Strategic Human Resource

Management
Aligning HR and Business-Level Strategy:
 Human Resource
Management
 HR’s focus is on attraction, retention,
and motivation of employees
 In many organizations, employees are
key to creation of sustainable
competitive advantage
 Q: For Wal-Mart, in what way does HR
contribute to creation of sustainable
competitive advantage?
 “HR’s Toughest Challenges
for 2006”
 Ensuring compliance w/ federal
and state employment laws
 Retaining talent in an improving
economy
 Managing performance
 Developing leadership
 Dealing w/ rising health care costs
 Source: Business & Legal Reports, 5/2/06
 Listening to HR’s Critics
 Quantify people-management results into dollars
 Productivityof workforce
 Cost of vacant position
 Cost of keeping bad manager
 Dollar impact of hiring and keeping top performers vs.
average ones in mission-critical jobs
 Adopt “fact-based” decision-making
 Not“I think” or “I believe” but “I know” re: cause and
effect
 Causes of turnover
 What motivates workers to produce more
 Which HR actions can turn business unit around
 Source: Workforce Management, 7/31/06
 Effective HR Strategy
Formulation and
Implementation

Organizational
Organizational Consistency Environment
Environment
Strategies
Strategies
Fit Fit

Consistency
Consistency

Improved
Improved
HR Strategies Firm
Firm
Performance
Performance
Fit Fit
Organizational
Organizational Organizational
Organizational
Characteristics
Characteristics Consistency Capabilities
Capabilities
Selected HR Strategies That Fit Porter’s
Three Major Types of Business
Strategies
Business Common Organizational
Strategy Characteristics HR Strategies
Overall • Sustained capital • Efficient production
cost investment and access • Explicit job descriptions
leadership to capital • Detailed work planning
• Intense supervision of • Emphasis on technical
labor qualifications and skills
• Tight cost control • Emphasis on job-specific
requiring frequent, training
detailed control reports • Emphasis on job-based
• Low-cost distribution pay
system • Use of performance
• Structured organization appraisal as a control
and responsibilities device
• Products designed for
ease in manufacture
Selected HR Strategies That Fit Porter’s
Three Major Types of Business
Strategies
Business Common Organizational
Strategy Characteristics HR Strategies
Differ- • Strong marketing • Emphasis on innovation
entiation abilities and flexibility
• Product engineering • Broad job classes
• Strong capability in • Loose work planning
basic research • External recruitment
• Corporate reputation for • Team-based training
quality or technological • Emphasis on individual-
leadership based pay
• Amenities to attract • Use of performance
highly skilled labor, appraisal as
scientists, or creative development tool
people.
 “Women vs. Wal-Mart”
AVERAGE ANNUAL
EARNINGS** IN 2001
-----------------------------
NO. OF % OF MALE FEMALE
JOB EES* WOMEN SALARIES SALARIES

REGIONAL V-P 39 10% $419,400 $279,800

DISTRICT MNGR 508 10 239,500 177,100
STORE MANAGER 3,241 14 105,700 89,300
ASST MNGR 18,731 36 39,800 37,300
MNGT TRAINEE 1,203 41 23,200 22,400
DPT HEAD 63,747 78 23,500 21,700
SALES ASSOC 100,003 68 16,500 15,100
CASHIER 50,987 93 14,500 13,800

* Full-time ** Including bonuses Data: Richard Drogin

 “Women vs. Wal-Mart”
 Wal-Mart culture built on inspirational leadership, autonomy,
trust
 Bring Ees into org, convert them to principles: respect for
individual, customer service, excellence, and imperative to buy
and sell at lowest price possible
 But practices also may create barriers, e.g., job posting
 Wal-Mart famous for promotion from within – more than two-thirds
of managers started as hourly Ees
 Hourly job posted within stores, but until current suit, Co had
never posted openings for mngt training positions
 Not the Wal-Mart way, thought to be too bureaucratic…
 Wal-Mart way was to trust that store mngrs will promote those who merit
promotion
 Co now also developing formula for pay increases based on evaluation
ratings, experience, and other factors to make raises more uniform
 Another aspect of culture which may create barrier is
willingness to move for the job
 Single mother Asst Mngr involved in litigation moved nine times in
eight years across three states
 Key for Wal-Mart is making processes fair without losing
culture that makes it special
 Source: Fortune, 7/21/03
 “Big Retailers Face Overtime
Suits As Bosses Do More
‘Hourly’ Work”
 Retailers such as Wal-Mart, RadioShack, Dollar General
facing lawsuits accusing them of using low-level managers
to do work of non-managers in order to avoid paying
overtime
 Suits claim little difference between job duties of hourly ees
and asst mngrs, esp nighttime asst mngrs (“glorified stockers”)
 RadioShack mngrs required to work at least 52 hrs/wk
 Under FLSA, mngrs may be entitled to overtime if more
than 40% of their time is not spent supervising or if jobs
don’t include decision making
 Wal-Mart tries to hold labor costs to 8% of sales, cf. 9-10%
on average at other large-store retailers
 Alleged that to stay within budget, Wal-Mart district mngrs
have encouraged store mngrs to send hourly ees home before
shift is over, then asst mngrs (who are required to work at
least 48 hrs/wk) may stay on job for as much as 75 hrs/wk to
cover
 Portion of store mngr compensation is annual bonus pegged to
store profit
 Source: Wall Street Journal, 5/26/04
 “In Ad Blitz, Wal-Mart
Counters Public Image as
Harsh Employer”
 Wal-Mart bought full-page ad space in January 2005
in more than 100 newspapers nationwide
 Co said ads are attempt to set record straight on labor issues
 “It’sbecoming clear that we have to do more and be more
aggressive in telling our story. The purpose is to be proactive
and initiate debate.”
 New web site: www.walmartfacts.com

 Amid criticism of labor practices, in 2004 Co initiated

new wage structure to increase pay of some hourly
Ees, created 40-person compliance team to ensure
labor laws adhered to and diversity goals met
 Also linked percentage of executive bonuses to certain
diversity goals
 Source: Wall Street Journal, 1/14/05
 “The Wegman’s Way”
 Wegman’s labor costs run between 15% and
17% of sales, cf. 12% for most supermarkets
 Annual turnover rate is 6%, cf. 19% for
grocery chains w/ similar number of stores
 Industry’s annual turnover costs can exceed
entire profits by more than 40%
 Gallup survey found that over one-month
period, shoppers who were emotionally
connected to supermarket spent 46% more
than shoppers who were satisfied but lacked
emotional bond w/ store
 Source: Fortune, 1/24/05
 Current Developments in
Union Organizing
 Wal-Mart has won all but one of seven union votes in
U.S. (as of 10/02)
 One U win was butcher’s dept in TX store, which was disbanded
two weeks after election
 Coannounced plans to phase out butchers and use prepackaged
meat in 180 stores, said timing of decision was a coincidence
 When Wal-Mart acquired Woolworth’s operations in Canada, it
bought 120 stores, but not the seven that were unionized
 Wal-Mart EVP of People: “Where associates feel free to
communicate openly with their management, why would they
need a third party to represent them?”
 Co gives managers 56-page guide, “The Manager’s Toolbox to
Remaining Union Free”
 “It’simportant for you to be constantly alert for efforts by a union
to organize your associates”
 Current Developments in
Union Organizing
 “In the 1970s, General Motors was the nation’s largest
corporate employer, and thanks to its contracts with
the UAW, it not only set the standards, but it raised
the standards for all workers. Wal-Mart is doing the
exact opposite. Nowadays it is the nation’s largest
corporate employer, and it is lowering standards for
everyone.”
 Organizing director for UFCW
 Wal-Mart says its average hourly pay for FT ees is
$9.68/hr
 UFCW counters that it’s only $8.23/hr (based on independent
statistical analysis)
 BLS estimates average hourly wage for all non-supervisory
retail ees is $12.34
 Wal-Mart spokesman says BLS data inflated by overtime, and that
Wal-Mart’s pay scale is competitive
 Source: CNNMoney, 7/27/05
 Current Developments in
Union Organizing
 Legal union avoidance tactics have impact
 Las Vegas Sam’s Club held mandatory Ee meetings every
week to express anti-U views
 “You can speak for yourself” (Some ees started wearing “I can
speak for myself” buttons)
 “The union only wants your money”
 Former Wal-Mart manager, now UFCW organizer, reports
surveillance cameras “sprouted” at Scottsburg, IN store (N
of Louisville) after he started talking to workers there
 Co says the 15 cameras installed there “have nothing to do
with union activity”
 Other former managers say that when they telephoned Co
hot line to report U literature was being distributed in their
stores, LR specialists were flown in on Co jet that
afternoon
 Other complicating factors include turnover, which may be
100% annually at some stores
 Source: Business Week, 10/28/02; New York Times, 11/8/02;
Business Week, 10/6/03
 “Wal-Mart Says It Would Allow
Unions in Its Chinese
Operations”
 Wal-Mart said it would allow trade unions in its
Chinese operations, an apparent response to
pressure from Chinese authorities
 Wal-Mart has 42 outlets in China, ~20,000 ees
 Wal-Marts in Germany aren’t unionized per se,
although they have works councils
 Labor officials hope development will put
pressure on other MNCs to follow suit
 In March, national legislature began investigation of
compliance w/ country’s labor law
 Finding: some leading MNCs were resisting efforts to
set up unions within operations
 Source: Wall Street Journal, 11/24/04
 Closing Case
 Wal-Mart hiring more than 1 million ees over
next five years
 Advancement opportunities
 65% of store managers began in hourly jobs
 College recruiting
 Diversity recruiting
 Internships in pharmacy and merchandising
 Management trainee program for college students
 Networking
 Students in Free Enterprise
 Case questions
 What corporate- and business-level strategies is Wal-
Mart pursuing?
 Discuss how Wal-Mart’s growth plans affect and are
affected by its HR strategy
 SWOT analysis