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Walmart’s Profitability and Employee Satisfaction

Walmart is one of the most successful retail chains across the globe. Despite its apparent success, the practices it implemented in order to keep the costs of operation down are now starting to catch up with the revenue, as the company struggles to increase its profitability (Page, 2020). However bright and appealing new projects and ideas can seem at first glance, all business decisions should be carefully weighed and planned. Therefore, before implementing any new practice, a cost-benefit analysis should be conducted to identify the potential losses and gains (both short-term and long-term) of the proposed change (Boardman et al., 2017). Previously, I have suggested several practices that can improve employee motivation within Walmart, and, in this paper, I will address the costs and benefits associated with the implementation of these ideas.

For any company, it is essential that its staff feels motivated. One of the most effective ways to boost employee engagement is through empowering them. It can be achieved by giving them more autonomy and more responsibility. However, there are several costs associated with managerial practices aimed at achieving greater workers independence. For instance, the process of delegating more to employees who have little or no experience with such responsibilities may lead to mistakes, additional complications, and an increased time used on accomplishing each task. All these problems would result in productivity losses, which would eventually represent indirect costs. Potential risks and revenue losses resulting from mistakes should also be taken into consideration. While adjusting to new responsibilities, employees are likely to clarify a lot of aspects or hesitate during the decision-making problems, which would inevitably result in massive losses of time both from the side of the workers and of the managers. Time is the greatest opportunity cost in this scenario because it can be used for other projects and tasks.

On the other hand, there could also be long-term benefits derived from introducing employee empowerment practices. Better employee satisfaction as the result of engagement would lead to enhanced productivity contributing to intangible benefits. Moreover, the increased employee satisfaction can improve their communication with customers leading to long-term revenue increases. Some researchers describe the politics of Walmart, both when dealing with employees and suppliers, as unjust, authoritative, and controlling every step in the process of selling a product (Reich & Bearman, 2018). This negative image, which continues to accumulate through the lack of visible improvements in employees’ satisfaction, has an adverse impact on customer attraction and retention.

The company is known for its poor treatment of employees for decades. In recent times, a new paradigm on how on the get emerged, and it includes an essential step that Walmart is yet to adopt – the lack of managerial despotism. However, the initial steps towards the improvement of the apparent issue with management are underway, as the company began to initiate numerous training programs in the past five years (Page, 2020). This approach led to increased costs of operation, and the company is yet to experience the benefits of higher employee motivation.

However, it is difficult for Walmart to initiate the changes that are, at first glance, oppose the primary pillar of the company’s strategy for domination in the retail market. Reich and Bearman (2018) state that “Walmart’s massive profits depend in part on the low prices it pays for workers’ labor” (p. 173). Page (2020) states that the company was “facing immense pressure from the media, its employees, and outside organizations for wage increases” and recently began to increase salaries, along with focusing on employee retention. The company’s efforts at improving the efficiency of its workers must be concentrated primarily on indirect benefits, such as training opportunities, active engagement in decision making, and the betterment of the working environment.

In order to give the projected costs of a program that deals with employee motivation, I will examine Walmart’s previous attempts at alleviating the issue. According to Corkery (2017), the company has spent “$2.7 billion on training and raising wages for 1.2 million of its store workers” in two years. Considering a significant increase in salaries that happened in this period, the expenditures on training can constitute about 35-40% of that sum. Despite an apparent hit to the company’s revenue, it is essential for Walmart to avoid further negative PR due to its mistreatment of employees. While the increase in prices can be expected by this change, it is also worth noting that Walmart loses customers and experiences a steady decrease in annual growth in the past three years (Trefis Team, 2019). Walmart can expect to spend less on liability and PR due to increased worker motivation, along with higher customer attraction.

In conclusion, the issue with the company’s strategy is that the costs of these measures must be negligible and have little to no adverse effect on product prices. Walmart needs to create a strategy within its financial limits that will improve employees’ motivation, and its current attempts, although insufficient, seem to be based on this paradigm. The increase in workers’ salaries have a less noticeable impact on their motivation if the labor is cognitive, therefore, it is advisable to fixate the hourly wage at an acceptable yet low bar.

References

Anthony E. Boardman, Greenberg, D. H., Vining, A. R., & Weimer, D. L. (2018). Cost-benefit analysis: Concepts and practice (5th ed.). Cambridge University Press.

Corkery, M. (2017). At Walmart Academy, training better managers. But with a better future? The New York Times. Web.

McMann, S. (2019). Turnover rate: Walmart [Master’s thesis]. Web.

Page, V. (2020). Walmart’s biggest liability: Labor costs (WMT). Investopedia. Web.

Reich, A. D., & Bearman, P. S. (2018). Working for respect: Community and conflict at Walmart. Middle Range Series.

Trefis Team. (2019). How much does Walmart spend on selling, general and administrative expenses? Forbes. Web.

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