Strategic Human Resource Management Aligning HR and Business-Level Strategy:

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





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
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
Strategies
Fit
Consistency
Consistency
Fit
Organizational
Characteristics
Environment
Consistency
HR Strategies
Fit
Improved
Firm
Performance
Fit
Consistency
Organizational
Capabilities
Selected HR Strategies That Fit Porter’s 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 Porter’s
Three Major Types of Business Strategies
Business
Strategy
Common Organizational
Characteristics
Differentiation
• 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*
JOB
REGIONAL V-P
DISTRICT MNGR
STORE MANAGER
ASST MNGR
MNGT TRAINEE
DPT HEAD
SALES ASSOC
CASHIER
39
508
3,241
18,731
1,203
63,747
100,003
50,987
% 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
* Full-time ** Including bonuses Data: Richard Drogin
$279,800
177,100
89,300
37,300
22,400
21,700
15,100
13,800
“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



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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
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



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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’s 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 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

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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 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’s 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 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



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”
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

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College recruiting

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Diversity recruiting
Internships in pharmacy and merchandising
Management trainee program for college students
Networking

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65% of store managers began in hourly jobs
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