Every organization has some problems or the other no matter what size they are. In fact, in my opinion, larger organizations that have extended their operations in a large number of countries have more problems, especially related to leadership and organizational behavior. At a glance, it may seem like Wal-Mart faces no problems as such. However, looking at the past events, one discovers that Wal-Mart faces a number of problems in relation to its leadership and organizational behavior.
Wal-Mart is the largest retail outlet. It was founded in 1962 and since then it has grown at an exponential rate. It has expanded its business globally by opening stores, Sam’s clubs, and Supercenters all over the world (Wal-Mart Stores, 2009). It follows the everyday low pricing strategy and hence provides the lowest prices to its customers. It charges low prices to its customers through an effective control system and economies of scale.
The organizational behavior and leadership-related problem that will be discussed in this paper will be that of low level of employee satisfaction and hence poor relations with the management. Wal-Mart has faced a lot of criticism for its policies towards its organization because of which its brand image has been spoiled in the industry. These problems mainly have to do with having poor employee relations with the workers at Wal-Mart. This does not only affect the brand image but also the operations that take place within the organization. The details of this will be discussed in this paper.
I am looking into this problem as a consultant. I was contacted after this problem was widely publicized. It may seem like it is too late. However, in my opinion, it is never too late to solve a business problem. My role in this situation will be to understand the background of the problem, its causes, its effects, and how to solve it. As a consultant, I can only advise. The rest of the responsibility falls on the management when it comes to execution and doing something about the problem.
The problem that will be discussed in this paper is the lower level of employee satisfaction and poor relations with the employees. This includes the relationship between the managers and the employees at a lower level. The reason behind dissatisfied employees and poor employee relations can be attributed to a number of factors. Firstly, a very important factor that is widely publicized is the criticism that Wal-Mart pays its employee’s low wages.
It concentrates too much on everyday low pricing and hence compromises on everything else. Since financial benefits are the main motivators for most people and since the employees at Wal-Mart are not given such rewards sufficiently, they tend to be de-motivated, and hence their efficiency increases. This also gives rise to politics. Another very important effect of low wages is a poor brand image in the industry. Wal-Mart is widely criticized for its ‘Always low wages. Always.’ approach towards its employees. This makes it seem like a socially irresponsible organization.
Everything that is discussed above lets us understand the problem of poor employee relations better. The problem statement that will be looked into in this paper will be ‘What are the reasons behind employee dissatisfaction and poor employee relations at Wal-Mart and how can this be improved?’.
The problem that will be discussed is dissatisfaction and poor relations with the employees. Employee satisfaction has been defined as is “the terminology used to describe whether employees are happy and contented and fulfilling their desires and needs at work” (About, 2009). It shows the degree to which the employees in an organization are happy with what they are doing. However, in order to be happy, they need to be given something in return for their work. This is what determines their employee satisfaction.
First of all, Wal-Mart is said to not compensate its employees as it should. These employees are underpaid. They are not given a bonus for working overtime (Olson, K., 2003). The average full-time Wal-Mart employee is paid only about $17,000 a year. In addition to this, the health care plan covers fewer than half of its workers (Krugman, P., 2005). According to one source, many of the employees are earning far below the poverty line. The wages are not even designed to support a family (Squidoo, 2009). Financial rewards are the main motivating factor for anyone who does not earn enough and since these kinds of rewards are not sufficient in Wal-Mart, the employees tend to be de-motivated and hence have poor relations with the management.
What the employee does is that he has some expectations when he starts a job. Once the job starts, he compares his expectations with his experience and if the experience is better than the expectations, then he will be satisfied. However, if the experience is worse than the expectation, he will feel dissatisfied.
The work that the employees at Wal-Mart carry out is very stressful. They have to deal with thousands of customers on a given day, look for items from stocks of similar goods, clean up if someone messes up, etc (Olson, K., 2003). Therefore they expect something in return for the hard work they put in. However, when they do not get it, it results in dissatisfaction.
There have also been many cases of sex discrimination against females in Wal-Mart. According to one source, the number of stories told by the huge number of women who work for Wal-Mart is ‘endless’. It also says that Wal-Mart does not only take away benefits such as wages, hours, and promotions from these women, but it also take away their dignity (Luce, S.2005). State and federal regulators have hit Wal-Mart for violating rules on work hours and leave. More specifically it has violated workers rights more than 2 million times. It has broken family leave and off the clock laws and is also responsible for hiring undocumented workers (Wal-Mart Watch, 2005).
Communication is another cause of employee dissatisfaction and poor relations. Wal-Mart pays so much attention to their everyday low pricing strategy that it has lost touch with the internal and external environment. They have ignored the needs, wants, suggestions and feedback from the employees. As a result of this communication problem, the employees do not give suggestions or feedback and are also de-motivated. In addition to this, Wal-Mart has a very poor brand image and public relations (Adubato, S., n.d).
The fact that company is non-unionized; this is a major source of concern given that the company does not have a good reputation in terms of employee relations (Bianco, A., 2006). The employees are low-paid, have inadequate benefit packages and there is heavy reliance on part-time employees. The company needs to have more full-time employees and invest thoroughly in employee relations. It needs to constantly motivate employees so that their performance levels rise (Yoffie, 2005, pp. 2).
Now that the causes of employee dissatisfaction and poor employee relations have been discussed, it is important that we look into how this affects the organization as a whole.
Employees need to be satisfied because customer satisfaction is positively related with employee satisfaction (Leonard, D., n.d). Customers are a very important part of a business because it is because of them the business makes its sales. Therefore, it is very important for them to be satisfied. When the employees are satisfied, they will provide a better quality service to the customers and hence they will be more satisfied (The Business Research Lab, 2007).
It does make sense that when the satisfaction of internal customers will lead to satisfaction of the external customer. If employees are content, they will provide better services to the customer and will urge them in one way or the other to come back and therefore, lead to customer retention. The organization must remember that it is much more costly to attract a new customer than keeping an old one. These old customers, if remain satisfied will become loyal to the company. Brand loyalty will result in frequent purchases which will directly influence the profitability of the company directly.
According to another source, the benefits of customer satisfaction include that firstly when a customer is satisfied, he stays longer with the organization. Secondly, customer satisfaction deepens its relationship with the company. Thirdly, the customer, when satisfied becomes less sensitive and elastic to changes in price. And lastly, the satisfied customer will always suggest the company’s brand to other people. Statistics also show that it costs a company five to six times more to win back a new customer than keep the one it already has. By keeping 5 percent of its customers satisfied, the company can benefit by enjoying a profit increase ranging from 25 to 125 percent.
Another fact is that one out of every 25 customers who is dissatisfied with the company will express how he feels and these customers on average tell nine to twelve people about their experience with the product (1000 Ventures, 2008). Also, ‘if employees are better trained as a result of good human resource policies, this will lead them to respond better in unforeseen situations and hence perform better customer service’ (Berry, 1981).
Employee satisfaction is directly related with the organizations performance and results. According to a source, ‘people issues are business issues’ (Schuler, 1990). Therefore employee satisfaction is very important for Wal-Mart. However, Wal-Mart has a very hard time maintaining the satisfaction level of employees and as a results, it is becoming harder and harder to retain employees.
Wal-Mart is one of the largest organizations in the world. It contributes to 2 percent of the America’s GDP. It sevres millions of people everyday all over the world. It is present in all the major countries in the world. Wal-Mart is the nation’s largest employer. It employs more than 1.2 million employees according to one source (Squidoo, 2009). It also has plans to grow further in future which means that figure is yet to increase. All these facts make one thing very clear. Wal-Mart is very active in the society. However, does it give back anything to it? Does it do anything to improve the society’s condition?
Wal-Mart can afford to increase the wages. By increasing 1 penny per dollar item, Wal-Mart could give each of its employees a $1 per hour raise without affecting their $10 billion in profits. This would increase the annual earning of an employee by $1,800 (Squidoo, 2009).
Questions such as these are often asked by people when they are criticizing Wal-Mart. A very common response to this is that Wal-Mart sells goods ranging from toys to furniture to clothing to groceries at very low prices. It makes a wide variety of goods available to those who cannot afford it otherwise. If this is not giving back to the society then what is?
All that about low prices is true. It does benefit the society is one looks at it like that. However, when considering that, one often ignores a very important aspect of the situation. This aspect is what Wal-Mart compromises to provide goods at low prices to its customers. Wal-Mart sacrifices its employee’s happiness to make the customers happy. How long can this go on? There will come a time when the problem of Employee Turnover will catch up to Wal-Mart and might be responsible for the failure of one of the world’s largest organizations.
Some of the factors that affect employees’ satisfaction include job security, communication in the workplace, working environment/conditions, training, unclear tasks, compensation, job burnout, support, promotions and appreciation for work (InfoSurv, 2009). All these are very evident in Wal-Mart and hence dissatisfaction among employees and poor relations between the management and the employees is no surprise. More specifically, some of the factors that cause dissatisfaction and poor employee relations are as following.
Some of the reasons that were highlighted in the literature review were poor compensation system, poor communication, inequity between expectation and experience, sex discrimination, breaking labor laws and no labor unions. Another aspect which is responsible for the poor employee relations and low levels of employee satisfaction is Leadership. Leadership has many functions that bring the subordinates closer to their goals to carry out.
The significance of leadership is reflected in the following functions: providing inspiration to employees, securing cooperation in the team, creating confidence among individuals, providing a conducive environment for employees, implementing changes, maintaining discipline among the members, representing them, and setting goals (Murugan, 2004). If one looks at leadership like this and compares it with the leadership that is practiced at Wal-Mart, one will realize that the leadership at Wal-Mart is nothing like that.
This shows that the poor employee relationship can be attributed towards poor leadership. Therefore the responsibility falls on the shoulders of the leaders or managers there to make sure that the employees are happy. All these were responsible for employee dissatisfaction and poor relations with the employees within Wal-Mart.
Employees are very important for any organization. The way the employees are treated Wal-Mart affects them negative and these effects are apparent; it leads to de-motivation and low self-esteem of the subordinates. They are never allowed to make decisions, even the smallest ones, and this puts pressure on their self-actualization or self-realization needs. Their job satisfaction must be close to nil. It discourages subordinates that could be potential managers and leaders to reach their aptitude. Furthermore, such leaders create a very unfriendly and peculiar environment which prevents employees from showing any innovation at all.
There are many aspects that get affected negatively by lower employee satisfaction and poor employer relations. What we have understood from this study is that employee satisfaction is very important for any kind of business organization. Why? Because employees are the most important assets for any organization and these assets need to be satisfied so they can perform better. When the employees are satisfied with their jobs, they tend to perform better.
They are motivated to do well in the workplace. This increased and efficient performance ultimately affects the organizations positively. In addition to this, satisfied employees do not leave the organization therefore employee turnover is lower. This again ultimately benefits the organization as the recruitment costs decrease and employees and their knowledge is retained for a longer period of time with the organization. Also, employee satisfaction and customer satisfaction are directly related with each other and since the workers interact with the customers directly, this consideration is very important for Wal-Mart.
In order to keep the employees satisfied, the employer or manager must understand how the employee compares the rewards he gets. This comparison is what results in satisfaction or dissatisfaction. According to our research, ‘we found that employees usually compare their actual rewards with their expectations or with the rewards of others. This has been supported by two theories, discrepancy theory and equity theory’ (McShanne, S. 2003).
Once the manager knows how the employee will compare the rewards he is getting, he is in a better position to provide the employee with what will motivate him. This is exactly what is happening in Wal-Mart. Either the management is ignoring the needs of its employees or they do not know what these needs are in the first place because of which employees satisfaction is so low there.
‘Ferris and Barnum (1995) suggest in their book that companies design policies, management structures and organizational processes to promote employee satisfaction rather than control their performance’. This means that designing good policies is a tool used to uphold employee satisfaction. This also means that employers are more concerned these days with employee fulfillment rather than wringing out the best of their abilities from them. Why so? This is because, perhaps, employee satisfaction leads to benefits such as customer satisfaction, employee retention and good performance.
‘Ebert and Griffin (2000) go on to say that when managers meet people’s interests and build their skills, the company as a result sees high performances and increased employee satisfaction’. This suggests that when policies are designed by good managers, they are good enough as to increase employee satisfaction in a work environment and hence better their performance.
‘It is further suggested that there are some kind of human resource policies such as selection policies, job design policies and management of organizational culture which possible promote human resource management and satisfaction’ (Poole, 1999). Not all kinds of policies affect employee satisfaction.
For example, a good or a bad policy for holding concealed weapons is not going to have a huge impact on employee satisfaction. But let us say that policies related to the code of conduct, discipline, ethics or even holidays can have a substantial affect on employee satisfaction. Such policies if designed poorly can have a negative impact on the company’s profitability because of low employee satisfaction and hence, poor performance.
What we have understood from this study is that employee satisfaction is very important for any kind of business organization. Why? Because employees are the most important assets for any organization and these assets need to be satisfied so they can perform better. In addition to this, satisfied employees do not leave the organization therefore employee turnover is lower. This again ultimately benefits the organization as the recruitment costs decrease and employees and their knowledge is retained for a longer period of time with the organization. In addition to all this, employee satisfaction is directly related to customer satisfaction. When employees are satisfied, they are motivated to provide a better service to the customer and hence the satisfaction level increases and customer retention also increases.
Now that the fact that employee satisfaction is important for any kind of organization’s success has been established, another very important aspect of this study is knowing what satisfies your employees. Some people get satisfied by monetary reward while others get satisfied by non monetary rewards etc. Therefore the manager needs to understand the needs and wants of the employee.
In order to keep the employees satisfied, the employer or manager must understand how the employee compares the rewards he gets. This comparison is what results in satisfaction or dissatisfaction. According to our research, ‘we found that employees usually compare their actual rewards with their expectations or with the rewards of others. This has been supported by two theories, discrepancy theory and equity theory’ (McShanne, S. 2003). Once the manager knows how the employee will compare the rewards he is getting, he is in a better position to provide the employee with what will motivate him.
‘Gerhart (1987) further suggests that well-structured and appropriately designed personnel programs can increase the overall satisfaction of employees, given that the relative satisfaction of the employees remained stable over time’. Another way that will ensure that the workforce is satisfied is feedback. The employees can be asked from time to time regarding what they expect from the organizations. This will help them in getting an insight on the expectations and the employees can be rewarded accordingly.
Another variable that we outline which affects employee satisfaction is the kind of rewards and experience the colleagues of the employees get. The employee would compare the rewards he is getting with the rewards his colleagues who is giving the same contribution. If the rewards are at par of more than that of the colleagues, the employee will be satisfied. However, if it’s the other way round the employee is getting less than the colleague who is giving equal contribution, he will feel dissatisfied and that he is worth more than this. The managers can ensure that all people giving equal contribution and at equal level of hierarchy are compensated equally. This can be done by an effective performance appraisal technique and by ensuring that every person in the same level of hierarchy is rewarded equally.
All these methods will help the management understand the employees better and hence ensure that they are provided with what will motivate them and as result they will be satisfied. This will ultimately affect the organization as a whole as quality of customer service that will be provided will be good and the performance of the organization as a whole will increase.
Wal-Mart must analyze the leadership style that is followed by its manager and does something to change it. Leaders make decisions based on their understanding of the fast changing and complex environment they operate within. Thus, Wal-Mart managers must work hard to develop the most appropriate leadership approaches, strengthen employee relations, and strive to create conditions for growth.
This study has been very insightful in many aspects. Such a study helped me realize the importance of Employees in an organization. It made me realize how employee relation and satisfaction can effect the entire organization.
Personally, it made me more sensitive to the external environment and the feelings and needs of the people around me. This has made me more aware and active when interacting with the people around me. It has also made me realize that no matter how large or strong one gets, there are certain weaknesses that may catch up in future.
As a future leader and manager, I have come to understand how I should behave with my subordinates. It also made me realize that I will need to understand the needs and wants of the employees before anything else. It has also made me realize that as the organization increases in size the responsibility of the leaders and managers also increases.
And lastly academically, this problem helped me understand the widely studied concepts of management such as employee satisfaction and employee relations. Application of these concepts to a real world situation put me in a better position to be aware of how these concepts affect the organization.
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