that have to be performed to fulfill the goals of an organization. For Walmart, this function is critical because this business has to ensure efficient operations of thousands of its stores, which includes managing the supply, ensuring that products are stored on shelves, and helping customers check out. Within the administrative units, the organization’s job design should be improved to ensure that employees provide better service to customers. This will require granting them authority to assist and answer questions and provide the additional training that will result in the improvement of skills and knowledge.
Thus, the current design is not appropriate for Walmart because it obstructs the organization from adopting innovative strategies and rapidly transforming in accordance with the demands of the retail environment. A more appropriate structure would involve grouping current departments and branches by geography instead of the current matrix organization. Mourdoukoutas (2016) states that the company’s “large stores, which worked nicely in rural areas, do not fit well in big cities” (para. 2). Moreover, locations opened overseas do not bring substantial revenue due to issues connected to different legal regulations and cultural differences that impact the shopping habits of individuals in a specific state.
Additionally, it is vital for Walmart to review the structure of supervisors and their responsibilities. Cain (2018) states that in-store employees struggle due to a need to adhere to recommendations of a variety of managers, which indicates a significant issue of the design and structure. Additionally, despite having a large number of executives working on ensuring the efficiency of operations, many supermarkets experience understaffing resulting in larger volumes of work for employees and long lines of customers.
However, despite the suggestions for possible improvements, it should be noted that Walmart remains to be an efficient organization. Cain (2018) states that the current system allows existing employees to apply and be considered for a new job opening right away, which provides additional incentives for work quality. The ability to maintain effective operations despite the fact that other retailers in the industry experience significant sales decline, which was discussed above, is another factor suggesting the efficiency of the current system.
Compensations
Similar to other retailers, Walmart developed a system of rewards that is designed to incentivize employees to perform better. Brickley et al. (2016) state that “it is difficult to devise compensation plans that motivate managers in large companies” (p. 119). Thus, this aspect of management is especially complex for Walmart because of a large number of difficulties connected to a need for ensuring that employees behave in a manner that benefits the company arise. Firstly, for the staff, the company offers trading and career advancement opportunities as the primary benefit (“Opportunity & advancement,” n.d.). Additionally, prevention care and medical plans are estimated at $26 per day and cover a large number of procedures, including dental care and vision are included. The reimbursement package offers a health savings plan and a matching system that allocates up to $700 to an employee’s medical expenses. Finally, the Resource for the Living system is a program that aims to provide counseling services to Walmart’s staff.
The compensation package for executives involves more benefits when compared to that of employees. For instance, the CEO was paid $22.8 million in 2018, including “$15.69 million in stock-based pay, $4.74 million in non-equity incentive pay and another $1.1 million other compensation” (“Walmart CEO’s salary,” 2018, para. 2). Thus, the executives receive both a salary and additional incentives such as company stock, which provides valid motivation for them to work on improving the company’s market share and revenue because they can receive financial benefits from these improvements.
While Walmart offers substantial benefits, several improvements can be made to improved employer satisfaction. The most significant issue is that the wage rates provided by the company to its on-site employees are low and should be increased. Additionally, while the executives and managers receive substantial compensation and benefits, those offered to other staff members are basic and could be improved by allowing better health care and pension plans.
Conclusion
Overall, the organization discussed in this paper is among the biggest companies in the world that employs millions of people. While Walmart remains to be a successful retailer, there are several issues that can improve its operations. The current structure and hob design do not provide enough authority to employees and obstruct innovation. Additionally, compensation for employees is insufficient and can be improved by offering higher wages and improved healthcare and pension opportunities.
References
Brickley, K., Zimmerman, J., & Smith, C. (2016). Managerial economics & organizational architecture (6th ed.). New York, NY: McGraw-Hill.
Cain, A. (2018). Walmart employees dish on what it’s actually like to work at the retail giant.Web.
Efron, L. (2017). Why Wal-Mart is winning in a losing industry. Web.
Mourdoukoutas, P. (2016). Walmart’s outdated management style is failing customers. Web.
Opportunity & advancement. (n.d.). Web.
Total number of Walmart stores in the United States from 2012 to 2019, by type. (2019). Web.
Walmart CEO’s salary is 1,188 times the median employee’s. (2018). Web.