Wal-mart overview and organizational structure

Wal-Mart is a multinational firm that is headquartered in Arkansas United States and its operation involves wholesale, retailing and also other units in different formats globally. Its operations comprises of 3 segments; Wal-Mart United States, Sam’s Club and Wal-Mart International. Wal-Mart US operations consist of concept based on mass merchant across United States and these operations are carried out under Wal-Mart brands and also through digital retail.  Wal-Mart International comprises of the firm’s operations in areas outside US including different retail websites. This segment consists of different formats which are separated into wholesale, retail and other. The organizational structure of Wal-Mart shapes the operations and business activities of the company and places limits on how the firm responds to the environment. The structure also determines how the various human activities are integrated with resource utilization and business operations in the entire organization. A resilient spirit by the company’s human resources partially depends on the perception that is supported through a common organizational culture. 

The company’s organizational structure is hierarchical functional and this describes the two major features on which the structure definition is based.  The hierarchy aspect relates to the vertical alignment of authority and command in the entire organization where, for instance, apart from the CEO, all employees are under a superior. The leadership placed by this structure aims at integration of the different values of the founder into the culture so as to improve workers morale and achieving positive inference on the bottom line. Due to the sheer large size of the company, the hierarchical structure is deemed necessary especially in the decision making process.  With many employees working across the many branches globally, the leadership deems this the best structure for the organization so as to ensure efficient and effective management of the large pool of human resources. In this structure, directives coming from the management at the top are placed under the middle managers who ensure their implementation by the lower ranking employees in the firm.

 In addition, the function based aspect if the organizational structure consists of employees’ groups that fulfill various functions allocated to them. For instance, the firm has Human Resource Management function being a department for that particular function. Other departments include the marketing and information technology sections that carry out the related functions which are just part of the many departments that are function-based in the organization. The major impact of the hierarchical organizational structure that is also functional is the ability of management to easily influence the whole firm.  The hierarchical organizational structure involves a clear definition of the role of employees in an organization and the nature of their tasks and relations with others is given. This kind of structure is usually tall and there is narrow control spans and this gets wider as one move down the structure (Hirschey & Bentzen, 2016). The structure is fit for organizations with a wide global reach given the complexity, dynamism and high integration of the world economy which has necessitated the need for redesigning firms critically. Organizational structure relates to the organizational culture of the firm that is in turn determines the behavior and human activities that are aimed at receiving the best outcomes of the business operations in the market. In the allocation of resources, a managerial control is established through the organizational structure to ensure that the intended purpose for these resources is achieved (Brickley, Zimmerman, Simon, & Smith, 2015).

Agency problem

 A major agency problem that has existed in Wal-Mart involves the need for improved employees and the need for employees to maximize value. On one hand, the company has previously made a decision with an aim of boosting the employees’ pay so that to meet the minimum wage as outlined by federal authorities after being under pressure from unions and groups of employees in the firm. On the other hand is a case where the shareholders feel that executive compensation at the firm is dealt with in isolation of major performance indicators. For the company’s workers, the decision to raise their pay resulted from various strikes from a group such as Our Wal-Mart on a shopping day that is busiest for the firm’s calendar. The argument was that majority of the workers were living in poverty forcing them to depend on food stamps for survival. This did not augur well with investors expectations and they reacted to the announcement negatively and this saw the company’ shares fall by 3.21 percent. The reaction can be attributed to the projection that change would cost as much as $ 1 billion and thereby wiping out 20 cents per share of earnings in the financial year. For Wal-Mart executives, shareholders felt that they continued receiving unreasonable pay while the performance of the company’s share declined previously.  This means that even when the performance of the firm is down, the executives continued to earn compensation that was not based on the performance metrics and essentially behaving like a private firm that is not held accountable by outside shareholders.

The decline in the performance of the firm could not be reflected in the formulas for setting compensation appropriately. This creates an agency problem where the executives are viewed to be rigging the entire process for their benefit and without considering the interest of the shareholders who are the owners of the firm. The management of the company is viewed as working against the interest of shareholders through their actions.  The agent problem arises from actions that lead to an environment that does not align the interest of the principal to that of the agent (Waschik, Fisher& Prentice, 2010). In general, the responsibility is on the principal to develop incentives that that ensures that his agent acts accordance to interest of the principal. A common perception on the contract of the employee is to relate the compensation of an employee to that of the set measurements for performance (Waschik, Fisher& Prentice, 2010).  The shareholders in this case may feel that the interest of the executives and employees are not aligned with interest of the organizations they own. Yet in many instances, the principal can only   check the agents’ acts imperfectly meaning that agents can decide to advance their interest rather than those of the principal.

In this scenario, the shareholders can advance their interest by monitoring the executive actions while at the same time, ensuring that the interests of employees are not undermined for the sake of profit maximization. This would ensure that the firm does not get into conflict with regulatory authorities due to poor compensation of its employees.   The solution for the agency problem created by salary increment for employees is to have an incentive plan that less costly and which aligns the interest of shareholders to those of workers. This can easily be done by tying the compensation of the employee to company’s performance or a given metric of productivity or success of the company (Van Essen, Otten & Carberry, 2015). In order to solve the problem caused by unchecked executive compensation is to tie the performance of the company in terms of financial well-being. This may involve offering stock options to executives as long as the process is legal and appropriate by disclosing it to the relevant regulatory authorities. Stock options have been successful and effective in solving compensation related agency problem in the past and can help in increasing the overall value of the company (Van Essen et. al 2015).  

The agency problem arises once a principal decides to delegate actions to the agent without having information on the possible behavior of the agent.  The agents carry out actions that do not serve the interest of the principal which means that the outcome will be very undesirable in relation to the expectations of the principal.  The shareholder, as the principal, aims at maximizing the profits of the organization and hence expects the management to run the organization in way that this will be achieved in the short-run and long-run (Van Essen et. al 2015). The agency cost prevents the shareholder from knowing the efforts of the management and to what extent the contract is being fulfilled. The agency problem can result to market failure since the agent may pursue own interests at the expense of those of the principal. The business may be run in a way that is inefficient and hence leading to failure on the part of the principal to achieve the intended outcome (Waschik et. al 2010).  To reduce such failures, there is a need for a solution to be found for the problem and thereby ensuring that principals interests are achieved.

Job dimension and design

 The job design of Wal-Mart is based on the organizational structure of the firm which is hierarchical in nature. This structure simplifies to specify distinct characteristics of features of a job since a clear authority line, communication lines and command lines are established throughout the organization. The job dimension of the firm aims at achieving the intended outcomes across the organization and in all the branches or stores locally and globally. Job dimension and design has a big impact on the morale of the employees, their job satisfaction, motivation, commitment to the organization and even turn over (DuBrin, 2012). The dimension of the job is skill variety which refers to the extent to which a certain job needs a variety of separate activities in performing the tasks (DuBrin, 2012). This involves utilizing various talents and skills of an individual to improve performance and hence achieve the expected outcome.  The dimension is informed by the worker-oriented and work oriented analysis of the job for the various positions in the company.  The analyses provide a good way for the firm to obtained perceptual, interpersonal and cognitive skills or abilities especially for the managerial jobs, and the method is applied through a Work Profiling System for such jobs. The human resource management function is tasked with carrying out the tasks related to defining job description.  The Job design for Wal-Mart, as the largest global retailer, involves defined criteria including position, duties, functions, performance standards, job knowledge and factors.  

The job design involves a wide range of job description but the essential features and attributes that are desired include the whole job description.  The job design is essential since the company has many stores and platforms in which business operations are carried out and which requires a variety of skills. This fits the nature of the company since its location in many parts of the international market requires specific skills for specific areas and tasks.  It is also essential for standardizing operations in stores, achieving economies of scale in different functions such as marketing, merchandizing and distribution. The store managers control the operations and thereby ensuring standards are maintained at the same level. An effective job design is one that out together various tasks, identifies them and placing the skilled individual that is best suited use a variety of skills in performance especially at the superior levels. Walmart store managers require such skills so as to drive up performance (Stanford, 2015). To improve on the job design, the company should focus on job specialization, enlargement and enrichment by grouping the various jobs by function.  Job specialization involves grouping different jobs into components and allocating them to individuals such they utilize their skills and improve on them through repetitive tasks. Breaking down tasks and allowing repetition of the same tasks minimizes jobs skills requirements, cost and effort involved in staffing (DuBrin, 2012).  Job enlargement involves expanding various tasks to add variety where employees are slowly given more tasks as they gain experience. Eventually, job enlargement teaches new skills for multiple tasks by the employees (DuBrin, 2012).   Job enrichment involves allowing workers more control over the tasks they are performing since employees who have authority over their tasks become more efficient and improve their general performance (DuBrin, 2012)..

Compensation package

The compensation package implemented by Wal-Mart is based on the need for cost minimization so as to provide low priced products to customers. The minimal wages have come under much criticism due to inadequacy in providing enough support for the needs of employees. However, the company has considered increasing the compensation packages offered to its employees. The compensation package for the company includes a plan for purchase of associate stock and contributions of 401(k) up to 6 percent of the salary both with company much. The package also includes associate discounts and a plan for Comprehensive Health Insurance. The package is aimed at maintain high motivation for the employees and the benefits address the goal of human resource function that it to retain its employees.

In addition, the package also involves the education and training programs for the employees for the purpose of personal growth and career development. The management aims by offer this package supporting employees by providing reasonable compensation at all the levels in the corporation.  However, the compensation plan and package fails provide enough financial support to cover the rising cost of human needs as their cost increases in the market. This is despite the fact that the firm counts on minimizing costs so as to lower product prices. For the package to be effective, it has to include the same standards of compensation for all the workers especially by use of performance standards. This will motivate the employees to work more, improve the firm’s earnings and hence sustaining their compensation.

Reference

Brickley, J. A., Zimmerman, J. L., Simon, W. E., & Smith, C. W. (2015). Managerial economics and organizational architecture.

Hirschey, M., & Bentzen, E. (2016). Managerial economics.701

DuBrin, A. J. (2012). Essentials of management. Mason, Ohio: South-Western/Thomson Learning. 256-258

Stanford, N. (2015). The Economist guide to organisation design: Creating high performance and adaptable enterprises.

Waschik, R., Fisher, T., & Prentice, D. (2010). Managerial economics: a strategic approach. Routledge.15-17

 

Van Essen, M., Otten, J., & Carberry, E. J. (2015). Assessing managerial power theory: A meta-analytic approach to understanding the determinants of CEO compensation. Journal of Management, 41(1), 164-202.