Wal-Mart is one of the US multinational corporations in the retail industry, which have branches in over ten countries. Founded in the year 1962, the firm is currently the largest retail chain not only in US but also around the globe. The retail chain is headquartered in Bentonville Arkansas. Wal-Mart’s aim is to increase it revenue through the innovative retailing processes that offers cheap and quality merchandize to its clients around the globe.
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In fact, the main philosophy of Wal-Mart is to offer its products at the most affordable prices to the clients. Besides, one of the reasons for the organization’s success is its structural design. The low-pricing strategy of the firm is attained primarily through its structural design, which lowers the cost of operations. In terms of structural design, the firm is organized in a short vertical management channel with moderate horizontal departmental blueprint.
The purpose of this paper is to examine the Wal-Mart’s organizational system design. Besides, the paper will identify the relationship between Etzioni’s three approaches to power and compliance in the organization’s chart as well as to examine how the approaches to power and compliance have influenced the development of the system. The paper will then provide recommendations for the most appropriate system.
Wal-Mart Organizational System Design
Wal-Mart has adopted a short vertical management structure aimed at reducing the operations cost. Broadly, the firm’s structural design can be described using the elements of geographical and divisional structures. However, like most of the large corporations, the top management decisions are taken by the executive governing body of board of directors. Moreover, certain decisions such as the appointment of directors are made by the shareholders at the annual general shareholders meeting.
Generally, the top decision-making organ of the organization is Annual General Shareholders Meeting (AGM). However, the Board of Directors (BOD) is the executive organ that executes the decisions made at AGM. The board of directors consists of fourteen members that represent various organs of the organization.
The board of directors normally implements the decisions made at the annual general meeting and ensure day to day running of the organization. The Chief Executive Officer (CEO) and the representatives of the annual shareholders general meeting are responsible for making strategic decisions in the organization, which are then implemented by the board of directors.
The organization is also divided into divisional and regional subdivisions. The sub-divisions enjoy autonomy in their decisions and operations. However, the strategic decisions are made at the top of the management. In fact, the corporation’s sub-divisions include US Wal-Mart stores, Sam’s Club and Wal-Mart international. These sub-divisions have greater autonomy in terms of governance and operations.
The sub-divisions are further divided according to the principles of geographical locations. For instance, the US Wal-Mart store is divided into Wal-Mart West, Wal-Mart South and Wal-Mart North. Wal-Mart international is divided into Wal-Mart China, Wal-Mart India, Wal-Mart Brazil and Wal-Mart Mexico. The sub-divisions are represented by the regional presidents.
The senior vice president and the regional presidents normally meet at the headquarters to normalize the operations of the basic market and geographic divisions in the US. Below the regional presidents are the Market Managers who are responsible for controlling operations related to Wal-Mart International. In the US stores, local Store Managers are directly responsible for operations, and they work with Assistant Managers to control the strategic plan in a district (Swanson, 1992). Department Managers in stores are responsible for the direct control of the work of the store’s staff, including cashiers, sales assistants, and stockers.
The Management Structure Chart
The Relationship between Etzioni’s three Approaches to Power and Compliance in the Organization’s Chart
Etzioni invented ground-braking ways of evaluating the structure of the organization. In many circumstances, organizational scientists term the Etzioni’s evaluating method of the structure of the organization as the compliance supposition (Lunenburg, 2012). According to Etzioni, firms’ structures are assessed with regards to the kind of force applied to create change in the perceptions of the employees, shareholders and the customers.
Besides, the organizations are grouped according to the level of participation the stakeholders have in the organization. Etzioni identified three types of power within the organization which are coercive, utilitarian and normative (Shaw & Zollers, 1993). The nature of power is closely linked to the level of participation. The categories of the level of employees participation range from alienative to moral. While the relationships between the power and involvement help to clarify the pattern among the components, life in organizations follows a complex process (Lunenburg, 2012).
Types of Power and Compliance
In this form of power, force is applied to create fear. In fact, control or subordination is achieved through the application of force and coercion (Lunenburg, 2012). The type of power and need for compliance is very common in corrective institutions unlike in the business organizations. The organizations that utilize this type of power are very bureaucratic with long vertical structures. Such organizational structures are designed to instill discipline through force. However, the lowest management structures of the firm particularly the in-store hourly employees are still intimidated and experience this form of coercive force (Champoux, 2011).
In this power type, rewards are applied to gain loyalty and increased performance (Greenwood & Miller, 2010). The rewards systems may depend on the level or the position on which the employee is holding (Greenwood & Miller, 2010). The type of power is very common in business organizations such as Wal-Mart. In fact, this is the type of power which is identified with Wal-Mart.
In other words, like all firms, Wal-Mart utilizes this form of compliance to control its employees at the lower cadre. The form of the institution structure implies that the reward system depends on the arrangement on the power structure. In fact, the form of the structural design of the organization closely relates to the Etzioni’s utilitarian type of power (Greenwood & Miller, 2010).
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Organizations utilize normative power to control lower cadre employees through the provision of intrinsic rewards (Shaw & Zollers, 1993). Some of the intrinsic rewards include interesting work, social responsibility and administrative ritual. In most cases, the management’s power in this situation depends on the capability of manipulating the symbolic rewards. In fact, this kind of power is evident in Wal-Mart in which the firm utilizes various symbolic manipulations to coerce employees (Shaw & Zollers, 1993).
Types of Involvement
Etzioni argues that the type of power firms apply to get subordination depends on the subordinate employees’ involvement. Involvement in this case is the orientation to the level of management that can be arranged from the top level to the lower ranks (Swanson, 1992). The participants’ engagement in the management can also have the form of categorization that ranges from calculative to moral (Swanson, 1992). For instance, in Wal-Mart, the type of involvement is calculative in which lower level employees see the management with calculative attitude.
How the Approaches to Power and Compliance have influenced the Development of the System
According to the compliance approach, organizations are categorized by the form of power they utilize to direct the behavior of employees as well as other stakeholders including the communities in which they operate (Lunenburg, 2012). Besides, organizations are categorized according to the sort of involvement of its members. In many firms, the compliance is determined by predictable combinations of force and engagement. Some organizations may use coercive-alienative while others may apply utilitarian-culculative.
The last form of combination is normative-moral (Swanson, 1992). Firms can either combine two of these predictabilities or utilize all the power forms. However, a firm that attempts to utilize power which is not appropriate in the environment in which it operates reduces the efficiency and effectiveness of its operations (Lunenburg, 2012). Retail firms tend to be utilitarian organizations. In terms of this form of reasoning, domineering and ethical application of coercive and normative power by the management and employees can lead to increased losses.
Besides, through the application of Etzioni’s innovative approach to the structure of the organization, retail organizations such as Wal-Mart have a design that reflects the suitable power and involvements that would enable their operations. In fact, majority of business organizations’ structural designs follow the compliance theory proposed by Etzioni (Lunenburg, 2012).
According to Etzioni, organizations’ structural design may be influenced by coercive, utilitarian and normative forces (Greenwood & Miller, 2010). Besides, the influencing forces are also related to three categories of participation (Lunenburg, 2012). The organizational structure would take the form of combination between the power and involvements of the participants and primarily influenced by the environment (Lunenburg, 2012). Wal-Mart’s structure is influenced by these forces and takes the form of utilitarian-calculative depending on the major goals of the organization, the needs of the clients, employees and shareholders.
Even though Etzioni proposed coercive power, it does not have much influence on Wal-Mart. However, the bureaucratic form of structure the organization adopts could be drawn from the characteristics of the coercive model of power interrelations (Shaw & Zollers, 1993).
The power interrelations have greater influence on the Wal-Mart’s organizational structural design. The rewards systems of the business organizations are pegged on the structure of the organization (Champoux, 2011). Wal-Mart follows similar principles in its structural design.
The normative power is also the type of interrelations that have some influence on Wal-Mart. In fact, business organizations like Wal-Mart have the ability to control lower cadre employees through the provision of intrinsic rewards. Wal-Mart is well known for its ability to manipulate the lower level employees through various forms of coercion and symbolic rewards.
Depending on the structural arrangement, Wal-Mart should adopt short-vertical structure with emphasis on the horizontal design. The design remains critical in allowing inter-organizational communication and consultations among the departments and regions, which is significant in increasing the employees’ performance. The structure also reduces the attitudes that arise from the power differences including calculative perceptions that are associated with utilitarian power that characterizes retail organizations.
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Shaw, B. & Zollers, F. E. (1993). managers in the moral dimension: what Etzioni might mean to corporate managers. Business Quarterly, 3(2), 153-168.
Swanson, D. (1992). A critical evaluation of Etzioni’s socioeconomic theory: implications for the field of business ethics. Journal of Business Ethics, 11(7), 545-553.