Why is there Large Employee Turnover Rate at Wal-Mart - Research Paper Example

? Why is there a Large Employee Turnover Rate at Wal-Mart? Introduction Organizations spend a lot of time and money on human resourcedevelopment and management (Ongori 2007; Linhartova). The cost starts with the recruitment process through to training and development at every stage through which the individual passes and then replacement in the case of an employee who quits. Although the figures for employee turnover for Wal-Mart are not readily available there is a lot of information to indicate at the least that employees are not happy and that the turnover intent is high. In fact, the company has been faced with a number of law suits relating to sex discrimination and working overtime without pay. Wal-Mart is currently one of the most influential and respected company which is synonymous with that commanded by the manufacturing giants of the twentieth century Lichtenstein (2009). The company is in position number 15 on Forbes List as a Global 2000 Leading Company and as one of the World’s Biggest Public Company (Forbes 2013). This is based on sales, profit, assets and market value. In terms of sales Wal-Mart is in the number 1 position, 16th in profit, 135th in assets and 7th in terms of market value. On Forbes (2012) list of ‘The World’s Most Powerful Brands, Wal-Mart is in the 25th position and this makes it the world’s top retailing company. The company’s advances in logistics and supply chain management have placed it in the curriculum of some of the most prestigious universities such as Harvard. Case studies on Wal-Mart are used in almost all Business Schools as most of the books used include features on Wal-Mart’s supply chain. The company employs 2.2 million employees and operates more than 10,700 retail units in 27 countries (Wal-Mart 2013). The company serves approximately 245 million customers per week with a mission to help them save money in order to facilitate better living – that is ‘to help people save money so they can live better’ (Wal-Mart 2013). Wal-Mart’s employment figure makes it the largest employer after the government of the United States. Therefore, it is no doubt that there are concerns relating to employee turnover. The company’s operations are divided into three segments – Wal-Mart US, Wal-Mart International and Sam’s Club. The international segment is seen as the engine of growth for the company as Wal-Mart continues to expand internationally. The aim of this research is to determine the reason for the high employee turnover rate at Wal-Mart. The objectives of this study are to determine: i. Whether compensation at Wal-Mart may be a factor in relation to the high rates of turnover ii. Whether employees are satisfied with the level of communication with their supervisors iii. Whether employees are happy with their job functions Employee turnover is the movement of workers in the labor market between organizations and between different roles or occupation (Abassi et al 2000). Literature Review According to Linhartova (2011) Employee turnover is one of the problems relating to the management of human resources that never go away. Linhartova (2011) carried out two studies on the causes of employees disaffection and turnover. The study used 29 determinates to describe seven of the main factors that led to employee turnover – remuneration, certainty, relationships, recognition, communication, culture, and expectations. The factors were in a similar manner to studies done by other researcher (See John et al 2008; Gosling et al 2003; Benet-Martinez and John 1998). The results of the study indicate that all seven factors were strongly linked to job satisfaction. Firth L, David J Mellor, Kathleen A Moore, Claude Loquet (2007). How can managers reduce employee intention to quit?, J. manage. Psychol. 19 (2): 170-187. … Strategies to minimize turnover Jain (2013) suggests that employee branding which is a relatively new concept n human resource management. This Jain (2013) indicates will allow the organization to choose and retain employees with strong talents in order to facilitate the company’s competitiveness in the market. In fact, Jain indicates that employees are recognizing that it s best to develop good brand relationships with employees than with customers so that employees will be able to pass on these benefits to the customer. This is indeed a ‘win win’ situation as it enables effective and efficient management of customer relations good relationships. Models of employee turnover According to Sheridan and Abelson (1983) Cusp catastrophic model indicates two of the factors that are linked to job terminations are the perception of low organization commitment and medium to high levels of job tension. The dynamics of the model indicates that these employees normally experience a drastic reduction in their commitment to the organization six months before they leave. Farrell and Rusbult (1981) sought to find a model that predicted employee turnover. In order to facilitate the process Farrell and Rusbult (1981) carried out an assessment of the ability of the investment model to predict employee turnover. The investment model claims that job satisfaction, the degree to which individuals evaluate the job in a positive manner should be relatively greater when the job offers high rewards and low costs (Rusbult and Farrell 1983). Farrell and Rusbult (1981) performed two studies which both indicate that job satisfaction and commitment were correlated with employee turnover. However, a stronger relationship existed between employee turnover and commitment than with employee turnover and job satisfaction. These results support the investment model. Most of the studies done prior to Farrell and Rusbult (1981) placed emphasis job satisfaction as the main reason for employee turnover (See Lawler 1973; Locke 1976; Porter and Steers 1973; Vroom 1964). Several other studies have shown that job satisfaction is only moderately related to employee turnover (Koch and Steers; 1978; Porte, Crampon and Smith 1976; Porter and Steers 1973; Porter, Steers, Mowday and Boulian 1974). However, organizational commitment was found to be a much better predictor of employee turnover (Porter, Crampon and Smith 1976; Porter Steers, Mowday and Boulian 1974). Organizational commitment is ‘the strength of an individual’s identification with and involvement in a particular organization’ (Porter, Steers, Mowday and Boulian 1974: p. 604). Job attachment was also found to be a stronger predictor than job satisfaction. Job attachment is ‘an attitudinal response to one’s job that is characterized by a congruence between one’s real and ideal jobs, an identification with one’s chosen occupation and a reluctance to seek alternate employment (Koch and Steers 1978, p. 120). Comparison of Wal-Mart and Costco Cascio (2006) in a comparison of Costco and Wal-Mart indicates how differently the core values that Sam Walton espoused and which resulted in the growth and prosperity of the company are being applied today. The criticisms include: failure to pay hourly paid workers for overtime work; challenges to exempt status by assistant store managers; sex discrimination in various ways including –pay, promotions, job transfers, training, assignments, and coverage for medical care. Fishman (2006) deems this kind of behavior as exploitative and illegal in some ways. In fact, Fishman (2006b) also states that Wal-Mart’s emphasis on every day low prices comes at a cost to employees and suppliers along with their employees. Cascio (2006) indicates that Costco’s model delivers low prices but not to the detriment of employees. The importance of increasing shareholder value is different for both companies. While Costco’s code of ethics emphasizes, taking care of the most important stakeholders - customers and employees ahead of shareholders. This is starkly different from Wal-Mart’s point of view which gives greater importance to shareholder satisfaction. Therefore, employees are required to facilitate this by carrying out their roles in an efficient and effective manner. That is, achieving the goals of the organization at the lowest possible cost. This, Cascio (2006) indicates, includes accepting low wages and nonpayment for overtime. The emphasis on shareholder value appears to have a negative impact on productivity and therefore motivation as Sinegal (2004; cited in Shapiro 2004, p. 5) points out that it good business sense treat workers well as this has a positive impact on productivity. It is better to be either an employee or a customer at Costco (Holmes and Zellner 2004). Wall Street; however, is not impressed with that as the main is not increasing shareholder value. Cascio (2006) also points out that Costco was the cost leader yet the company was able to pay high wages ranging from a low of $10 to a high of $18.32 while Wal-Mart Costco averaged $10.11 an hour for a full-time worker. Methodology Email questionnaire was used to carry out a survey at one of Wal-Mart’s stores in Florida. A total of 30 questionnaires were sent but only a total of 11 were returned after several follow ups. The number that responded represents 37% of the number of questionnaires emailed. The questionnaires were sent to various categories of staff including cashiers, sales representatives, shelf packers and others. The questionnaire contained a total of 12 questions. Some of the questions involved yes/no answers. Two types of attitude rating scales – simple attitude scaling; and category scales were also utilized in the study. The results were then tabulated and analyzed. Analysis of Findings A total of six (6) males and five (5) females responded to the survey. The diagram below shows the percentage of the total respondents that each gender represents. Diagram 1 – Pie chart showing percentage of each sex that responded The pie chart in Diagram 1 indicates that 55% of the respondents were male and 45% female. This in no way suggests that more males than females work at the particular location where the respondents are stationed. The job description of the respondents was classified into four categories. This information is shown in Diagram 2a. Diagram 2a – Pie chart of percentage of respondents in specified jobs The pie chart in diagram 4 indicates that 28% or three (3) of the respondents were shelf packers; 27% or three (3) cashiers, 18% or two (2) customer service representatives and 27% or three (3) in administrative roles (other). Diagram 2b further indicates the breakdown of the various job descriptions into male and female. Diagram 2b – Graph showing gender of respondents in various job functions Diagram 2b indicates that all the shelf packers were males while all the cashiers were females. One of the customer service representatives was a male and one a female while two of the respondents in the ‘other’ category were males and one female. The ‘other’ category represents those who serve in administrative roles such as purchasing and accounts. It has been suggested that workers do not stay very long with Wal-Mart and even if they do they intend to leave soon. Respondents were therefore asked questions relating to the length of time that they have been employed a Wal-Mart followed by how much longer they would stay with the company. Diagram 3 provides an illustration of the results of the length of service of the respondents. Diagram 3 – Percentage of respondents and their corresponding length of service The pie chart in Diagram 3 illustrates that 46% - five (5) respondents have been with the organization for less than one year. A total of 36% - four (4) respondents chose the ‘1 - 3 years’ category; and 18% - two (2) respondents chose the category representing ‘more than three years’. In terms of the length of time that the respondents would remain on the job if they had a choice, Diagram 4 provides an illustration of the results. Diagram 4 - Length of time respondent would like to remain with current employer The information presented in the pie chart in Diagram 4 indicates that most of the respondents 73% or 8 of the respondents would leave Wal-Mart in less than six months if they were able to find alternate employment while 27% indicated that they would stay longer than one year. None of the employees indicated six months to a year. The results illustrated in Diagram 4 are closely linked to the results in Diagram 3. There is a high cost associated with health insurance and other employee costs. Whenever employees work over a certain number of hours per week they are entitled to certain benefits. Wal-Mart has been accused in the past of not allowing employees to work over a certain number of hours so that they do not qualify for such benefits or not paying them for overtime at all. In relation to the question of – ‘How many hours do you work per week’, four categories were used to group the number of hours worked by each respondent. The responses are shown in Diagram 5. Diagram 5 – Pie Chart showing the number of hours worked per week The information in the pie chart in diagram 6 indicates that of the 11 respondents 46% - a total five (5) of them worked less than 30 hours per week. The percentages for those who worked within the hours shown in the ‘30 – 35 hours per week’, ‘36 to 40 hours per week’, and ‘more than 40 hours per week’ categories were 18% each. Diagram 6 – Pie Chart showing hourly pay The pie chart in Diagram 6 shows that most of the respondents – 64% earn less than $10 per hour. The number of these that are females and males, their length of service and their relative positions may be used for further analysis The question of whether or not respondents received health insurance was also asked. The responses are summarized in Diagram 7. Diagram 7 – Pie chart of respondents with medical insurance The pie chart representing Diagram 7 indicates that most of the respondents – 73% had no health insurance while only 27% had health insurance. Table 3 shows the correlation of the respondents with health insurance and the hours they work. The respondents were asked whether or not they had children. The pie chart in Diagram 8 shows the percentage of respondents with and without children. Diagram 8 – Pie Chart of respondents with and without children The pie chart in Diagram 8 indicates that most of the respondent – 64% had children while 36% had no children. Promotion is one of the things that employees look forward to in an organization. This is normally a reward for having done well on a job. Having done well they are promoted to the next level. The pie chart in Diagram 9 shows the number of respondents who received a promotion during their employment with Wal-Mart. Diagram 9 – Pie Chart of the percentage of respondents who received a promotion The pie chart in Diagram 9 indicates that the majority of respondents – 73 had never received a promotion while at Wal-Mart. In response to the question of – ‘What is your present work like most of the time? ’, three choices of responses were given – fascinating, routine and satisfying. The pie chart in Diagram 10 below shows the percentage of respondents who chose each of the choices available. Diagram 10 – Respondents opinion of their current role The pie chart in diagram 10 indicates that of the 11 respondents 73% - eight respondents thought that their work was routine; 18% thought that it was satisfying- 2 respondents; and 9% - one respondent thought that it was fascinating. This is an indication that the majority of respondents did not find their job satisfying. Respondents were questioned in terms of how courteous they found their supervisors. The pie chart in Diagram 11 illustrates the responses to this question. Diagram 11 – Frequency with which courtesy was displayed by supervisors The pie chart in Diagram 11 indicates that 28% thought that their supervisor was never courteous, 27% thought that their supervisor was rarely courteous, 27% indicated sometimes and 27% indicated often. None of them suggested very often. In addition to the above findings respondents were asked to provide information on whether they got a chance to communicate with their supervisors. They were provided with five choices – never, rarely, sometimes, often and very often. The responses are illustrated in Diagram 12. Diagram 12 The information in pie chart in Diagram 12 indicates most of the respondents thought that supervisor’s were either never accommodating – 28% or rarely accommodating – 27%. However, 18% thought that they were accommodating sometimes on matters that affected them and the same 18% thought that they were often accommodating. Only 9% thought that they were accommodating very often. Discussion The respondents in the survey came from only one of Wal-Mart’s approximately 10,700 stores and so it cannot be used by itself as a means of inference in relation to other Wal-Mart stores. However, the information in some way collaborates with a lot of the information in the press which has led to criticisms of the way Wal-Mart treats it workers who the company describes as associates. The results do not indicate that there is sexual discrimination at the store from which the respondents came. However, there may be other signs pointing to this. The results of the survey indicate that the reasons for the high employee turnover rate at Wal-Mart appear to be related to compensation in its many forms. There were also problems relating to communication between supervisors and respondents. Communication is one of the most important things in an organization and things that act as barriers to communication such as an unaccommodating supervisor leads to lack of job satisfaction, lack of job commitment and lack of job attachment. All of the respondents who received less than $10 per hour indicated that they have been employed to Wal-Mart for less than a year and that if they had a choice they would leave the job at Wal-Mart within six months. This is an indication that they were not satisfied with their job and therefore was not committed to it. The investment model indicates that job satisfaction positively correlated to pay Rusbult and Farrell (1983). Therefore, as pay increases job satisfaction increases with it. Additionally, these were the same respondents who have never received a promotion. A higher level of compensation normally accompanies a promotion to a higher level in an organization. Part of any compensation package in an organization includes regular pay and health insurance. Respondents who worked for less than 40 hours per week received no health insurance as Wal-Mart seeks to cut cost in this area to the detriment of its associates who do not work for more than a stipulated. In fact, Wal-Mart’s pension contribution expense fell from $1,100 million in 2010 and 2011 to $752 million in 2012. This represents a 46% reduction in pension contribution expense (Wal-Mart 2012). The results also indicate that these respondents also had no commitment or attachment to the job. The level of job commitment can be gleaned from the length of time in which they indicate they would leave Wal-Mart to find alternative appointment. Most of them indicated they would do so within six months if they had a choice. Rusbult and Farrell (1983) indicate that commitment to a job increases with rewards. Most of the respondents also did not feel any sense of attachment to the organization in anyway because the jobs they did was routine. They did basically the same things everyday. There was no variety and nothing challenging about it. It is clear that the persons in the ‘other’ category who performed administrative functions in accounts and purchasing were more satisfied with there jobs as the rewards were much better with hourly pay of $16 and over. These people are normally paid on a fortnightly basis. Additionally, they received health benefits in the form of health insurance and they were able to work for 40 hours or more. They were also able to communicate with their immediate supervisors who were accommodating for the most part. They were either fascinated or satisfied with their jobs and this suggests that they were committed to their jobs and therefore the organization because the have received at least one promotion since they have been employed to Wal-Mart. Limitations of this study The study was handicapped by the number of persons who responded to the questionnaire. Additionally, the survey was only administered to one store. In order to make generalizations about the topic a survey of Wal-Mart’s 10,800 associates needs to be given the chance of being chosen. Conclusion and recommendations The employee turnover rate at Wal-Mart corresponds very well with levels of job satisfaction; job commitment, and job attachment that the employees possess. It is clear that there is a strong relationship between job satisfaction and rewards as those at the top would be promoted while those at the bottom would just have to concentrate on finding alternative employment. Numerous studies have found that employees who are most involved in their jobs are more satisfied with their jobs and also more committed to their organization (Blau and Boal 1989; Brooke and Price 1989; Brooke et al 1988; Kanungo 1982). It is extremely critical that employers who want to reduce the cost of managing their human resources focus on ways in which to get the employees or associates, for example, in Wal-Marts’ case more committed to their jobs. The cost is higher when they come and go very frequently as it appears in Wal-Mart’s case. In fact, Bloomberg reports that customers were moving away from Wal-Mart to other stores because the goods were not on the shelves – instead they were in the warehouse because there were not enough workers to pack them on the shelf. One worker indicated that when workers leave they are not replaced. Wal-Mart appears to be too focused on cutting salaries and wages in order to facilitate increases in the level of profits and therefore dividends paid to shareholders. It was found that although Wal-Mart is on a major expansion drive employee costs has not increased significantly. Employee branding has been suggested as a way to increase employee retention. Instead of focusing on shareholders and customers the management of Wal-Mart should place more emphasis on employees. This should make them more attached to the brand and therefore want to serve customers in professional manner. Employees who deal with customers tend to transmit their feelings to them. Satisfaction represents an affective response to specific aspects of the job or career and denotes the more pleasurable or positive emotional state that results from a review of a job or career (Locke, 1976; Porter et al 1974; Williams and Hazer 1986). Weisberg (1990) indicates that there is an inverse relationship between employee turnover and length of service. This is also consistent with other studies as well this one. Therefore, If Wal-Mart really wants to increase the number of years that employees stay with them the management will have to do a little brainstorming as well as consider the recommendations from Jain (2013) and others. References Benet-Martinez, V. and John, O. P. 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