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Needed Organizational Improvements in Wal-Mart

Executive Summary

With the domestic and global economy continuing its decline, the wave of the future in the retail environment is not going to be found in old thinking. Wal-Mart, the largest privately held corporation on the planet is no exception. In fact, 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. Wal-Mart is lagging behind in more ways than one. Their growth rate is right at about 10%. While this is still growth, their competition is charging ahead with amazing products and services that make Wal-Mart’s Supercenters look old fashioned. Some have likened what is occurring to the K-Mart decline.

Wal-Mart needs to approach their issues with a problem solving plan, creativity, and with the pointed effort of organizational improvement. They need a culture adjustment and an organizational revamp. If they do not, they risk losing not only their dominant position, but perhaps their empire as well.

Wal-Mart 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 for that matter. It is however, a change that needs to occur if they seek to remain relevant in the coming years in the retail environment.


Abstract

Problem solving, creativity and organizational improvement in Wal-Mart is a critical but difficult thing to achieve. The competition is gaining the upper hand with innovative products and solutions and Wal-Mart must make some tough decisions moving forward. The economy is further complicating the issues at hand. Wal-Mart must follow the problem solving wheel with honesty and integrity if they seek to make real change. They need to “deep dive” their situation and they must utilize their workers in the discovery process if they want the best ideas. They need to be more creative and more innovative than their competition. Ultimately, they must alter their current change model to allow for improvement of not only their processes, but also their culture which currently does not allow change to occur at the speed and effectiveness that it should.


 

Problem solving, creativity and organizational improvement in Wal-Mart

What is Wal-Mart? The easy answer would be that Wal-Mart is 2014’s number one, Top 100 Largest U.S. Based Retail Companies, on the World’s Largest Retailers List (Farfan, 2014). That is a very fancy and complicated way of saying that Wal-Mart is the largest retail chain in the world. They are the largest private employer in the world. In fact, they are the third largest overall employer in the world; second only to the US Department of Defense and China’s People’s Liberation Army (Alexander, 2012).

As of October 2009, Wal-Mart 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, Wal-Mart confirmed it was acquiring the video streaming company Vudu, Inc. In 2011, Wal-Mart also acquired 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 Wal-Mart, 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 at Ben Franklin and Sam would set the tone for what Sam Walton envisioned moving forward. In 1962 Sam opened up his first Wal-Mart store in Rogers, Arkansas (Biography, 2014). Within fourteen years, Wal-Mart would be a publicly traded company and worth over $170 million. This was just the beginning.

Today, Wal-Mart has over 11,000 locations, reports a revenue of over $465 billion, 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. In fact, 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 effectively solve problems. This growth took a great deal of creativity and constant refinement in regard to the organization itself; mainly because this type of growth was unheard of prior to the Walton family actually doing it.

growth

Unfortunately, their struggle has not ended and their need to effectively solve problems is far from over. Wal-Mart 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 Wal-Mart’s 10.3% (NYSE). In fact, Wal-Mart has grown slower than Target, Costco, and Amazon over the past several years and is under-performing its competition in both discount and warehouse sales (Hoium, 2013).

But why? There appear to be a host of issues at hand and it really depends on where you want to get your information. Regardless, their continual decline in profit is real (AP News, 2014). The finger has been pointed at quite a few things, including limited selection or unattractive products in apparel, home furnishings and consumer electronics. Others have pointed the finger at slow checkout service as a result of the company seeking to reduce hours for workers. Still, some suggest that it is because Wal-Mart 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 cost and/or loss by the company. For instance, Wal-Mart 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 into the bottom line somewhere at some point.

However, it is not just competition or the environment they need to contend with. Experts have been quoted repeatedly in headlines across the globe, discussing the doom and gloom on the horizon in regard to 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, or 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 Wal-Mart has the opportunity to not only solve their problems, but also put themselves back in the driver’s seat in regard to 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, Wal-Mart 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).

Problem Solving

The perceived problem is usually not the actual problem. That may sound counter intuitive, but everyone has problems. 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 makes the difference. Rushing into such an 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 to go.

The Problem Solving Wheel

problemwheel

Identifying the Problem

Identifying the problem sounds easy enough, but if you were to really examine this, you will find that it is not as easy as originally believed. This is because of cause and effect. Sometimes the problem you may be looking at is actually the effect of an underlying cause. Therefore, if you rush into “fix” the effect, you will have missed the cause. If you missed the cause, you can 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 Wal-Mart because the culture of hierarchical arrogance means that many of the lower levels hide or cover-up potential flaws. In other words, workers are often afraid to share the true 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. Many times, the information being provided is flawed itself 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 Wal-Mart (Nelson, 2014).

Harsh? Perhaps. The reality of the problem remains however. The company needs to start collecting as much information as they can about their system and the symptoms they are experiencing. These issues include, but are not limited to things like slower check out, higher theft, distributing center issues, and so on. Then, after having compiled the list of issues and potential issues, they need to simply ask “Why?” “Why are we having slower check out 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. Wal-Mart will undoubtedly have a laundry list of issues and symptoms in which 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 issue or symptom should be explored. Question with boldness everything about the issue. Allow employees to be a part of 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 in an effort 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 properly identified, the problem needs to be defined. “Slow checkout lines” or even “not properly staffed” are not proper definitions though.

The problem needs to be rephrased in several ways. Assumptions as to why the problem exists needs to be abandoned. Boldly question the reasons presented instead. Associated and related problems should be examined. Getting a proper (unbiased) perspective should be a part of the plan as well.

After having gone through each of these measures, the ability to properly define the issue should be much further along. Furthermore, the chances that the root of the problem was actually identified are 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.

Brainstorm Solutions

Some organizations are finding 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.

Wal-Mart 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 are dealing with the problems the company faces. When the checkout lines are slow, the associates are the ones trying 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 handling 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. Obviously each level in the corporate structure has insights that the other levels simply 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, simply 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, Wal-Mart 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 as a whole and for the stores or areas actually being 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 in the shopping experience for the customer overall.

The plan should provide easy to follow steps for achieving these goals that are reasonable and pertinent to the problem at hand. Such a plan should also not blanket the organization in hopes of conquering a localized problem globally. Such measures or actions would ultimately hurt the company more than it would help. This is because some parts of the company would not be subject to the same issues or symptoms as other parts. Therefore, certain measures would more than likely burden the stores who were otherwise not affected. In turn, this would ultimately just deepen the issue pool.

It should be reiterated at this point that evidence suggests that making plans that include stakeholder input on a regular basis, equates to organizational survival in competitive markets when the plan does not cost too much or rigidly followed (Mintzberg & Ghoshal, 2002). What this means is 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 in such a way that measurements of effectiveness can be tracked. A detailed list of initiatives within the plan should be made and followed, which should include the potential resources needed. The company should prioritize each objective within the plan and should 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 say. It should have alternatives ready to implement in the event that the initial plan was 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 important, 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 the ability to think of multiple possible solutions to problems. This is easier said than done because our minds are more likely to think habitually and in overly simplistic ways (Soin, 2014). Wal-Mart must take this lesson to heart if they truly seek to course correct.

Make no mistake though; Wal-Mart can be extremely innovative. In fact, Wal-Mart 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 really make an impact in eCommerce. Wal-Mart continues to pursue numerous new ideas each year and comes up with an amazing amount of ideas on top of that.

The downside is not the creativity at Wal-Mart. The downside is the lack of speed in which implementation of such ideas actually takes place. Wal-Mart is simply not willing 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 what the effect will look like if something bad happens or if the effort is misunderstood or offensive (Nelson, 2014). Once again, the political impact or the brand impact takes the lead over creativity and problem solving. Meanwhile, in many ways, the basics are being neglected; basics like repeatedly reported problems such as slow checkout lines, angry or bitter workers, and worsening customer service.

Change

Understanding the process of problem solving or even how creativity can play a role is not enough. If you have a problem, you want to adjust or change the circumstance in an effort 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 difficult, and for 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 and/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. John Kotter, a professor at Harvard Business School and world-renowned change expert, suggests 8 basic steps to change in his book “Leading Change”. These steps work in both 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 that either you or the company may face, and develop scenarios based out of cause and effect. Examine potential opportunities. Be honest in your search and in your findings and openly discuss them. Build support or evidence for what you have found.

Then build a team comprised of those who know something about the problem at hand. It could be an expert in the field, workers who are familiar with the process or problem, 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 extremely difficult at times.

From there, the plan must be communicated with those who are going to carry it out, support it, and/or 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 provides you an opportunity 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 build 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 all leads into utilizing empowered work teams to solve organizational problems and make effective change. As stated several times thus far, it is important that workers be involved in the decision-making process because by doing so you 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 Wal-Mart, the worker seems to believe that all they are empowered to do is their job according to several employees interviewed for this paper. Ideas that are had are heard, but often passed upward as the ideas of someone else. Only when an idea is realized as a good one, and tweaked enough to call it their own, is the change actually implemented by leadership. Are there exceptions to this rule? Of course there are, but to suggest this does not occur in Wal-Mart (or any other large organization) is a demonstration of naivety.

An organization should care not who the idea came from, as long as the organization’s improvement and ultimate profitability is realized. If the worker is happy and the organization is improved, why not empower the employee?

Organizational Improvement

Wal-Mart’s current organizational situation is complex. The structure is very high with often narrow spans of control. Yet, training is limited and a worker is often thrown into the mix. There are numerous formats and sizes that are all ran as though they are a Supercenter. Wal-Mart has Neighborhood Markets, Express, Wal-Mart Supercenter’s, Sam’s Club, Supermercado de Walmart, Asda, and many more. There is an information overload accordingly, both up and down the chain. And customer perceptions are rapidly moving into the negative for a host of reasons.

Organizational improvements can be had, but it takes being able to look at your problems honestly to be able to address them. For instance, if the company adopted a flatter hierarchy and split the formats and placed them under separate umbrellas, such as what they had done with Sam’s Club, you would fix a great deal of the problems that are currently occurring. Such a move would reduce the information overload going up and down the chain which equates into efficiency. It would allow for a wider span of control which would reduce costs. And it would allow the leadership of each brand to truly 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 in a company that size is to reduce labor. This is much easier to do when you are dealing with a large Supercenter comprised of over 350 workers. However, in a smaller format, such as the Neighborhood Market format, you are dealing with a fraction of the workforce. Cutting personnel makes a much more dramatic impact. This issue is largely ignored by the company 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 both from a customer service perspective but also a public perception of the company.

As with any problem or solution in regard to business, the answer is found in the people. The business needs people for both inside and outside reasons. True, the company often sells at a loss to ensure their position as the “low cost leader”, but this is simply another example of another area that could use some improvement.

Organizational Culture, Problem Solving and Conclusion

Wal-Mart's culture is generally characterized by the orientation towards customer service and providing the best value at the lowest prices. That is of course, what the company attempts to publicize and what most American’s 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 Wal-Mart. 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 actually fix operational problems. Instead, they are left to defend actions, and attempt to avoid association with operational problems. This equates into 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 a number of 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, and/or addressed with half-measures if they are actually addressed at all. This, all in an attempt to avoid the negative, avoid a potential stigma, or simply avoid the stress of going through motions that most understand will result in little or no change anyway. Nobody wants to go through the labor without getting the baby.

So if we are really talking about problem solving, creativity, and organizational improvement, we are talking about something much deeper. We are talking about the core of what Wal-Mart is, was, and will ever be. This means that what we are talking about is the need to change or even adjust the culture of Wal-Mart. The culture of Wal-Mart needs to become a culture of real change. Such a culture would equate into positive problem solving, useful and effective creativity, and positive organization improvements that would ultimately aid in the advancement of competitiveness in regard to the competition.


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David Robertson

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