Walmart and the Baldrige Award
Walmart saw a growth rate of just over 10% between 2008 and 2014, but that pales in comparison to competitors like Amazon, which boasts a growth rate of over 230% in that same time. This might have something to do with the lack of investment in innovations to solve problems that customers repeatedly have. The innovation (perhaps the motivation) to solve these problems remains absent.
While Walmart is repeatedly recognized for different things, the award that Walmart has yet to receive is the Malcolm Baldrige National Quality Award. Walmart simply may not be competitive for it. The Baldrige Criteria attempts to identify and recognize role-model organizations, which Walmart may no longer be.
Walmart either does not focus on the Baldrige Criteria, or they struggle in areas significantly in ways that would render them ineligible. Still, Walmart has been known to benchmark against the Malcolm Baldrige National Quality Award winners who were their vendors. But the practice of consuming the ideas instead of creating them might be another part of why Walmart is not competitive for the award and why their competitors continue to outpace them.
If Walmart wants to be competitive and otherwise eligible for the award, the operational practices associated with its major organizational functions will need to become available for examination, and they will need to share ideas in the required areas as detailed in the criteria. While it is likely that Walmart will not apply for the Baldrige Award, it is also correct that they likely would not be competitive for it anyway. Walmart must improve in several areas to become competitive for the award and remain competitive in the marketplace.
Walmart and the Baldrige Award
Walmart was 2014’s number one, Top 100 Largest U.S. Based Retail Companies on the World’s Largest Retailers List (Farfan, 2014). That means that Walmart is the largest U.S. retail chain in the world. They are the largest private employer in the world too. In fact, they are the third-largest overall employer in the world, next to the U.S. Department of Defense and China’s People’s Liberation Army (Alexander, 2012). The point is that Walmart is huge. Perhaps too big.
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. Walmart isn’t just big box stores, though. In 2010, Walmart confirmed it was acquiring the video streaming company Vudu, Inc. In 2011, Walmart also acquired 51% of Massmart Holdings, which gave the company access to the elusive 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 retail career 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). Eventually, he owned 15 Ben Franklins. However, Sam’s ultimate vision was not shared with the leadership at Ben Franklin. That vision was to open retail stores in rural areas, making Walmart the powerhouse it would soon be. 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.
Today, Walmart has over 11,000 locations and reports a U.S. revenue of over $470 billion. But the Walmart environment is a unique one and ever-changing. Many, inside and outside the company, say that Walmart is a different company today than it was during Sam’s reign, and not in a good way. People suggest that perhaps the priorities are different. Sam died of cancer in Little Rock, Arkansas, on April 5, 1992 (Martin, 2013). Some say the “real” Walmart died along with him. According to Arkansas Business, “some put the blame on Walmart’s management team, saying it has drifted away from Walton’s essential philosophy… (Friedman, 2012).”
Customer relations aside, internally speaking, there is a rift that is growing. In Walmart, a faction of leadership is very old school. They focus on old ideas and look out for their buddies. Some could call it the “good ol’ boy system.” On the other side, there is a faction that is very new-school and wants to see growth and innovation. This often confuses employees about the direction and cultural atmosphere. This also dramatically confuses company policies regarding interpretation and implementation. Ultimately, this creates a level of stagnation regarding getting things done or having ideas even looked at, let alone implemented. There is a sort of “inside joke” at Walmart concerning its change: to expect change now but to expect positive change later.
Walmart is not exactly dysfunctional, though. Their name and reputation carry a lot of weight. Walmart thrives from its relationships with outside vendors and non-competing companies. A new Walmart store will significantly boost businesses in the area when a new store is opened (Walmart-Washington, 2013). This is due to increased employment and new revenue from the companies that supply the store. Other retailers will also open up new locations near a Walmart because they understand the boost and “spill-over” that occurs accordingly. A recent California study confirms that after a new Walmart store opens, revenues for other local retail outlets increase by an average of 10.2% in the first year (Hatamiya, 2014). From there, it creates a perpetual business/retail model where most in that area benefit from the activity. The opposite can also be true when a Walmart leaves, though.
From this perspective, Walmart’s strategic situation is beginning to falter. This is evidenced by the drastically low growth rate compared to their competitors. Target, Costco, and Amazon are eating up market share at an amazing rate. For example, 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 discount and warehouse sales (Hoium, 2013). True, Amazon and Target have a lot of catching up to do, but with solid growth rates as they have seen over the last several years, to say that it is impossible would be naïve.
This growth from Target and Amazon has a lot to do with the shift of online retail consumer purchases. Still, it can also be speculated that it might have something to do with Walmart’s lack of investment in innovations. I have argued that a limited selection of unattractive products in apparel, home furnishings, and consumer electronics add to the problem. Others have pointed the finger at the slow checkout service due to the company seeking to reduce hours for workers. Environmentalists continue to repeat the idea that Walmart encourages waste by selling low-quality goods and building warehouse-sized stores. Chances are, though, it is more than likely a combination of them all.
Baldrige Criteria and Awards
Walmart is not exactly down or even on its way out. They are still a contender regarding numerous retail aspects, and businesses and government entities worldwide continue to recognize this. Walmart has won many awards over the years. An example of this would be their website, which has won the Retail Council of Canada Excellence in e-commerce award for providing groundbreaking customer responsiveness (Retailing Today, 2014). Walmart also recently won an Outstanding Contributions to Food Safety & Public Health award in Shanghai (Wal-Mart Global, 2012). Walmart has even won an award for ‘Coming Back to America’ for its $250 billion programs to source American-made goods (Made in the USA Foundation, 2014).
More than that, Walmart is repeatedly recognized for its diversity. Former Walmart CEO Mike Duke was recently inducted into the Network of Executive Women’s CPG/Retail Diversity Hall of Fame (O’Neill, 2012). Walmart is widely recognized as a top employer for women and has won numerous awards for that, including:
- 2010 Top Companies for Executive Women – National Association for Female Executives
- 2010 Best Companies for Multicultural Women – Working Mother Media
- 2009 Top 50 Places to Work for Women by the Times (awarded to ASDA)
- 2009 Top Diversity Employers for Multi-Cultural – Women Professional Women’s Magazine
- 2009 Top Companies for Executive Women – National Association for Female Executives
- 2009 Best Companies for Multicultural Women – Working Mother Media
- 2009 10 Best Companies for Women – PINK Magazine
- 2009 Top 12 Companies for Latinas – Latina Style
Of course, these are just a few (Walmart-Washington, 2013).
Still, the award that Walmart has yet to receive is the Malcolm Baldrige National Quality Award. The Malcolm Baldrige National Quality Award promotes the collection and sharing of best practices within successful organizations around the United States (Dean & Tomovic, 2004). The idea behind the award is to ensure the United States remains competitive against other nations economically and to encourage a “team” environment among American organizations.
This award is given to organizations that excel or show remarkable improvement in innovation management, intelligent risk and strategic priorities, social media, operational effectiveness, work systems, and core competencies (NIST Criteria, 2013). It used to be funded by the government. Still, due to budget cuts and tax increases instated by President Obama, the Baldrige Performance Excellence Program was eliminated from public funding and now has to acquire funding from participants who want to win the award (Borawski, 2010). Speculatively speaking, one would be hard-pressed to imagine Walmart investing in participation on that point alone.
Understanding that every company has its issues, and even though Walmart wins award after award, Walmart may not even be competitive for the Baldrige award in the first place. The Baldrige Criteria for Performance Excellence attempts to identify and recognize role-model organizations, establish criteria for evaluating improvement efforts, and disseminate and share best practices in things like visionary leadership, agility, focus on the future, social responsibility, customer-driven excellence, managing for innovation, and systems perspectives. (Summers, 2009). Therein lies the problem.
One of two things may be occurring regarding the areas listed; 1) Walmart does not focus on these areas, or 2) Walmart struggles in these areas significantly in ways that would more than likely render them ineligible. Of course, it could simply boil down to sharing information. The idea of Walmart disseminating information is almost laughable. Walmart is somewhat secretive in many regards; at least, that has been the case under their old leadership. The benefit of the doubt; this might change with their new leadership. In February 2014, Rob Walton announced that Doug McMillon would be Walmart’s new CEO. Time will tell.
The irony is that while Walmart has not seemed interested in competing for the award, the Baldrige Award has been in the back of their collective minds. This goes back to Sam Walton, who benchmarked his practices against the Malcolm Baldrige National Quality Award winners who were vendors to Walmart (Bergdahl, 2007). Many practices in Walmart come from other organizations, all the way down to their stretching routines and morning cheer.
This practice of consuming the ideas of others instead of creating them might be another part of why Walmart is not competitive for the award and why companies like Amazon.com continue to grow at such amazing rates. Innovation is a big part of improvement efforts. Walmart is not known for its innovations. They are, however, known for taking an idea and making them work great… eventually. Sure, there are efforts and occasional success in innovation, but Walmart is simply not known for this.
This is especially true regarding technology. When the internet became popular, Walmart missed the first boat because it did not see it as a focus or “real” opportunity. They saw it as a fad of sorts. They were thinking in very old ways. It was not until their competitors made a lot of money that they saw its real potential. In response, they revamped their website (again), but other retailers already had their jump, and it took years for Walmart to gain any real market share online. Another example in this same regard is that while companies like Amazon.com were figuring out ways to get products to the doorsteps of their customers in two days or less, Walmart.com launched a service called “Site to Store,” which enabled customers to make a purchase online and pick up that merchandise in the store of their choosing, free of charge (Wal-Mart, 2014). This is not exactly a competitive posture. This plays into many different aspects. For instance, Walmart is not known for its social media skills either.
These points are vital regarding the position that Walmart is very old in its thought processes. True, something will always be said about the value of the basics and fundamentals, but taking “risks” with innovation will always be necessary. Proof of this is found throughout this paper, and eligibility for the award requires both innovation (risk) and dissemination. Both of which Walmart lacks.
Sure, Walmart is headquartered in the United States and has been around since 1962. Still, from what I can tell, the operational practices associated with all of its major organizational functions are not exactly available for examination, and as addressed before, another reason why Walmart may not be eligible. Walmart does not share ideas in innovation management, intelligent risk, strategic priorities, social media, operational effectiveness, or even work systems and core competencies. This combination ultimately makes them ineligible for the award (NIST Eligible, 2013).
That being said, and to be perfectly honest, some of Walmart’s major organizational functions and other “innovative ideas” have been known to be “acquired” from other organizations or individuals when Walmart has the opportunity and can see that it might pay off somehow (Norman, 2013). Information could not be found on whether theft of intellectual property disqualifies an organization from consideration. Still, one can be confident that disclosing such activity would not be in the better interests of the organization applying.
In all fairness, it should be noted that there are aspects of their operations that they will share. However, this usually comes with a court order, significant pressure, or strategic advantage to make themselves look good. For example, in 2005, Walmart made a public commitment concerning environmental sustainability (Wal-Mart, 2014). Out of almost nowhere, Walmart announced a goal to create zero waste and use only renewable energy. This was very innovative in the minds of most, and Walmart even went as far as opening up new lines and selling products that sustain people and the environment. This was great P.R. for the company and benefited the company substantially in the long run.
However, Walmart Stores have since paid multiple millions of dollars for what prosecutors have said was for negligently dumping pollutants from stores into sanitation drains (Neuman, 2013). Was their environmental generosity a positive change or a preemptive strike for what would surely be fallout over related lawsuits? The violations occurred between 2003 and 2005 and resulted in $81 million in penalties as part of a guilty plea on criminal charges of improperly disposing hazardous waste in California and Missouri. This would not be the last time the company was forced to pay for environmental issues to either state (Neuman, 2013).
Recently, Walmart has made efforts to promote transparency in its supply chain regarding its international sourcing. For instance, they have released the results of their factory assessments in Bangladesh (Wal-Mart Global Responsibility, 2014). They have also begun to share best practices about their global supply chain with other organizations. Still, one cannot help but wonder if this will end up being something similar to their environmental debacle.
Regardless, if Walmart wants to be competitive and otherwise eligible for the award, there are a few things the retail giant must do. The operational practices associated with all of its major organizational functions will need to become available for examination. It will also need to share ideas regarding required criteria and competencies. Let us look at this a bit deeper.
The operational practices associated with all of its major organizational functions will need to become available for examination in a very open and honest way. Historically speaking, and despite the claims of openness and transparency, this will probably not happen any time soon. Walmart will not let its people see certain kinds of information, even when it directly affects them and even when the data is already somewhat public. For example, in July 2014, it was reported that Walmart had argued to the Delaware Supreme Court that shareholders were not entitled to internal documents from an FCPA investigation that might show what executives and directors knew about alleged bribes paid to officials in Mexico (Cassin, 2014).
The public was already aware of much of it, though. In 2005, according to documents released by U.S. Congress members and a former company lawyer, Walmart used a state governor in Mexico to facilitate $156,000 in bribes meant to help open stores. Among details released since then by Waxman and Cummings, Walmart paid at least $273,000 in bribes to local officials and managers of a power company to expedite construction projects (Feeley, 2013). The point is that Walmart is notoriously secretive about almost everything unless it serves them strategically to be open. This position would need to change to be competitive. Of course, this would more than likely also require the company to change a few of its practices before disclosure so as not to expose itself to more lawsuits.
Walmart would also need to start sharing ideas on innovation management, that is… if anyone wants them. Walmart boasts a U.S. revenue of roughly $476 billion a year. Their big recent news was that they had created a $10 million innovation fund to be spread out over five years. This is yet another example of old thinking, if one would want to call it thinking at all. In those five years, the company will generate roughly two trillion three hundred eighty billion in revenue versus the measly 0.000004% they plan to put back into innovations (Walmart Foundation, 2014). This plays into their intelligent risk and strategic priorities, which appear to be faltering as a direct result. In my opinion, this explains their comparatively slow growth.
Meanwhile, companies like Amazon.com, which are seeing growth at over 230%, are labeled as one of the top innovative companies in the world (Safian, 2012) because the vast majority of their revenue goes right back into figuring out ways to facilitate faster shipments, ideas such as a grocery delivery service and a T.V. set-top box to compete with Netflix Inc. and Apple Inc. in video streaming and more (Satariano & Frier, 2014). Sure, Amazon reported a $41 million loss on $17 billion in sales, but that is not the point (Clark & Young, 2013). Amazon is trying to figure out how to lead the industry and maybe even change the world. Walmart spends its money on old programs, following other companies and trying to defend the “big box” model. They need to increase the percentage of investment into innovations if they want to lead the way into the future. Technological advancement is not slowing down, and their intelligence risk is no real risk. This equates to a demonstrable lack of strategic priority, and their market share is beginning to suffer accordingly.
As far as social media goes, again… Walmart is not exactly leading the way. It would be good if Walmart would again benchmark itself off of Malcolm Baldrige National Quality Award winners to see what they are doing in this regard. This might also be a good idea regarding operational effectiveness and even work systems and core competencies because other companies are simply beginning to lead the way in these sectors and leaving Walmart behind. Having your own truck fleet and distribution houses is nice, and they will get you a long way, but these are not the end-all of the program.
While it is likely that Walmart will not apply for the Baldrige Award any time soon, it is also correct that they likely would not be competitive for it anyway based on the information provided herein. Via the provided critical analysis, we can see that Walmart must improve in several areas to become competitive for the award and perhaps even remain competitive in the marketplace. Paramount is their willingness to share ideas on operational practices associated with its major organizational functions. They need to become a leader in innovation, intelligent risk, and strategic priorities. Finally, they need a greater focus on social media, operational effectiveness, work systems, and core competencies. Realistically, it would be wise if Walmart attempted to improve in all of these areas regardless of whether or not they even care about the award. If not, just for their own longevity as a company.
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