Needed Organizational Improvements in Walmart
With the domestic and global economy continuing to decline, the wave of the future in the retail environment will not be found in old thinking. Walmart, the world’s largest privately held corporation, is no exception. They may be the proof.
Amazon.com and other innovative retailers are shutting their brick-and-mortar stores left and right, while, at the same time, growing at rates in the triple digits. Walmart is lagging in more ways than one. Their growth rate is right at about 10%. While this is still growing, its competition is charging ahead with exceptional products and services that make Walmart’s Supercenters look old-fashioned. Some have likened what is occurring to the K-Mart decline.
Walmart needs to approach its issues with a problem-solving plan, creativity, and the pointed effort of organizational improvement. They need a culture adjustment and an organizational revamp. They risk losing their dominant position and perhaps their empire if they do not.
Walmart can utilize the problem-solving wheel, Kotter’s 8 Steps to Change, and address some common-sense situations to begin the course correction. This is not to say it will be an easy change or even cheap. It is, however, a change that needs to occur if they seek to remain relevant in the coming years in the retail environment.
Problem-solving, creativity, and organizational improvement in Walmart are critical but complex things to achieve. The competition is gaining the upper hand with innovative products and solutions, and Walmart must make tough decisions moving forward. The economy is further complicating the issues at hand. Walmart must follow the problem-solving wheel with honesty and integrity to make real change. They need to “deep dive” into their situation and utilize their workers in the discovery process if they want the best ideas. They need to be more creative and innovative than their competition. Ultimately, they must alter their current change model to allow for the improvement of their processes and culture, which currently does not allow change to occur at the speed and effectiveness it should.
Problem-solving, creativity, and organizational improvement at Walmart
What is Walmart? The easy answer would be that Walmart is 2014’s number one, Top 100 Largest US-Based Retail Companies on the World’s Largest Retailers List (Farfan, 2014). That is a very fancy and complicated way of saying that Walmart is the largest retail chain in the world. They are the largest private employer in the world. They are the world’s third-largest overall employer, second only to the US Department of Defense and China’s People’s Liberation Army (Alexander, 2012).
As of October 2009, Walmart stores operate in Argentina, Brazil, Canada, Chile, China, Costa Rica, El Salvador, Guatemala, Honduras, India, Japan, Mexico, Nicaragua, Puerto Rico, the United Kingdom, and the United States. In 2010, Walmart confirmed acquiring the video streaming company Vudu, Inc. In 2011, Walmart also received 51% of Massmart Holdings. This acquisition gave the company access to the African countries of South Africa, Botswana, Ghana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Nigeria, Swaziland, Tanzania, Uganda, and Zambia (Wal-Mart,2014).
Sam Walton, the creator of Walmart, started his journey by borrowing $25,000 from his father-in-law to buy his first store, a Ben Franklin franchise, in Newport, Arkansas, in 1945 (Biography, 2014). He would eventually own 15 Ben Franklins. However, Walton had a vision that the leadership at Ben Franklin did not share. That vision; expanding these types of stores into rural areas. This rub between the leadership of Ben Franklin and Sam would set the tone for what Sam Walton envisioned moving forward. In 1962 Sam opened up his first Walmart store in Rogers, Arkansas (Biography, 2014). Within fourteen years, Walmart would be a publicly-traded company worth over $170 million. This was just the beginning.
Today, Walmart has over 11,000 locations, reports over $465 billion in revenue, and boasts a workforce of roughly 2.2 million people. Six of the Waltons have made Forbes’ list of the wealthiest Americans, touting a net worth of $144.7 billion. Just three of the Waltons – Rob, Jim, and Alice – are projected to receive an estimated $3.1 billion in Walmart dividends from their majority stake in the company (Forbes, 2014).
This kind of growth did not come without struggle, persistence, tenacity, and the ability to solve problems effectively. This growth took a great deal of creativity and constant refinement regarding the organization itself, mainly because this type of growth was unheard of before the Walton family did it.
Unfortunately, their struggle has not ended, and their need to solve problems effectively is far from over. Walmart may be in trouble. To begin with, Target, Costco, and Amazon are eating up market share at an amazing rate. For instance, Amazon boasts a growth rate of 231.9% from 2008 to 2012, compared to Walmart’s 10.3% (NYSE). Walmart has grown slower than Target, Costco, and Amazon over the past several years and is underperforming its competition in both discount and warehouse sales (Hoium, 2013).
But why? Depending on where you want to get your information, there appear to be a host of issues. Regardless, their continual decline in profit is real (AP News, 2014). The finger has been pointed at quite a few things, including a limited selection of unattractive products in apparel, home furnishings, and consumer electronics. Others have pointed the finger at the slow checkout service due to the company seeking to reduce hours for workers. Still, some suggest that Walmart emits millions of tons of CO2, encouraging waste by selling low-quality goods and building warehouse-sized stores. Or, it could simply be a combination of them all.
Each of these by themselves adds to the cost and loss of the company. For instance, Walmart Stores have paid multiple millions of dollars for what prosecutors have said was for negligently dumping pollutants from stores into sanitation drains (Neuman, 2013). This gets added to the bottom line somewhere at some point.
However, it is not just competition or the environment they must contend with. Experts have been quoted repeatedly in headlines across the globe, discussing the doom and gloom on the horizon regarding global economics. Many claim these headlines are only the tip of the iceberg for the retail industry. For instance, CNBC recently released information stating that people need to “get ready for the next era in retail—one that will be characterized by far fewer shops and smaller stores” (Gustafson, 2014). The article demonstrated how businesses like Sears, JC Penney, Macy’s, Target, etc., are all currently making plans to shut down many of their stores, lay employees off, and reduce the square footage of the few stores they aim to keep.
Fortunately, there is a solution, and Walmart has the opportunity not only to solve its problems but also put itself back in the driver’s seat regarding both market share and performance; that is, of course, if they approach the issue with creativity and with the goal of real organizational improvement.
That sounds easy enough. After all, Walmart employs some of the brightest minds in business today. However, “simply bringing together a group of professionals does not ensure that this group will function effectively as a team or make appropriate decisions” (de Janasz, Dowd, & Schneider, 2012).
The perceived problem is usually not the actual problem. That may sound counterintuitive, but everyone has issues. And because everyone has problems, it is easy to see how any organization will have problems too. The key is discovering the real problems and understanding that it is how you go about fixing those problems that make the difference. Rushing into such action when you have such a large organization at stake is not the best approach. Instead, being methodical, deliberate, strategic, and planned is the better way.
The Problem-Solving Wheel
Identifying the Problem
Identifying the problem sounds easy enough, but if you were to examine this, you would find that it is not as easy as initially believed. This is because of cause and effect. Sometimes the problem you may be looking at is the effect of an underlying cause. Therefore, if you rush in to “fix” the effect, you will have missed the cause. If you missed the cause, you could expect a repeat of the effect.
To identify the problem effectively, you need to collect information. This can be difficult in a large organization such as Walmart because the hierarchical arrogance culture means that many lower levels hide or cover up potential flaws. In other words, workers are often afraid to share the actual issues because even if they did not create the problem, the hammer that is the organization sees those associated with the problem as a nail. The information being provided is often flawed because of the fear of losing a job or having a supervisor flag a store or manager as a problem, according to Mr. Nelson, a Store Manager for Walmart (Nelson, 2014).
Harsh? Perhaps. The reality of the problem remains, however. The company needs to start collecting as much information as possible about its system and the symptoms they are experiencing. These issues include but are not limited to things like slower checkout, higher theft, distributing center issues, and so on. Then, after having compiled the list of the problems and potential issues, they need to ask, “Why do we have slower checkout times?” “Why are we experiencing higher theft?” “Why are certain stores experiencing distributing center-related shrink?” Asking why is a great place to start and is entirely necessary before you can move to the next step.
Research the Problem
The next step in the process is research. At this point, there will undoubtedly be a host of issues and symptoms that have been discovered. If you are serious about the process, this should not be a comfortable list to review. Walmart will undoubtedly have a laundry list of issues and symptoms to examine.
Each problem needs to be checked. Each piece needs to be researched in depth. It should not be as easy as a “quick fix.” Each issue or symptom should be thoroughly examined. The cause and effect of each problem or symptom should be explored. Question with boldness everything about the issue. Allow employees to participate in the discussion and encourage their questions, thinking, and suggestions (Valcour, 2014). Brainstorming further ideas about contributing factors should be had. No stone should go unturned. All of this should be done to fully and effectively define the actual cause of the symptoms being felt that are associated with the perceived problem at hand.
Define the Problem
Albert Einstein is quoted as having said that if he “had one hour to save the world, he would spend fifty-five minutes defining the problem and only five minutes finding the solution.” Once the problem has been adequately identified, the issue needs to be defined. “Slow checkout lines” or even “not properly staffed” are not proper definitions.
The problem needs to be rephrased in several ways. Assumptions as to why the problem exists need to be abandoned. Boldly question the reasons presented instead. Associated and related issues should be examined. Getting a proper (unbiased) perspective should also be part of the plan.
After having gone through each of these measures, the ability to properly define the issue should be much further along. Furthermore, the probability that the problem’s root was identified is much more likely. Then, when all of these steps and measures have been met, focused research should be done on the defined problem. Only then should the process of finding a solution be explored.
Some organizations find that some of their best idea generators are their employees (Flamholtz & Randle, 2011). This is a great place to start when brainstorming. Not all solutions can be found in a book. This is especially true when it comes to innovation.
Walmart has a distinct advantage when it comes to the business environment. With over 2 million associates, the pool of ideas seems almost infinite. Sam Walton once said, “listen to your associates…they are your greatest idea generators”. For this point in case, Mr. Walton was entirely accurate.
Associates are the ones who deal with the problems the company faces. When the checkout lines are slow, the associates try to compensate while listening to angry customers. When the store experiences shrink because the Distribution Center is not adequately equipped to handle a certain format or perhaps is not managing store credit effectively, it is the store associates who have to answer for it. It would only make sense, then, that the associates be involved in the idea generation. This is a critical piece because not only are workers associates of the company, but more often than not, they are also paying customers.
Brainstorming should come from all levels, of course. Each level in the corporate structure has insights that the other groups could not have because of the positions they currently find themselves. One could call this being a victim of normalcy bias or positional complacency. In other words, an executive who has spent the last several years in an office, a Regional Manager that spends their life on the road, or even a Market Manager who visits a store to give notes, does not see the problem through the same eyes as the person who is face to face with both the customer and the problem. After all, it is this person who first recognizes the problem and deals with the problem. Who better to listen to?
Develop a Plan
At this point, Walmart will be able to begin to develop a proper plan of action. This plan should not point fingers. This plan should establish joint goals and objectives for the company and the stores or areas affected by the identified problems. For instance, if a particular city was identified as a high theft area, unaffected areas or cities should not be subject to the same asset protection measures decided upon in the plan unless it specifically aids the customer’s shopping experience overall.
The plan should provide easy-to-follow steps for achieving these goals that are reasonable and pertinent to the problem. Such a plan should also not blanket the organization in hopes of conquering a localized problem globally. Such measures or actions would hurt the company more than they would help. This is because some parts of the company would not be subject to the same issues or symptoms as others. Therefore, specific measures would more than likely burden the stores that were otherwise unaffected. In turn, this would ultimately deepen the issue pool.
At this point, evidence suggests that making plans that include stakeholder input regularly equates to organizational survival in competitive markets when the plan does not cost too much or is rigidly followed (Mintzberg & Ghoshal, 2002). This means that employee involvement should not end in the previous brainstorming session. It should continue throughout the process.
Implement the Plan
Implementation of the plan should be methodic and strategic. It should also be done so that measurements of effectiveness can be tracked. A detailed list of initiatives within the plan should be made and followed, including the potential resources needed. The company should prioritize each objective within the plan and set reasonable timetables for each. Communication with the affected areas of the company should be constant, and follow-up should be a requirement.
More important than just about anything mentioned thus far are the alternatives. The company should not place all of its eggs in one basket per se. It should have alternatives ready to implement if the initial plan is unsuccessful.
Evaluate the Plan
Once certain milestones have been achieved, the company may be in a position to evaluate and course-correct if necessary. Is the plan working? Is it too much? What are the repercussions of the measures being taken? Are customers happier? Are associates happier? These questions and more should be a part of the evaluation step. Sure, cost and productivity are essential, but are workers bad-mouthing the company when they leave? Are customers?
Creativity and Problem Solving
The importance of creativity when it comes to problem-solving must not be overlooked. Effective problem-solving derives from thinking of multiple possible solutions to problems. This is easier said than done because our minds tend to think habitually and in overly simplistic ways (Soin, 2014). Walmart must take this lesson to heart if they genuinely seek to course correct it.
Make no mistake, though; Walmart can be highly innovative. Walmart is technically one of the most innovative companies on Earth (Ashe, 2013). Their logistics network model is often followed in business, their satellite system is envied, and they are beginning to make an impact in eCommerce. Walmart continues to pursue numerous new ideas each year and comes up with many ideas.
The downside is not creativity at Walmart. The downside is the lack of speed in which the implementation of such ideas takes place. Walmart is unwilling to move fast enough to remain relevant in the marketplace. This is because they are often too afraid to make a mistake. The worry is about the effect if something terrible happens or the effort is misunderstood or offensive (Nelson, 2014). Once again, the political or brand impact takes the lead over creativity and problem-solving. Meanwhile, in many ways, the basics are being neglected; basics as repeatedly reported problems such as slow checkout lines, angry or bitter workers, and worsening customer service.
Understanding the problem-solving process or how creativity can play a role is not enough. If you have a problem, you want to adjust or change the circumstance to avoid the problem to begin with. Of course, this is easier said than done.
Often, complacency, normalcy bias, or, more often than not, fear can affect this fundamental process. Change is complex, and for a good reason. Change disrupts our mental equilibrium. This can be frightening for most people because our survival instincts rely heavily on the ability to predict our environment so that we can then be able to act accordingly. When we experience change, the predictability of our environment disappears or alters, and with it, our sense of security (Bradt, 2014). This might be particularly true if the position you were coming from was extra safe or super secure, such as being the king of the proverbial hill in the corporate world.
This roadblock can be overcome with a little effort, though. In his book, “Leading Change,” John Kotter, a professor at Harvard Business School and world-renowned change expert, suggests eight basic steps. These steps work in personal and corporate environments (Kotter, 1996).
To begin with, you must understand the urgency of the change and embrace that urgency. This can be done by identifying potential threats you or the company may face and developing scenarios based on cause and effect. Examine potential opportunities. Be honest in your search and your findings, and openly discuss them. Build support or evidence for what you have found.
Then build a team of those who know something about the problem. It could be an expert in the field, workers familiar with the process or situation, or even consultants from outside who perhaps know a thing or two on the subject. If you can pull representation from all three, that will be even better.
The next step is to create a plan or strategy to correct the issue. This should be rooted in the vision of the overall goals and should not infringe upon unaffected or operationally sound elements. This step can be challenging at times.
From there, the plan must be communicated with those who will carry it out, support it, and be affected by it in some way, shape, or form. Everyone who might be impacted should be made aware because they will all play a role of support (or not) in some way, shape, or form. This will also be a perfect time to address questions or concerns that people may have. This is important because it allows you to create “buy-in.”
The next four steps we lump together because, in the context of this paper, the point for these is already being made. The next four steps are removing obstacles, creating short-term wins, continually building on the changes being made, and of course, ensuring that the changes become rooted in the organizational culture you are attempting to adjust.
Empowering Workers to Solve Problems and Make Change
This leads to utilizing empowered work teams to solve organizational problems and make effective changes. As stated several times thus far, workers must be involved in the decision-making process because doing helps to improve customer satisfaction, increase quality, lower costs, and increase employee productivity. We could even go as far as to say that it will also ensure buy-in and help to solidify goal achievement because the worker’s name will be on the project. Ultimately, the idea is to constantly work towards an environment or atmosphere of collaboration (Goodwin & Griffith, 2007).
At Walmart, the worker seems to believe that all they are empowered to do is their job, according to several employees interviewed for this paper. Unfortunately, some employee ideas are heard but often passed upward as someone else’s ideas. Only when an idea is realized as good and tweaked enough to ensure the originator does not get the credit is the change implemented by leadership. Are there exceptions to this rule? Of course, there are, but to suggest this does not occur in Walmart (or any other large organization) is a demonstration of naivety.
An organization should care not about who the idea came from as long as the organization’s improvement and ultimate profitability are realized. Why not empower the employee if the worker is happy and the organization is improved?
Walmart’s current organizational situation is complex. The structure is very high, with often narrow spans of control. Yet, training is limited, and workers are usually thrown into the mix regardless of their training status. There are numerous formats and sizes that are all run as though they are a Supercenter. Walmart has Neighborhood Markets, Express, Walmart Supercenters, Sam’s Club, Supermercado de Walmart, Asda, and many more. There is an information overload accordingly, both up and down the chain. And negative customer perceptions are increasing as a result.
Organizational improvements can be had, but it takes being able to look at your problems honestly to address them. For instance, if the company adopted a flatter hierarchy, split the formats, and placed them under separate umbrellas, such as what they had done with Sam’s Club, you would fix many of the problems currently occurring. Such a move would reduce the information overload going up and down the chain, which equates to efficiency. It would allow for a wider span of control which would reduce costs. And it would enable the leadership of each brand to honestly evaluate the needs of the brand rather than blindly follow the direction of the powerhouse Supercenters (McShane, & Von, G. M. A. Y. 2013)
Such a move would also provide the opportunity to adjust the personnel to the needs of the format. Currently, the easiest thing to do to reduce costs is to reduce labor. This is much easier to do when dealing with a large Supercenter comprising over 350 workers. However, you are dealing with a fraction of the workforce in a smaller format, such as the Neighborhood Market format. Cutting personnel makes a much more dramatic impact. The company largely ignores this issue because Regional Management has stated in many ways that the smaller formats are small fish.
The truth is that a reduction in workers in the retail environment results in a worsening of customer service, increased workload for the employee, and increased opportunities for theft. These result in higher shrink numbers, higher turnover, and a public perception that is generally negative. This is true both from a customer service perspective and overall public perception of the company.
As with any problem or solution regarding business, the answer is found in the people. The business needs people for both inside and outside reasons. The company often sells at a loss to ensure its position as the “low-cost leader,” but this is another example of another area that could use some improvement.
Organizational Culture, Problem Solving, and Conclusion
Walmart’s culture is generally characterized by the orientation towards customer service and providing the best value at the lowest prices. That is what the company attempts to publicize and what most Americans tend to believe of the retail giant. However, perception is not always reality.
There are two factions when it comes to the organizational culture of Walmart. Because of this, there are two different ways of problem-solving. To begin with, there is the store culture. This is the actual unit itself. The culture within the individual box is often comprised of teamwork and unity. The darker side is that problem-solving revolves around survival and damage control because the store level is not given the authority to fix operational problems. Instead, they are left to defend actions and attempt to avoid association with operational issues. This equates to shrink and, ultimately, higher costs.
On the other side of the organizational problem-solving coin is the corporate culture. This is the system of shared actions, values, and beliefs developed over the years that now guide the behavior of upper management. Generally speaking, problem-solving on this level is more theoretical. It boils down to what looks good on paper. Ideas and actions are often wrapped in bureaucracy and pandered to hierarchical paradigms. Furthermore, decisions are usually made with a political bias for several reasons, including but not limited to brand preservation (Nelson, 2014).
So it is not hard to see that issues or “problems” could often be swept under the rug, avoided, or addressed with half-measures if they are addressed at all. This is all in an attempt to avoid the negative, avoid a potential stigma, or avoid the stress of going through motions that most understand will result in little or no change anyway. Nobody wants to go through labor without getting the baby.
So if we are talking about problem-solving, creativity, and organizational improvement, we are talking about something much more profound. We are talking about the core of what Walmart is, was, and will ever be. This means that we are talking about the need to change or even adjust the culture of Walmart. The culture of Walmart needs to become a culture of real change. Such a culture would equate to positive problem-solving, valuable and practical creativity, and positive organizational improvements that would ultimately aid in advancing competitiveness regarding the competition.
You might also like “Walmart – Misalignment of Goals and Leadership.“
- Alexander, R. (2012, March 19). Which is the world’s biggest employer?. Retrieved from http://www.bbc.co.uk/news/magazine-17429786
- AP News. (2014, February 21). Analyst: Wal-Mart facing growing list of issues. Bloomberg Business Week. Retrieved , from http://www.businessweek.com/ap/2014-02-21/analyst-wal-mart-facing-growing-list-of-issues
- Ashe, N. (2013, June 6). Our Associates are Our Best Innovators. Walmart Corporate – Walmart Global eCommerce CEO Neil Ashe: Our Associates are Our Best Innovators. Retrieved , from http://news.walmart.com/executive-viewpoints/our-associates-are-our-best-innovators
- Bradt, G. (2014, January 1). Why change is so hard, and what you can do about it. Why change is so hard, and what you can do about it. Retrieved , from http://www.reliableplant.com/Read/12018/why-change-is-so-hard,-what-you-can-do-about-it
- de Janasz, S. C., Dowd, K. O., & Schneider, B. Z. (2012). Interpersonal Skills in Organziations 4th Edition. New York: McGraw – Hill Irwin.
- Farfan, B. (2014, January 1). 2014 Top 100 Largest US Based Retail Companies on World’s Largest List. About.com Retail Industry. Retrieved , from http://retailindustry.about.com/od/usretailcompaniesb/fl/2014-All-Worldrsquos-Largest-US-Retail-Chains-Biggest-American-Retailers_2.htm
- Flamholtz, E., & Randle, Y. (2011). Corporate culture: The ultimate strategic asset. Stanford, Calif: Stanford Business Books.
- Goodwin, J., & Griffith, D. B. (2007). The Conflict Survival Kit. Upper Saddle River: Pearson Prentice Hall.
- Gustafson, K. (2014, Jan 22). A ‘tsunami’ of store closings expected to hit retail. Retrieved from http://www.cnbc.com/id/101353168
- Hoium, T. (2013, October 10). Is Wal-Mart Heading for Disaster?. (WMT). Retrieved , from http://www.fool.com/investing/general/2013/10/10/is-wal-mart-heading-for-disaster.aspx
- Kotter, J. P. (1996). Leading change. Boston, Mass: Harvard Business School Press.
- McShane, S. L., & Von, G. M. A. Y. (2013). Organizational behavior: Emerging knowledge, global reality. New York: McGraw-Hill Irwin.
- Mintzberg, H., & Ghoshal, S. (2002). The strategy process. Harlow: Financial Times Prentice Hall.
- Nelson, T (2014, June 18). Three Questions about Wal-Mart. Personal Interview with David Robertson.
- Neuman, S. (2013, May 28). Wal-mart to pay $81 million for hazardous waste dumping. Retrieved from http://www.npr.org/blogs/thetwo-way/2013/05/28/186951760/wal-mart-to-pay-81-million-for-hazardous-waste-dumping
- Soin, R. (2014, January 1). Creative Problem Solving. Creative Problem Solving. Retrieved , from http://www.wright.edu/~scott.williams/LeaderLetter/cps.htm
- Sam Walton. (2014). The Biography Channel website. Retrieved June 13, 2014, from http://www.biography.com/people/sam-walton-9523270.
- The 400 Richest Americans. (2014, January 1). Forbes. Retrieved , from http://www.forbes.com/lists/2005/54/Worth_1.html
- Valcour, M. (2014, January 23). If You’re Not Helping People Develop, You’re Not Management Material. Harvard Business Review. Retrieved from http://blogs.hbr.org/2014/01/if-youre-not-helping-people-develop-youre-not-management-material/
- Wal-Mart. (2014). History timeline. Retrieved from http://corporate.walmart.com/our-story/history/history-timeline