The benefits that are the advantages and costs that are the disadvantages of Wal-Mart’s growth across the countries have been in question since many years. Retailer’s critics have recognized the extent to which Wal-Mart abuses its strength in the market to wane its workers’ compensation. Crushing suppliers and badly hurting local economies along its course, on the other hand supporters of Wal-Mart say that the challenging prices offered by Wall-Mart have a more recompensing impact on the customers of U.S. for any negative effect the company’s development has on salaries. To get an idea for how much Wal-Mart can increase the wages financed through shortened profit shares a person can get an idea of Wal-Mart’s income margins going as low as the margin was in 1997, which would also mean reducing disparity between their margins and the margins of their major competitor, which is Costco. Lowering the profit margin by the given amount would provide Wal-Mart a $2.3 billion to allocate for better worker compensation without having the necessity to increases prices of goods at their stores. This means wages would be just below $2,100 per each non managerial employee. Basically making Wall-Mart return to net profit margins which they had during 1997. Wal-Mart can then also provide its non supervisory workers a 13% increases in pay without having to raise the price, and also keeping higher margins of profits than their chief competitor (Spotts 2005).
Many companies have faced the challenge of a proper compensation plan working in China, this is due to a major problem with every Chinese manager. Finding the correct people in China is very difficult, but holding on to them is even more difficult. Any sharp MBA with limited experience a company hires and trains, advises and counsels is now hearing from headhunters that he or she is worth 2 or 3 times what the current company is paying him or her. Even if the company is in a position to give him more money, it knows that this is only going to solve the problem until the next round of calls start coming to that manager plus it causes resentment and bigger demands from the rest of the company’s team. All this causes a lot of problems for international companies operating in the premises of China, but there is a factor that attracts the attention of every company to China. This factor is the low compensation per hour rate of an employee, in fact it is one of the lowest across the globe.
Though Wall-Mart has made sure that they follow rules and regulations and make sure that their employees are treated according to the rules and regulations, plus they also make sure that working conditions are eligible to the standards but many complains and unethical working conditions in the manufacturing areas of Wall-Mart factories have been reported. Wall-Mart also made sure that compliance to all quality standards are made and suppress their suppliers to the limit that they can to maintain reduced prices over their stores (Fishman 2006). Stats show that a huge amount of Wal-Mart’s suppliers are actually located in the premises of China. While workers of Wal-Mart United States are fighting Wal-Mart’s devious union busting activities, in China Wall-Mart has imposed an official ban on any independent unions. A study that was conducted by the National Labor Committee gave results that showed people working in China’s Guangdong province worked as much as 130 hours per each week and received wages that averaged 16.5 cents per hour which is obviously well below the minimum wage rate plus they did not have any health insurance (Jorgensen 1996).
In order to implement corrective actions in the Wall-Marts compensation plan for the Chinese suppliers a new approach would be introduced. The major emphasis would be on making sure that all working stations are ethically eligible to be used as work stations. In case standards are not met a heavy fine would be imposed on the manager of that station. Chinese authorities would have full permission to inspect the area at anytime for possible problems.
The Objectives of the Compensation Plan would include:
· Meeting the minimum wage level in any case
· Improving the working conditions of the suppliers
· Benchmarking standards for quality and ethical control
· Product prices would not be kept too low but to a certain level
· Ensuring wage increases at high level performances
· A yearly bonus for each employee depending upon the profits
· Encourage the formulation Labor Unions
· Compensation Committees
These objectives are a way to increase the employee’s living and working standards, these objectives would be met keeping in mind the company’s policies. The major reason to implement this compensation plan is to increase motivation level plus put an end to the unethical practices of Wall-Mart as reported by many researchers.
The program would be implemented along the hierarchical levels of the suppliers. A station manager would be situated at the manufacturing centers of Wall-Mart. The additional job of this manager along with his daily routine tasks would be to keep an eye on the employee issues plus the working and compensation situation of the work stations (Jorgensen 1996). The manager would monitor each employee’s performance and then the employee would be rewarded accordingly. There would be a regional manager above the station manager that would oversee and assess the station manager’s performance according to the compensation plan outlined in the beginning. Above the regional manager would be the country manager looking into the matters from a brief perspective and assessing the performances of the regional managers.
The compensation philosophy is simple and easy to understand. The basic agenda is to improve working and living conditions of the employees of Wall-Mart while maintaining low costs as always at the Wall-Mart outlets. Still this limits us to a certain point till where wages and other incentives could be increased as any change would also have a direct impact on China’s economy and other important aspects.
Another important concept would be of a compensation committee, every work station would have one compensation committee. The committee would comprise of two managers selected from the station plus the labor union leader and the station manager. An upper level compensation committee would also be formulated at the decision making level. This committee would include the Human Resource Manager, The Country Manager, The Regional Managers. This committee would be responsible to take decisions regarding the important aspects of employee compensation and yearly bonus. The lower level compensation committee would only have the power of presenting ideas and problems which would be solved at the higher level compensation committee. This would lead to fair representation of each and every employee.
The compensation plan would give equal rights to each and every employee to be rewarded according to his or her performance. The rewards would mostly be in the form of money and bonuses. Health facilities like medical and etc. would be provided mandatorily. Full time workers and part time workers would have the same sort of the wage plan, the wage plan would be simply designed at an hourly rate. People working at night shifts would be paid a higher wage than day workers. The wages would be based on the global wage rates of Wall-Mart. This would result in two positive aspects for the company. Firstly the company will have the right to choose the best of the best among the large numbers applying for the vacancies. More people would be willing to get a job in Wall-Mart due to the fact that it would be paying high wages and hence the concept of selecting the best amongst the lot would be easily implemented.
The company would leap greater heights and rapid growth by the compensation plan highlighted above. The compensation plan not only improves the image of a Wall-Mart employee it also acts as huge motivating factor. Another advantage of implementing this compensation plan is improving the image of Wall-Mart as a body. High wages would attract employees with higher potential and talents, resulting in increasing efficiency and profit rates of the company.
1. Charles Fishman. (2006). The Wal-Mart Effect: How the World’s Most Powerful Company Really Works–and How It’s Transforming the American Economy. Penguin Press HC.
2. Greg Spotts. (2005). Wal-Mart: The High Cost of Low Price. The Disinformation Company; Film Tie-in Ed edition.
3. Karen Jorgensen. (1996). Pay for Results: A Practical Guide to Effective Employee Compensation. Merritt Pub.; 1st edition.