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Strategic Human Resource Management

Aligning HR and Business-Level Strategy:

Human Resource Management


HRs 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?

HRs 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 HRs Critics

Quantify people-management results into dollars


Adopt fact-based decision-making

Productivity of 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

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 Strategies
Fit Consistency

Consistency Fit

Environment

Consistency

HR Strategies

Improved Firm Performance

Fit Consistency

Fit

Organizational Characteristics

Organizational Capabilities

Selected HR Strategies That Fit Porters Three Major Types of Business Strategies
Business Strategy Overall cost leadership Common Organizational Characteristics Sustained capital investment and access to capital Intense supervision of labor Tight cost control requiring frequent, detailed control reports Low-cost distribution system Structured organization and responsibilities Products designed for ease in manufacture HR Strategies Efficient production Explicit job descriptions Detailed work planning Emphasis on technical qualifications and skills Emphasis on job-specific training Emphasis on job-based pay Use of performance appraisal as a control device

Selected HR Strategies That Fit Porters Three Major Types of Business Strategies
Business Strategy Differentiation
Common Organizational Characteristics Strong marketing abilities Product engineering Strong capability in basic research Corporate reputation for quality or technological leadership Amenities to attract highly skilled labor, scientists, or creative people. HR Strategies Emphasis on innovation and flexibility Broad job classes Loose work planning External recruitment Team-based training Emphasis on individualbased pay Use of performance appraisal as development tool

Women vs. Wal-Mart


NO. OF EES*
39 508 3,241 18,731 1,203 63,747 100,003 50,987

JOB REGIONAL V-P DISTRICT MNGR STORE MANAGER ASST MNGR MNGT TRAINEE DPT HEAD SALES ASSOC CASHIER

% OF WOMEN
10% 10 14 36 41 78 68 93

AVERAGE ANNUAL EARNINGS** IN 2001 ----------------------------MALE FEMALE SALARIES SALARIES $419,400 239,500 105,700 39,800 23,200 23,500 16,500 14,500 $279,800 177,100 89,300 37,300 22,400 21,700 15,100 13,800

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

Women vs. Wal-Mart

Wal-Mart culture built on inspirational leadership, autonomy, trust

But practices also may create barriers, e.g., job posting


Bring Ees into org, convert them to principles: respect for individual, customer service, excellence, and imperative to buy and sell at lowest price possible 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

Another aspect of culture which may create barrier is willingness to move for the job

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

Key for Wal-Mart is making processes fair without losing culture that makes it special

Single mother Asst Mngr involved in litigation moved nine times in eight years across three states
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

Under FLSA, mngrs may be entitled to overtime if more than 40% of their time is not spent supervising or if jobs dont include decision making Wal-Mart tries to hold labor costs to 8% of sales, cf. 9-10% on average at other large-store retailers

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

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

Its becoming 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 Wegmans Way

Wegmans 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 Industrys 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 butchers dept in TX store, which was disbanded two weeks after election

Co announced plans to phase out butchers and use prepackaged meat in 180 stores, said timing of decision was a coincidence

When Wal-Mart acquired Woolworths 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 Managers Toolbox to Remaining Union Free

Its important 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 nations 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 nations largest corporate employer, and it is lowering standards for everyone.

Wal-Mart says its average hourly pay for FT ees is $9.68/hr


Organizing director for UFCW

UFCW counters that its 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-Marts pay scale is competitive

Source: CNNMoney, 7/27/05

Current Developments in Union Organizing

Legal union avoidance tactics have impact

Las Vegas Sams Club held mandatory Ee meetings every week to express anti-U views

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

You can speak for yourself (Some ees started wearing I can speak for myself buttons) The union only wants your money

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

Co says the 15 cameras installed there have nothing to do with union activity

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

Labor officials hope development will put pressure on other MNCs to follow suit

Wal-Marts in Germany arent unionized per se, although they have works councils

In March, national legislature began investigation of compliance w/ countrys 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

College recruiting

65% of store managers began in hourly jobs Diversity recruiting Internships in pharmacy and merchandising

Management trainee program for college students Networking

Case questions

Students in Free Enterprise

What corporate- and business-level strategies is Wal-Mart pursuing? Discuss how Wal-Marts growth plans affect and are affected by its HR strategy

SWOT analysis

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