Wall-Mart applies the compensation strategy of offering the workers the lower limit of wages allowed by the law, but misstating for the same through offering its employees with an insurance scheme (Wilkes, 2013). In this respect, while the employees may not be benefiting greatly in financial terms, the future of such employees is well covered, due to the fact that they have been provided with an insurance cover that addresses their needs beyond the monthly pay checks (Wilkes, 2013).
However, the Wall-Mart strategy has been termed as unsuitable both for the employees and the economy, since it is a strategy that seeks to categorize the workforce of the organization as an expense that needs to be minimized Wilkes, 2013). This concept is harmful both to the employee motivation and to the public perception, owing to the fact that treating the workforce as an expense that must be kept under control does not work well either with the employees or the public perception, which in turn adversely affects the sales of the organization directly (Atchison, Belcher & Thomson, 2013).
Thus, while the Wall-Mart compensation strategy has enabled it to keep its expenses low and thus maximize its profitability, it might have even been more damaging than already thought, if the strategy is analyzed from the employee nutrition and the customer perception point of view.
Further, the Wall- Mart compensation strategy has emerged to be damaging to the reputation and the goodwill of the company amongst the public and the customers, owing to the fact that it is perceived to transfer the burden of changing hard economic times directly to the employees, by causing them to suffer low wages, so that the company can maintain its profitability levels, as they were during the good economic times (Wilkes, 2013).
How Wall-Mart applies compensation practice to determine the positive or negative impact to the many and its stakeholders The effect of the negative perceptions of the customers and the general public is to make the organization owners and the top leadership and management to come out as greedy and unethical, which in turn is a turn off for many potential customers of the organization (Atchison, Belcher & Thomson, 2013).
Most importantly is the distinction between the concept of low wages and low labor costs. The fact that an organization offers low wages to Its workforce does not mean that such an organization will in turn incur low labor costs (Atchison, Belcher & Thomson, 013). This is because, while the low wages may be an alternative for reducing expenses, the costs associated with the labor turnover might exceed the benefit derived from offering low wages (Atchison, Belcher & Thomson, 2013).
Thus, Wall-Mart is an organization that is being faced by the challenge of high employee turn-over, owing to the fact that most of its employees are dissatisfied with the conditions of work and the low wages offered by the organization, such that they tend to quit the job at the rise of any other viable alternative, forcing the organization to engage in a continuous cycle of hiring and employment recruitment, which in turn drives the costs of labor higher (Wilkes, 2013).
A recent study has shown that while Wall-Mart offers low wages compared to Cost, Quick Trip and Trader Joey’s, the organization incurs an overall high cost of labor compared to these organizations, thus in turn earning low profitability margin (Alter, 2013). The study has indicated that the cost of labor turnover at Cost is 17%, compared to the cost of labor turnover at Wall-Mart, which stands at 44% (Atchison, Belcher & Thomson, 2013).
The overall effect of this study is to show that the compensation strategy for Wall- Mart might be considered to deliver positive results by lowering the expenses associated with the employee wages, but the overall effect is that the company continues to incur very high cost than it would be incurring, if it paid good wages for its employees (Alter, 2013). The other important aspect to consider in the Wall-Mart’s compensation strategy is its effect on the employees’ productivity.
A well paid employee is a productive employee, since such an employee is enthusiastic and motivated about his work, and thus applies extra effort to ensure that the employer will also benefit from the show of goodwill and appreciation of the employee services. In this respect, the study indicated that the productivity of the employees at Wall- Mart was much lower compared to that of Cost, owing to the fact that the profit per employee in Wall-Mart was $11 ,039 compared to that of Cost, which was $13, 647 per employee (Atchison, Belcher & Thomson, 2013).
Thus, the compensation strategy of Wall-Mart is wanting, and as a result needs to be changed so that it can enable both the organization and the workforce to reap higher benefits from their relationship. The ways in which laws, labor unions, and market factors impact the Wall-Mart compensation practices Wall-Mart compensation practices have been affected greatly by laws, labor unions and market factors, such that for example, in 2005, labor unions created organizations and launched internet and social media campaign to criticize Wall-Mart for its poor treatment of employees in wages and conditions of work (Atchison, Belcher & Thomson, 2013).
The law has also been on collision course in several occasions with Wall-Mart, where it has been investigated for possible prosecution for both monopolistic tendencies and unlawful treatment of its workforce (Green, 2003). The market forces have also been of great influence to the Wall-Mart business, through causing the organization to earn low profitability as a result of economic recession, thus in turn paying low wages for its workforce (Wilkes, 2013). The effectiveness of traditional bases for pay at the Wall-Mart The rotational bases for pay are still applicable for Wall-Mart, although selectively.
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