The present-day system of employees’ benefits and compensations is a complex area of research, which dates back as far as the 19th century when the industrial revolution took place. The rapid technological development brought about an unprecedented increase in accidents at the workplace. However, the only way to receive compensation for an injury was to sue your employer for the negligent attitude to safety measures. The first compensation law was introduced in 1911 (Brunn, 2006).
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By the middle of the twentieth century, each state had already adopted a system of compensation and benefits. These systems share several features but they still differ considerably: state funding as opposed to private insurance. Employers have an option to use either of the two variants. Large corporations commonly choose in favor of self-insurance to be able to act without any intermediaries. Nowadays, besides compensation there exist performance standards and extra benefits for showing excellent results. It is up to each company to decide how to reward its employees and what kinds of compensation to provide. Enterprises that opt for self-insurance must be able to prove that they can cover all the costs. However, even if they can, there may appear certain challenges that arise from the company’s desire to save costs and stay competitive providing low-priced goods and services. If the issue is not addressed in due time, it may lead to deplorable consequences such as violation of ethical norms, total job dissatisfaction of employees, loss of labor force, and marred reputation of the company in the long term (Martocchio, 2011).
Wal-Mart is the biggest enterprise in North America covering the area of more than 200,000 square feet and selling all possible goods. The problem is that working for a retailer of such a scale implies hard physical labor if you are responsible for stocking and arranging the shelves. This makes workers run the risk of injuries. The number of compensation claims is so high that the company cannot decide on one universal compensation policy (Freeman, Nakamura, Nakamura, Prud’homme, & Pyman, 2011). The process of payment is often too long. Besides, Wal-Mart has become notorious for failing to pay the injured workers the money that they owed under state laws. A lot of employees were forced to go through lengthy legal proceedings to get what they deserved. Besides, as far as benefits are concerned, Wal-Mart employees have to rely on state support. The company no longer provides them to those who work less than 24 per week (Ford, 2011).
Thus, the paper at hand is aimed to address the problem of compensation and benefit system and the company’s responsibilities. The research will prove that Wal-Mart’s unwillingness to introduce adequate compensation standards under the existing legislation as well as incentives for workers’ performance is the main factor that brings about job dissatisfaction and consequent loss of trust, which tells negatively on the company’s image. The purpose of my study is to perform a comprehensive evaluation of the issue (including comparison with other companies) and to develop a set of recommendations for Wal-Mart to implement for putting things right. The contribution to the literature on the topic consists of elaboration and systematization of strategies that could be applied by any organization that faces similar challenges. The research could be used to teach future managers how to choose the most delicate approach to the problems that include both financial and ethical aspects.
Review of the Literature: Theories and Strategies
Wal-Mart Store is an international family-run company in the United States that was created by Sam Walton in 1962. It was later incorporated in 1969 and now encompasses a large number of department stores, grocery stores, and hypermarkets across the world. It is the largest corporation of the United States that has an enormous impact on the economy of the country. Besides, it is the biggest employer in the world: at present, the company gives jobs to more than 2 million people. Wal-Mart now operates in 28 countries (Collins, 2011).
The problem of compensation and benefits is not new for the company. It became pressing in 2001 when the State of Washington Department of Labor and Industries attempted to take control of the company’s labor program. The reason was that Wal-Mart proved its total inability to provide due to compensation to its employees as required by state laws. As a result, the company managed to preserve its certification; however, it was banned from self-regulation concerning compensation in Washington until 2010 (Brunn, 2006). In 2004, the Workers’ Compensation Act was amended in Maine to be able to control payments to injured workers as the company could not satisfy compensation claims (Vedder, 2006). In 2007, the company was charged in Oklahoma for using punitive measures (which included lowering positions, cutting wages, and hiring) against workers who filed compensation claims. As a result of the company’s actions for the last two decades, its reputation has been severely damaged (Gereffi & Christian, 2009).
The current problems Wal-Mart encounters may be summarized as follows (Brunn, 2006):
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- the average employee of the company earns less than $9 per hour; thus, it means that a full-time worker, who works 34 hours a week, makes only $15,500 a year – the sum that leaves him/her even below the line of poverty;
- Wal-Mart workers, whose needs are constantly ignored by the company, have to rely on state support and taxpayers;
- Wal-Mart’s employees do not have health insurance if they work part-time;
- Wal-Mart is notorious for implementing anti-union strategies; the company eliminates all the opportunities to organize or attend union meetings;
- Wal-Mart’s workers cannot enjoy the benefit of a convenient schedule – they have to adapt to the requirements; this makes a lot of them transfer to part-time jobs and saves the company a huge amount of money;
- Employees who work in warehouses and are subject to hazardous working conditions do not get any kind of financial incentives and do not receive compensations in case of an emergency at the workplace unless they go to court.
Some management theories could help Wal-Mart address the situation (Wang & Pizam, 2011):
- Contingency Theory promotes an individual approach to each particular situation and rejects universal solutions. For Wal-Mart, the application of this theory would mean higher flexibility in decisions: the company would be able to choose an appropriate action for every conflict with employees after a careful assessment of the consequences and decide whether his/her needs should be satisfied;
- Systems Theory emphasized the interdependence of a worker and a system and promotes a holistic approach (which means estimating overall organizational performance instead of separate departments). Applying this theory in Wal-Mart would mean that the company is ready to cooperate with its employees to reach a compromise that would allow creating the best possible conditions for both parties in achieving common goals;
- Theory X and Theory Y are the two opposing theories. The former emphasizes the necessity of benefits, compensations, and incentives for employees to do their best whereas the latter counts on workers’ responsibility and willingness to collaborate. Since Wal-Mart has already acquired the reputation of a company that cannot be relied on in terms of cooperation, it would be better for the corporation to opt for Theory X.
- Chaos Theory states that come complex processes in a company cannot be regulated. Thus, changes happen without being initiated to allow the system to stay afloat. This synergetic principle could work with Wal-Mart provided that the company did not resist favorable alterations that come as a result of the successful management of employment issues.
It would be fair to mention that Wal-Mart is not alone in dealing with job dissatisfaction of its employees. Such giants as McDonald’s and Starbucks also had to reassess their benefits and compensation systems to stay attractive to potential employees.
The following strategies were applied by McDonald’s for achieving higher job satisfaction of its workers (Brizek, 2014):
- the company has switched to the pay-for-performance system, which means that its employees can earn benefits through successful performance;
- McDonald’s has set a fixed sum of compensation, which depends on your experience, qualifications, and performance;
- it has introduced short-term rewards that you may earn if you achieved remarkable results during one year;
- those employees who demonstrate stable excellence earn long-term incentives;
- strong performers also get an opportunity to use a company car for both work and private purposes (the cost of insurance and maintenance is paid by the company).
Unlike McDonald’s, Starbucks addresses the problem of job satisfaction in a more unusual way. However, its system of benefits and compensations has proved to be no less successful (Brizek, 2014):
- employees get their benefits in the form of the company’s products: every week you can take home a pound of coffee or tea that you prefer, or you can use a 30 percent discount on any drinks and meals that you like;
- you automatically participate in Bean Stock program, which gives you shares with increasing benefits every year you work for the company; once you own the full share, you can do anything you want with it;
- there are a lot of packages that were introduced to approach the needs of each worker individually: you can choose those that suit you best;
- the company partially pays its workers’ college tuition.
Thus, having reviewed the literature on existing management theories and strategies that different companies use to reach compromise with their employees in terms of benefits, we can see that Wal-Mart has a wide variety of options to overcome the existing challenges, prevent the loss of labor force, and fix its reputation. However, despite the comprehensive coverage of the company’s current state and prospects in articles, books, and press releases, they barely touch upon the common opinion of the company’s employees. Although there exist certain case studies showing the injustices people had to suffer from the company, there have been no attempts to systematize what Wal-Mart’s workers are mostly dissatisfied with and what benefits they would like to receive.
Implications of the Study
The studied literature, though being quite different in scope and approaches to the problem, still shares common implications:
- Wal-Mart has committed a lot of strategic mistakes that have already undermined the company’s good name (Brunn, 2006).
- The company has no universal reward philosophy and thus the quality of performance of its employees is often neglected (Gereffi & Christian, 2009).
- Wal-Mart’s policy of part-time scheduling, coupled with the company’s reluctance to ensure compensations and provide competitive rewards, causes failure in attracting talented workers (Gereffi & Christian, 2009).
- The company’s adverse policies lead to a lack of career opportunities that would be appealing for qualified specialists (Brunn, 2006).
- The overall compensation strategy is not flexible enough to adjust to local practices and individual cases, which makes the company’s approach to problem-solving outdated (Vedder, 2006).
However, my analysis allows me to add some more to the list:
- The position of Wal-Mart on the market creates a deluding image of a progressive corporation in terms of management, which turns out to be far from reality.
- Wal-Mart’s violation of ethical issues does not prevent thousands of people from applying for jobs, which means that the image of the company is still linked to stability and reliability.
- The company demonstrates negligence in issues concerning the investigation of policies applied in other enterprises.
- The Wal-Mart surprising adherence to employee-adverse policies may indicate deliberate intention to make people rely on taxpayers and government assistance, which may mean that it is more profitable for the company than paying compensations.
- The company’s primary objective now is to develop a new compensation strategy.
- Pay-for-performance philosophy must be applied to reward the most deserving employees.
- Corporate officials must do surveys to understand why people come to the company and leave it.
- Wal-Mart should offer consistent rewards that would ensure promising career paths.
- The company must adjust its strategies to the local practices and promote an individual approach to each case.
- The company must offer competitive wages and pay more attention to the investigation of the labor market.
- The reward packages must be flexible and aligned with basic business indications.
Wal-Mart needs to address each problem thoroughly and comprehensively as the company’s competitiveness is at stake. Besides, taking into account Wal-Mart’s influential position in the world of business, the way the company will handle the problems of job satisfaction can serve as a demonstrative example for growing and even experienced companies. Its status of the driving economic force on the market enables it to shape the future policy of benefit systems development.
The conducted study allows me to conclude that compensation and benefit system is a matter of paramount importance as it has an impact on workers’ motivation, commitment, the productivity of the company, its reputation, and competitiveness. An organization must ensure that compensation is provided under state laws.
The analysis of literature addressing the case of Wal-Mart allowed me to prove that the company’s reluctance to develop a fair system of compensation is the only reason for its failures in the past. The comparison with the two other corporations showed that there exist numerous strategies that could be applied if Wal-Mart admitted its wrongdoings and decided to take the right course. Moreover, the study proposed several more general theories as well as specific steps that would help eliminate the consequences of the previous failures. The implications of the research could be taken into consideration in theoretical strategic development as well as in practical management plans of other companies facing the same problems.
Brizek, M. G. (2014). Coffee wars: The big three: Starbucks, McDonald’s, and Dunkin’Donuts. Journal of Case Research in Business and Economics, 5(4), 1-17.
Brunn, S. D. (2006). Wal-Mart world: The world’s biggest corporation in the global economy. London, UK: Taylor & Francis.
Collins, J. (2011). Wal-Mart, American consumer citizenship, and the 2008 recession. Focaal, 2011(61), 107-116.
Ford, R. T. (2011). Beyond good and evil in civil rights law: the case of Wal-Mart v. Dukes. Berkeley Journal of Employment and Labor Law, 32, 513-524.
Freeman, R. B., Nakamura, A. O., Nakamura, L. I., Prud’homme, M., & Pyman, A. (2011). Wal‐Mart innovation and productivity: a viewpoint. Canadian Journal of Economics/ Revue canadienne d’économique, 44(2), 486-508.
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Gereffi, G., & Christian, M. M. (2009). The impacts of Wal-Mart: The rise and consequences of the world’s dominant retailer. Annual Review of Sociology, 35(1), 12-43.
Martocchio, J. (2011). Strategic compensation: A human resource management approach (6th Edition). Upper Saddle River, N.J.: Prentice Hall.
Vedder, R. (2006). Wal-Mart, individuals and the state. Connecticut Law Review, 39(2), 1725-1737.
Wang, Y., & Pizam, A. (Eds.). (2011). Destination marketing and management: Theories and applications. London, UK: Cabi.