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People Problems at Wal-Mart

People Problems at Wal-Mart. Sam’s/Wal-Mart vs. Costco. Refresher Quiz: Profit = xxx – yyy Revenue – Costs Lowering costs leads to _____ Higher profit. Labor “Cost” or “Investment”. Sam’s Club/WM Costco Avg. Wage $10.11/hr $17/hr Health Ins. 46% covered 85%

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People Problems at Wal-Mart

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  1. People Problems at Wal-Mart

  2. Sam’s/Wal-Mart vs. Costco • Refresher Quiz: Profit = xxx – yyy • Revenue – Costs • Lowering costs leads to _____ • Higher profit

  3. Labor “Cost” or “Investment” Sam’s Club/WM Costco • Avg. Wage $10.11/hr $17/hr • Health Ins. 46% covered 85% • Health Ins. 67% prem. Paid 92% • HI Cost. $3500 $5735 • Retirement 64% covered 91% • Retirement $747 $1330 • Union 0% 13% • Labor Costs 42% of operating costs 70%

  4. Wal-Mart Profit

  5. Labor “Cost” or “Investment” • Net Result?? Sam’s Club/WM Costco • Profit/Employee $7,804 $15,890 • Turnover 44% 17% • Shrinkage (Theft) 1.0% sales 0.2% • Productivity $525 sales/ft2 $886 • Wal-Mart’s “Missing” Profit = $16,980,600,000

  6. Labor “Cost” or “Investment” Wal-Mart vs. Costco Stock Price

  7. Wal-Mart’s Message to Managers DANGEROUS SAFE VALUABLE Your job is to cut costs A little lower Lower You should cut labor costs The biggest cost you control is labor Your job is to help us make money We make money by cutting costs

  8. Lowering Labor Costs • Pressure may lead to illegal activities • Wage & Hour lawsuits • 12/05 Ordered to pay $172 million for failing to provide meal breaks to 116,000 CA workers • Fined repeatedly for violating child labor laws • Largest class action case in history for sex discrimination

  9. Gender-Based Pay Disparities

  10. Were Women as a Group Less Qualified for Management ?

  11. “Women don’t want to be managers”

  12. In the news… • June 3, 2010 New York Times • June 20, 2011

  13. DANGEROUS SAFE VALUABLE

  14. Competitive Advantage • Something that allows one company to successfully compete against its competitors. • Valuable: Does it increase revenue or decrease costs? • Rare: Is it unique to this company? • Not easily imitated or substituted: Is it difficult to copy? • Example: Wal-Mart’s size

  15. The Cost of Turnover • Turnover Costs (1.5 – 2.5 x salary) • Separation Costs • Exit interviews, administrative functions, separation pay, unemployment tax • Replacement Costs • Advertising, selection function, staff meetings, travel/moving expenses • Training Costs • Formal/informal training, performance differences

  16. The Cost of Turnover? • SAS

  17. Savings from low absenteeism • SAS (6,000 employees) • National Average Absenteeism = 5 days/yr • X 6,000 = 30,000 days/year • X $240/day = $7.2 Million • SAS Absenteeism = <2 days/yr • X 6,000 = 12,000 days/year • X $240/day = $2.88 Million • Savings of $4.32 Million

  18. Some companies get it. • Fortune’s Best Companies to Work For

  19. Competitive Advantage • Something that allows one company to successfully compete against its competitors. • Valuable: Does it increase revenue or decrease costs? • Rare: Is it unique to this company? • Not easily imitated or substituted: Is it difficult to copy? • Example: HR Function at SAS

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