Employee Turnover at Wal-Mart

EmployeeTurnover at Wal-Mart

EmployeeTurnover at Wal-Mart

Problem

Thehigh rate of employee turnover is a major challenge in the retailindustry. However, War-Mart has been reported as one of the playersin the retail industry with the highest rate of employee turnover.According to Neate (2015) the 2015 rate of turnover at Wal-Mart isthe highest among the U.S. based firms. Over the years, themanagement of Wal-Mart has failed to identify viable solutions toaddress the ongoing issue of employee turnover. This has cost thecompany finance and employee productivity. Analysts have identifiedthat the cost of replacing a single employee earning $ 30,000 andbelow is approximately 16 % of that annual wage (Neate, 2015). Thisanalysis reported that most of the U.S. retail employees earn about $21,140 annually, which means that the cost of replacing one employeeis approximately $ 3,400. Currently, Wal-Mart has about 500,000employees earning less than $ 21,140 annually, which means that thecost of replacing them is approximately $ 1 billion (Stock &ampBhasin, 2015). Apart from the cost implications of employee turnover,newly employed workers are less productive because they take time tofamiliarize with the firm operations.

Abetter understanding of the underlying causes of the high rate ofstaff turnover will help in the development of viable solutions.There are four major causes of the high rate of staff turnover atWal-Mart. First, low wages motivate people to look for better payingjobs in the same or different industries. Currently, Wal-Mart is oneof the retail companies that pay the lowest hourly wages to itsunskilled workers in the United States. Neate (2015) identified thatunskilled employees working for Wal-Mart earns less than $ 9 per hourcompared to other retailer companies where the same category ofemployees in other retail companies (such as Costco) earns $ 11.50and $ 20 per hour for those who have been in the firm for at leastfive years. Wal-Mart employees are easily tempted to look for jobselsewhere.

Secondly,failure to consider the needs of employees (such as work-lifebalance) reduces their motivation and increase the rate of turnover.Wal-Mart has unfair and unpredictable work schedules that frustrateemployees and increase their dissatisfaction with their current jobs.For example, over 20,000 Wal-Mart employees stated that they areforced to for unpaid overtime and without a prior notice (Valenti,2015). In addition, these employees are forced to continue workingthrough meals as well as rest breaks, but the company does notprovide the spread of hours pay for them. This is inconsistent withthe U.S. labor laws that require employees working for more than 10hours to be given an hour of minimum wage compensation (Valenti,2015). This increases the dissatisfaction of employees, which resultsin a high rate of turnover.

Third,unsafe working conditions in the stores make employees feeluncomfortable with their current employer, which motivates them tolook for an employer who will give them safer working environment.Wal-Mart is experiencing this challenge where employees claim thatthey are forced to work without heat during winters and to operateforklifts at on snow during winter (Cancino, 2014). These poorworking conditions affect the health of workers and increase theirdissatisfaction with the current employment.

Fourth,denying employees an opportunity to grow and develop themselvesincreases their dissatisfaction and the need to look for a betteropportunity to expand their skills, knowledge, and experience. Apartfrom initial training and orientation that Wal-Mart employees get,they rarely get the opportunity to increase their skills and otherchances of developing their skills (Mont, 2014). This discouragesemployees who need to improve their skills and move up their careerladder. In essence, the failure to address the current rate ofemployee turnover will cost Wal-Mart in terms of finance throughregular recruitment of new workers, reputation, and productivity inthe future. Fines imposed on Wal-Mart for unsafe working conditionsare also to reduce its profits and reputation. A combination of theseimplications of high rate of staff turnover will reduce the growthrate of the world’s giant retail company in with time.

Listof options for addressing the issue of staff turnover

  • Increase the wage for other employment benefits

  • Develop a suitable recruitment policy

  • Enhance the working environment

  • Invest in staff training

Evaluationof options

Increasingwages to reduce staff turnover

Underpaymentof employees is among the key factors that increase the rate ofturnover. This challenge can be effectively addressed by keepingemployee compensation and other employment benefits current(Jacobsen, 2015). Wal-Mart can keep the compensation packagesup-to-date by ensuring that the compensation rates are updated tomake them market competitive. The major benefit of this option isthat an increase in the rate of compensation will motivate employeesto work harder. This will in turn increase their productivity andprofitability of Wal-Mart. Most importantly, increasing employees’wages will enhance their satisfaction with the current job positions,which will in turn reduce their chances of leaving Wal-Mart to lookfor better paying jobs. However, this approach may have somedemerits. For example, Wal-Mart will have to increase salaryexpenditure, which will lower its profits. This might occur of anincrease in wages is not followed by an increase in productivity ofemployees. In addition, some employees are motivated by differentfactors other than money. This may reduce the effectiveness of theoption of salary increment.

Developmentof a suitable recruitment policy

Thesuccess of the company in reducing the rate of turnover begins withhiring the right members of staff. Wal-Mart can achieve this bymodifying its pre-employment process and selection system. Thepre-employment process and selection system should enable the companyto determine the employee factors that are likely to influence theirsatisfaction before they are recruited (Whitaker, 2009). Effectiverecruitment systems should match job characteristics with employee’sfactors. Therefore, Wal-Mart should consider each job applicant onthe basis of their personal characteristics in addition, to academicqualification and hire those who are likely to remain in the companyfor long in order to avoid the cost of hiring new employees. Althoughthe suitable recruitment system may help Wal-Mart in filteringpotential employees to eliminate those who might leave shortly afterrecruitment, it may be difficult to personal characteristics of eachjob applicant. This is because job applicants may hide their wrongtraits during the recruitment process, which will reduce theeffectiveness of this option.

Enhancingthe working environment

Unsafeand unhealthy working environment is among the leading factors thatincrease the rate of staff turnover. Therefore, improving the workingenvironment can increase employee satisfaction and reduce the rate ofturnover. Unsafe and unhealthy working environment creates aperception that the employer has failed to provide the necessarysupport to the employee and adopt fair workplace practices (Qureshi,2013). A competent supervision can help Wal-Mart determines the levelof safety of the working environment in its stores and make thenecessary changes to ensure that employees are comfortable. This isan effective option given that all employees wish to feel safe andremain healthy at workplaces. However, the fact that employees aremotivated by multiple factors to remain in the firm can reduce theeffectiveness of this option, especially when other factors (such asemployee compensation) are not addressed.

Stafftraining and development opportunities

Althoughmany activities in retail stores can be effectively carried out byunskilled or semi-skilled members of staff, giving these employeesopportunities to increase their skills can enhance their jobsatisfaction. Training employees increase their ability to handletasks more efficiently, which in turn contributes to their jobsatisfaction while reducing intentions to leave the current employer(Mapule, 2013). Training of staff also increases their productivity,which creates a perception that they are capable of contributingtowards the success of their employer company. Moreover, stafftraining and other staff development programs increase the ability ofemployees to assume more challenging roles, which gives them chancesfor promotion within the same employer company. Therefore, theopportunity develop personal as well as professional skills is aneffective option because it give employees a hope of going up theircareer ladder within the same company instead of looking foralternative jobs. Similar to other options, training employees andgiving them opportunities to develop their skills may not be suitablefor all employees. Therefore, there are chances that some employeeswill still leave Wal-Mart, even after the company invests in theirtraining.

Recommendation

Wal-Martshould increase the employee compensation to market competitivelevels. This is because most of the employees have been leaving thecompany to look for better paying companies, including those thatoperate in the same industry as Wal-Mart. For example, other retailcompanies pay at least $ 11 while Wal-Mart pays even less than $ 9per hour (Neate, 2015). Therefore, increasing the minimum wage to atleast $ 11 per hour will reduce the rate of turnover. There are twofactors that might contribute towards the success of the option ofincreasing the minimum wage in reducing the rate of staff turnover.First, most of the Wal-Mart employees have been complaining of thewages that are below subsistence levels, which implies that nearlyall employees are sensitive to the level of compensation. Therefore,increasing the minimum wage to market competitive rates will helpemployees address the challenges associated with the increase in thecost of living. This will give employees the reason to continueworking for Wal-Mart.

Secondly,money is an effective type of extrinsic reward that makes employeesfeel appreciated for their contribution to the organization. Thistype of reward motivates employees to continue or stop a givenbehavior (Vallerand, 2012). In this case, the extrinsic value ofadditional hourly wage will motivate employees to continue workingfor Wal-Mart. In addition, the management of Wal-Mart should reviewwages annually in order to update them and ensure that they remainmarket competitive. The use of money as a form of extrinsicmotivation can target the middle level and executives who are alreadyreceiving salaries that are above the living wage. This is because anincrease in the cost of living may not be a major factor to make themleave, but increasing their compensation can motivate them to stay.

Action plan for increase employee compensation

Action step

Resources

Persons responsible

Measurement

Time

Conduct the skills audit

-Computer

-List of employees

-Employee academic certificates

Human resource manager

Successful list of employee and their respective skills

2 weeks

Grouping employees according to their academic and professional qualifications

-Computer

-Skills audit report

Human resource manager

Successful grouping of employees according to their qualifications

3weeks

Analyzing the market wage rate for each category of employees

-A record of employees indicating their qualifications

-Money

-Computer

-Internet

Human resource manager

Identification of levels of compensation for all job groups

3 weeks

Formulating a performance-based compensation policy

-Internet

-Computer

-Money

-Record of current employees indicating the qualifications

-A report on market ware rates

Human resource manager

Successful compilation of rules and principles guiding the process of employee compensation

4 weeks

Determination of compensation for job group

-Computer

-Record of current employees indicating the qualifications

-A report on market ware rates

Human resource manager

Production of a list of all employees in their respective job groups and compensation rate per group

4 weeks

Infirming employees about changes in compensation policy and rates

-Computer

-Internet

-Email address of all employees

-A4 size papers

Human resource manager

-Successful notification of all employees via email

-Posting notifications on all notice boards

1 week

Review the success of the compensation policy

-List of employees for a period of one year

-Computer

Human resource manager

Determination of employees who left the company within one year

Production of a list of employees who remained n company for the whole year

Production of a list of new employees who joined the firm

2 weeks

References

Cancino,A. (2014, April 18). Wal-Mart warehouse workers say they worked withno heat. ChicagoTribune.Retrieved May 2, 2015, fromhttp://articles.chicagotribune.com/2014-04-18/business/chi-indiana-walmart-nlrb-say-they-worked-with-no-heat-20140417_1_warehouse-operator-unsafe-working-conditions-wal-mart

Jacobsen,D. (2015). Twelve surefire tips to reduce employee turnover.Globeforce.Retrieved May 2, 2015, fromhttp://www.globoforce.com/gfblog/2013/12-surefire-tips-to-reduce-employee-turnover/

Mapule,I. (2013). Effects of training and development on employee turnoverin selected medium sized hotels. Journalof Tourism, Hospitality, and Sports,1 (1), 43-48.

Mont,J. (2014, January 16). Hackers leak Wal-Mart’s guide on how tosilent workers. Wal-MartWatch.Retrieved May 2, 2015, fromhttp://makingchangeatwalmart.org/2014/01/16/hackers-leak-walmarts-guide-on-how-to-silence-workers/

Neate,R. (2015, February 28). Wal-Mart wage to keep rise piles pressure onrivals. TheGuardian.Retrieved May 2, 2015, fromhttp://www.theguardian.com/business/2015/feb/28/walmart-wage-increase-staff-pressure-rivals

Qureshi,M. (2013). Relationship between job stress, workload, environment,end employee turnover. WorldApplied Sciences Journal,23 (6), 764-770.

Stock,K. &amp Bhasin, K. (2015, March 6). Why retailers are suddenlydesperate to keep their least valuable workers. BloombergBusiness.Retrieved May 2, 2015, fromhttp://www.bloomberg.com/news/articles/2015-03-06/why-retailers-are-suddenly-desperate-to-keep-their-least-valuable-workers

Vallerand,J. (2012). Intrinsic and extrinsic motivation in sports. AppliedPsychology,2, 427-435.

Valenti,C. (2015). Employee sues Wal-Mart for overtime. ABCInternet Ventures.Retrieved May 2, 2015, fromhttp://abcnews.go.com/Business/story?id=87844

Whitaker,B. (2009). Driverturnover: Costs, causes, and solutions.Macedonia, OH: Avatar Management Services Incorporation.