Introduction to Wal-Mart’s Background
Sam Walton was running a franchise store in the 1940’s and 1950’s that was advertising the low prices they had to offer customers. It is a common practice for any retail organization to work with suppliers to improve costs and efficiency and attempt to maximize profits. The stores would then retain those cost savings as additional profits. However, Sam Walton saw the advantage that if he would pass on some or all of the realized savings to customers, he could attract more business versus competition and growing in great volume would support the continued lower costs and allow the business to grow as well. So in 1962, Sam Walton opened his first Wal-Mart in Arkansas committed to his ideal of lowest prices and building repeat customer loyalty.
Walton realized the importance of valuable, well-trained employees and a stable workforce. Although becoming very wealthy personally, Walton never drifted far from his very thrifty means. He saved money wherever he could, did not believe in lavish business travel or expense and felt it very important to stay in close touch with his employees and their issues at hand.
Walton always promoted that Wal-Mart employees had limitless potential if they worked hard and stayed loyal to the organization. In 1971, he instituted an employee profit sharing program utilizing company stock ownership as the incentive for employees to invest in the success of the company. It was not uncommon for employees to invest $100,000 over 20 years in the company program to end up with $700,000 in vested value. He understood payroll was one of the largest expenses in the retail segment and also implementing technology into the infrastructure would put Wal-Mart well ahead of K-Mart and other competitors. Wal-Mart had crossed into the billions of dollars in revenue, thousands of locations and maintained its low cost mantra.
Research Problem, Issue Identified
It was in the 1990’s after Walton’s death in 1992 that the labor relations aspect of Wal-Mart stores took a different turn, and not for the better. Due to a series of black eyes on Made in America products not made in America and using factories with questionable labor practices off shore. I was bad press and the stock slid going into 2000. The subsequent executive team led by David Glass was putting a tremendous amount of pressure on regional and store managers for cost savings, leaner headcount to operate stores and high pressure tactics with store associates to demand more productivity. With more emphasis on stock offered incentives for management, the tactics worked and Wal-Mart stock rebounded extremely well. However, managers were getting burned out, turnover in associates were reaching all time highs, union pressure was mounting and the levels of customer service was starting to slide due to ill-trained and short experienced personnel. These all seemed fair enough, however, there was a distinct gap developing between the rate of promotions and incentive pay in favor of men as compared to the rate at which women were being given opportunity and the same sized incentives.
By late 2000, the hard charging work ethic uncovered a serous inequality that continues to loom over the retail giant yet today. It was found that thousands of employees were being forcefully denied lunch breaks. Since the majority of hourly associate employees were female , a form of sexual harassment was emerging. Target and Costco over the 10 year period had zero reported violations for off-the-clock work. Walmart had faced 44 claims from 28 states with judgment and back pay charges totaling over $350 million. This sparked the action of a woman in California filing suit for discrimination under sexual harassment law provisions. It was in fact discovered that women working in the same store manager jobs with same experience and merits were making roughly $90,000 whereas the male counterparts were making $100,000 and upward. The judge in California hearing the case saw overwhelming evidence of the discrimination and declared it a class action suit in 2003. Where 79% of the department heads at Wal-Mart were women, only 15% were then placed in management. This suit is still active in 2011 and could eventually be the single largest sexual harassment discrimination lawsuit in US business history.
HRM Theories/Literatures
The comparable worth theory is an effective means of generating gender-based pay equity. It holds that women should receive compensation equal to men's for work requiring similar skills, responsibility, and effort. Comparable worth states that two people with comparable skills, education, and experience should be paid comparable amounts, even when they’re working at two different jobs. The impetus behind the comparable worth theory is that the size of a worker’s paycheck should be related to job content rather than to the predominant sex of employees in an occupation.
There are two principal federal laws against gender-based wage disparities – the Equal Pay Act of 1963 and Title VII of the Civil Rights Act of 1964. The Equal Pay Act of 1963 established the principle that employers cannot pay different wages to employees of the opposite sex for equal work on jobs the performance of which requires “equal skill, effort, and responsibility,” and which are “performed under similar working conditions at the same location.” With this “equal pay for equal work” standard, there is a middle ground between requiring that two jobs be either exactly alike or just comparable. Wal-Mart has been charged with illegal discrimination based on sex in terms of pay.
Title VII of the Civil Rights Act of 1964 is not as limited as the Equal Pay Act. The fundamental differences between the two acts is that the Equal Pay Act only prohibits wage discrimination based on sex and requires jobs to be “substantially equal” or “similar” for different pay rates to be considered discriminatory, while Title VII bars all discrimination in employment (hiring, firing, promotion, etc. as well as wage) and bases wage-based discrimination on a comparison of the value of women’s jobs to those of men who perform work that is “dissimilar” but of “equivalent or comparable worth” to the employer. In Dukes vs. Wal-Mart Stores, Inc., Wal-Mart is charged with discriminating against women in promotions, pay, and job assignments in violation of Title VII of the Civil Rights Act of 1964. The plaintiffs claim that Wal-Mart pays women less than men and promotes men more frequently than women.
Title VII addresses two theories of employment discrimination – disparate treatment and disparate impact. Under disparate treatment, an employer treats two groups of protected classes (e.g., sex) differently as the result of intentional or volitional conduct. Wal-Mart is involved in a systematic disparate case because of alleged policies and practices that discriminate among gender groups.Under the disparate impact theory, employer practices or policies that appear to be neutral on their face may be found to violate Title VII if, as a matter of statistics, they have a significantly negative impact on workers of only one sex. There are statistical gender differences in pay and promotions at Wal-Mart. Statistics have proven that “women make up two-thirds of Wal-Mart’s hourly employees but only 14 percent of its managers. Additionally, men earned 19 percent more than women and were five and a half times more likely to be promoted” (Valderrama).“Fifty-five percent of women were initially hired as cashiers compared with 12 percent of men. Twenty-nine percent of men were initially hired in receiving jobs like unloading, which generally pay at least 20 percent more than cashier jobs, compared with 7 percent of women” (Greenhouse).
Devaluation theory is the assumption that women are culturally devalued in society. As a result, female occupations and tasks are assumed to be less valued than are male tasks and wage differentials occur. The proportion of females in an occupation has a net negative effect on wages. Statistics indicate “that women constitute 80 percent of hourly Wal-Mart workers but hold only a third of managerial jobs. The percentage decreases on each step up the company hierarchy. According to devaluation theory, wage difference is a consequence of the employer’s bias” ("Wal-Mart Class-Action").
Efficiency wage theory states that the productivity of workers depends positively on their wages; thus, it is beneficial for employers to pay a higher wage in order to motivate employees to exhibit higher effort. In reference to this theory, women at Wal-Mart could be receiving lower wages due to two assumptions: (1) women are highly productive at all wage levels whereas men tend to be more productive as pay increases and (2) women do not react with more effort to higher wages because they are not work/career-oriented. Under these assumptions, there is no need for an employer to pay females higher wages or to promote them (Schwieren).
Data Collection Methods
It is no secret that Wal-Mart had been paying its hourly associates on average at much lower rates than their competitors. The sexual harassment condition that exists emerged from their general lack of equitable pay. For example, while their competitors were paying their employees at about $11.08 per hour, Wal-Mart was paying their associates an average of $9.68 per hour. Women were on the lower end of the scale. That is 12.7% less than the industry average. With 1.6 million employees, it could mean billions of dollars in payroll if they were to bring their standards of pay for women and men equally up to par. In order for an organization to determine fair and equitable pay scales regardless of gender, they should undertake both formal and informal methods of collecting data. There a number of ways to accomplish this. The most used method and probably most influential in determining effective pay rates are surveys.
Surveys can be conducted through the use of telephone with other HR professionals or consultants, they can be conducted through the used of newspaper research for similar jobs posted and of course through the use of the Internet. The primary objective is to formulate a benchmark salary scale by carefully constructing a job description match to responsibilities performed and comparing those to other companies in the same field and area of demographics. A company should match up to 20% of their positions with similar positions. Attention should be paid to areas such as additional benefits to base pay scale. For example, determining sick leave, vacation policies, employment sponsored insurances and pension or other employee contributory retirement savings plan. Utilizing compensation survey tools on the internet such as offered through the US Government, Salary.Com and cnnmoney.com are commonly used to get an idea of where a company should compare given certain criteria.
In addition to conducting surveys, either with the use of consultants or independently, it is important to include other steps internally that may be important to the structure of the company. As mentioned previously, having valid job descriptions to compare individually is important. A logical next step would be to group similar jobs in level of expertise required to see if they would fall in a common range. Going beyond that, companies often move to a position ranking that somewhat follows the organization structure of the firm. Government departments and agencies, for example, use structured pay grade level ranking with corresponding salary ranges. Non-government firms use similar models for non-exempt and exempt status employees.
Wal-Mart actually uses a number of survey tools to rank positions from service associates up through management. Their critical mistake relative to maintaining a fair and equitable pay scale for all employees is that they failed to make it gender neutral which led to the sexual harassment discrimination action. Even when they saw the numbers very much out of skew with the advantage for men over women with management positions and pay rates within the company, they failed to take action to start the correction process to level the field.
Data Analysis
Recommendation/Evaluation
Works Cited
Dessler, Gary. Human Resource Management.12th ed. Boston: Prentice Hall, 2011. 394-98. Print.
Frank, T. A. "A Brief History of Wal-Mart." Reclaim Democracy! Revoke Corporate Corruption of American Democracy. Washington Monthly, Apr. 2006. Web. 24 Apr. 2011. <
Greenhouse, Steven. "Report Warned Wal-Mart of Risks Before Bias Suit." Reclaim Democracy! Revoke Corporate Corruption of American Democracy. 03 June 2010. Web. 19 Apr. 2011. <
Schwieren, Christiane. "The Gender Wage Gap – Due to Differences in Efficiency Wage Effects or." Department of Economics, Universiteit Maastricht.Web. 20 Apr. 2011. <
Valderrama, Corina. "Wal-Mart Suit Crosses Competition Lines in Attempt to Avoid Largest Job Discrimination Class Action « Fair Employment Legal Update." Fair Employment Legal Update. 26 Mar. 2011. Web. 19 Apr. 2011. <
"Wal-Mart Class-Action May Be Heading to Supreme Court." The Fiscal Times. 28 Mar. 2011. Web. 20 Apr. 2011. <