People Problems at Wal-Mart Perception that HR does not add value Lack of investment in HR HR...
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![Page 1: People Problems at Wal-Mart Perception that HR does not add value Lack of investment in HR HR doesn’t produce value.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649ecd5503460f94bda0c6/html5/thumbnails/1.jpg)
People Problems at Wal-Mart
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Sam’s/Wal-Mart vs. Costco
• Refresher Quiz: Profit = xxx – yyy– Revenue – Costs
• Lowering costs leads to _____– Higher profit
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Labor “Cost” or “Investment” Sam’s Club/WM Costco• Avg. Wage $10.11/hr $17/hr• Health Ins. 46% covered 85%• Health Ins. 67% prem. Paid 92%
– HI Cost. $3500 $5735• Retirement 64% covered 91%• Retirement $747 $1330• Union 0% 13%• Labor Costs 42% of operating costs 70%
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Wal-Mart Profit
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Labor “Cost” or “Investment”• Net Result?? Sam’s Club/WM Costco• Profit/Employee$7,804
$15,890• Turnover 44% 17%• Shrinkage (Theft) 1.0% sales 0.2%• Productivity $525 sales/ft2 $886
• Wal-Mart’s “Missing” Profit = $16,980,600,000
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Wal-Mart vs. Costco Stock Price
Labor “Cost” or “Investment”
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DANGEROUS SAFE VALUABLE
Wal-Mart’s Message to Managers
We make money by
cutting costs
Your job is to help us make money
Your job is to cut
costsThe
biggest cost you control is
labor
You should
cut labor costs
A little lower
Lower
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Lowering Labor Costs
• Pressure may lead to illegal activities– Wage & Hour lawsuits– 12/05 Ordered to pay $172 million for failing to
provide meal breaks to 116,000 CA workers– Fined repeatedly for violating child labor laws– Largest class action case in history for sex
discrimination
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Gender-Based Pay DisparitiesJob % of
Women in jobs
Male Salaries
FemaleSalaries
Differencein Salaries
Reg. Vice Pres. 10% $419,400 $279,800 $139,600
District Mgr 10 239,500 177,100 62,400
Store Mgr 14 105,700 89,300 16,400
Assistant Mgr 36 39,800 37,300 2,500
Mgmt. Trainee 41 23,200 22,400 800
Dept. Head 78 23,500 21,700 1,800
Sales Associate 68 16,500 15,100 1,400
Cashier 93 14,500 13,800 700
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Were Women as a Group Less Qualified for Management ?
Performance Ratings 2001
3.2
3.4
3.6
3.8
4
4.2
4.4
4.6
All Hourly Sales Assoc. Dept. Managers
Job Positions
Per
form
ance
Sco
res
Women
Men
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“Women don’t want to be managers”
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In the news…
• June 3, 2010 New York Times
• June 20, 2011
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DANGEROUS SAFE VALUABLE
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Competitive Advantage
• Something that allows one company to successfully compete against its competitors.– Valuable: Does it increase revenue or decrease
costs?– Rare: Is it unique to this company?– Not easily imitated or substituted: Is it difficult to
copy?
• Example: Wal-Mart’s size
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The Cost of Turnover• Turnover Costs (1.5 – 2.5 x salary)• Separation Costs
– Exit interviews, administrative functions, separation pay, unemployment tax
• Replacement Costs– Advertising, selection function, staff
meetings, travel/moving expenses
• Training Costs– Formal/informal training, performance
differences
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The Cost of Turnover?• SAS
SAS 2% T/O SAS 20% T/O
# of employees 6,000 6,000
Avg. Salary $60,000 $60,000
Avg. Replacement Cost
$90,000 $90,000
Turnover 120 1,200
T/O Cost $10.8M $108M
Savings $97.2M
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Savings from low absenteeism SAS (6,000 employees)
National Average Absenteeism = 5 days/yr X 6,000 = 30,000 days/year X $240/day = $7.2 Million SAS Absenteeism = <2 days/yr X 6,000 = 12,000 days/year X $240/day = $2.88 Million Savings of $4.32 Million
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• Some companies get it.
• Fortune’s Best Companies to Work For
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Competitive Advantage
• Something that allows one company to successfully compete against its competitors.– Valuable: Does it increase revenue or decrease
costs?– Rare: Is it unique to this company?– Not easily imitated or substituted: Is it difficult to
copy?
• Example: HR Function at SAS