Diversity and Performance at Walmart, Research Paper Example

Introduction

Wal-Mart is one of the most successful companies in America, and has recently engaged in a rapid international expansion strategy. Mun  (2004, p. 2) states that entering international markets that are somewhat similar to the company’s domestic market makes it easier, and the success rate is higher. This indicates that the knowledge of markets, buyer motivations, regulations, social values and preferences increases companies’ competitive advantage. In recent years, however, Wal-Mart entered some culturally diverse markets as well, and they faced several problems. While initially the global strategy’s leaders were selected from a group of executives who had an “American” business attitude, the company soon realized that knowledge is power, and put local talent into regional positions, increasing the competitive advantage of the company on the international market. However, the author of the current study will prove that these steps should be continued on an executive level, in order to further improve the company’s performance.

Problem Statement

The current study is designed to examine the limitations of WalMart’s corporate strategies to embrace diversity at the workplace. While the company ensures that its employees come from diverse background, the main thesis that the author would like to examine is that in the company’s leadership, minority groups are still under-represented. Based on the assumption that cultural diversity helps companies connect with culturally diverse customers, understanding their values and beliefs, WalMart is losing out on creating a competitive advantage through recruiting leaders who understand the culture of the given country. The below analysis will confirm that the ratio of culturally diverse leaders in the executive team of WalMart is low, and there is a close correlation between cultural competency and competitive advantage; therefore, the more culturally competent the global strategy leaders are the better the performance of the company will be on the international scale.

Company Analysis

WalMart was founded in 1962, when the first Arkansas store opened. Today, it is one of the largest supermarket chains in America, and the company has recently expanded its operations to global markets: Asia and Latin America. The company currently operates in 26 countries (WalMart, 2013), however, the representation of culturally competent employees in the leadership is low. As an example, none of the global executives are from minority background. Some of the regional store chains, however, have an internally recruited CEO, such as Horacio “Haio” Barbeito, the president and CEO of WalMart Argentina, and the president of Mexican and Indian store chains. The author  – through careful analysis of performance reports – would like to prove that the stores of WalMart are more successful in countries where local leadership is present. While the global expansion strategy of WalMart overall successful, it is clearly visible through reviewing the organizational structure of the company (WalMart, 2013) that in global leadership minority groups are under-represented. This indicates that the company has a limited ability to create meaningful and culturally relevant messages to diverse populations.

The company’s Statement of Ethics (WalMart, Web, p. 12) states that “Walmart will not tolerate discrimination in employment, employment-related decisions, or in business dealings on the basis of race, color, ancestry, age, sex, sexual orientation, religion, disability, ethnicity, national origin, veteran status, marital status, pregnancy, or any other legally protected status”. However, it is clear that diversity on a lower level of employment is greater than within the management.

It is clear that WalMart is already committed to change, and their diversity programs, recently started symbolize a movement in the right direction. There are several programs initiated by the company, and they are unique and outstanding at the same time among international organizations. The below table will show the different programs and initiatives aimed at recruiting, training, and promoting managers from culturally diverse backgrounds.

Source: WalMart (2013) The Global Impact of Our Diversity & Inclusion Journey. Diversity MBA Magazine.

It is evident that through advisory groups and interest represantation, the company embraces diversity and takes advantage of the talent pool available through its huge workforce. There are also some leadership development programs aimed at every individual within the organization, and the statistics are published by the Diversity MBA Magazine. (2013). A summary of diversity impact is detailed in the below table, which is demonstrating how many “people of color” representatives and employees participated in each leadership program.

Source: WalMart (2013) The Global Impact of Our Diversity & Inclusion Journey. Diversity MBA Magazine.

From the above table, it is clear that the company’s claims published in its 2012 Workforce Diversity document (WalMart, 2013, p. 3) are valid: “Walmart is one of the most diverse employers in the United States. In 2012, the company increased the number of colored market managers by 61 percent, the number of colored store managers by 32 percent, and the number of colored co-managers by 125 percent. Overall, people of color represent 37 percent of the total WalMart workforce (WalMart, 2013, p. 4). The same document compares the diversity representation level of WalMart with EEO-1 data (national employment statistics). While the total representation of minority groups in the workforce is higher than the national average, an interesting trend is clearly visible from the chart below, published by WalMart (2013, p. 8). The representation of culturally diverse workforce in management positions is higher in management positions than the national average, however, it is lower for skilled and non-managerial positions.

An interesting study, created by Knorr and Arndt (2003) reveals how important cultural competence is when entering new markets, by attempting to answer the question: “Why did Wal-Mart Fail in Germany?”. The authors find that one of the main reasons was “a management by “hubris and clash of cultures”-approach to labor relations” and “bad publicity due to its repeated infringement of some important German laws and regulations” (Knorr and Arndt, 2003, p. 18). The authors also state that WalMart’s lack of language, communication and “culture bridging” skills created a hostile environment for the company in Germany. It is evident that all the above problems could have been avoided by the organization, if they recruited CEO-s who were able to – at least – research the cultural, economic, regulatory, and social environment of the new market, and placed regional leaders in executive positions who possessed the relevant cultural competence.

Since the failure in Germany, it seems like WalMart has changed its global expansion strategy, and several regional offices have local leaders who have an extensive knowledge about the local social and economic environment. Indeed, the expansion of the company in Mexico has shown that local knowledge creates a competitive advantage. In 2007, the company opened more than 50 Bodega Aurrera stores in the country, 16 self-branded (WalMart) supercenters, and other retail outlets. The recruitment of Scot Rank as a president of Walmart Mexico proved to increase the competitiveness of the company. The CEO, according to his online bio (Walmart Mexico, Web), has an economic degree from America, however, he had been working for Mexico-based retail company regional offices before being promoted to an executive position within WalMart. Working for American companies in Mexico, the CEO became familiar with methods to resolve cultural issues and aligning cultures.

Significance of the Issue

Kreitz (2007) states that companies can take different approaches towards diversity: they can either tolerate, value, celebrate, manage, harness, or leverage it. From the review of WalMart’s organizational structure, it is evident that the company limits its diversity policies to tolerating and valuing culturally diverse workers, however, the management fails to harness and leverage the talent of these individuals within the organization. While the company currently has a Leadership Academy Program (Freifield, 2014), it is currently limited to the U.S. Freifield (2014) mentions that recruiting from within the organization has created transformational results, therefore, implementing the same program in international operations is likely to produce the same outcomes.

In order to fully utilize the benefits of culturally diverse and competent workforce, WalMart needs to work on developing effective collaboration and communication strategies internally and externally. Cornelissen (2004) states that there are several barriers ahead of executive managers to implement an open and culturally relevant communication method in international organizations. These challenges are listed below in order to support the development of creative approaches for WalMart to increase the benefits of having a culturally diverse workforce.

• Strategic thinking of communication professionals
• Support of senior management
• Organizational arrangements

In order to increase the positive effects of the high rate of culturally diverse talent, the executive team needs to focus on the above three areas.

Literature Review

According to Tharp (2005), organizational culture impacts the overall effectiveness of the company. Examining WalMart’s culture, the author will attempt to determine where the company stands on the competing values framework (Tharp, 2005, p. 2), and which of the organizational culture types (control, compete, collaborate, create) is relevant to the international operations of the organization.

Shore et al. (2009) talk about the basic assumptions related to ethnic/race diversity at the workplace. The authors mention that some researchers found positive correlation between team outcomes and overall performance (Shore et al. 2009, p. 118). However, the author of the current study would like to focus on the underlying assumption that “an increase in racial/ethnic diversity means that a work group will experience possible positive outcomes such as: increased information, enhanced problem solving ability, constructive conflict and debate, increased creativity, higher quality decisions, and increased understanding of different ethnicities/cultures” (Shore et al. 2009, p. 118).

Stevens, Plaut & Sanchez-Burks (2008) differentiates between three approaches towards diversity: colorblind, multicultural, and all-inclusive. The author of the current study would like to review the above categories and determine the place of WalMart on the scale of approaches, examining how implementing (or improving) the all inclusive approach can increase the company’s competitive advantage.

According to McDaniel, Samovar & Porter (2004, p. 8), “A knowledge of intercultural communication, and the ability to use it effectively, can help bridge cultural differences, mitigate problems, and assist in achieving more harmonious, productive relations What the authors above describe is identified as multiculturalism by Stevens, Plaut, & Sanchez-Burks (2008, p. 118). Bridging differences seems to be the most effective solution to WalMart’s problem: low beneficial impact of culturally diverse workforce. DiStefano, Imon, Lee  & DiStefano (2004) describe five different models of bridging differences. Hofstede’s model recommends the cultural assessment of cultures through the five value dimensions, in order to determine common values. The next mentioned approach is the Global Leadership and Organizational Behavior Effectiveness Research Project, based on Hofstede’s dimensions, however, using an additional four dimensions in the assessment. The Myer-Briggs Type indicator model (Big Five Model) assesses national and organizational behaviors. Other models quoted focus on cultural differences and conflict resolution, while the MBI (Mapping, Bridging, and Integrating) model is a simple way of aligning organizational culture with new markets’ and culturally diverse workforce’s values, behaviors, and visions. The solutions outlined in the next part of the study will all be suitable to be implemented using the MBI model, which is the simplest, and most effective of the above mentioned frameworks. The author selected this approach because it does not only focus on culture and values, but also behavior patterns.

Preliminary Leadership and Organizational Behavior Concepts

• Due to global expansion and increased competition, WalMart needs to face changes and challenges regularly. This means that there is an increased need for collaboration within the leadership. Samovar, Porter & McDaniel (2011) talk about improving intercultural communication within the company. The application of this framework is beneficial for the company, as collaboration is the key to increased organizational knowledge, competency, and can result in a competitive advantage.
• Schein (2004) states that leaders need to create an open communication system that embraces diversity and creativity, while aligning organizational values and culture with individual ones. Creating a strategic team that involves all regional and executive leaders to create more effective strategies, while involving regional teams in the decision making process (democratic leadership) is likely to improve the company’s performance and organizational commitment.
• Chemers (1997) talks about implementing transformational leadership while strengthening core values of the organization in order to successfully face the challenges of the globalized and multicultural world. Transformational leadership implementation would result in a strong shared vision across the organization, which would provide ethical and business decision guidance for executives around the world. However, if transformational leadership is not effectively communicated within the organization, it can not achieve its intended goal: increased level of collaboration and shared responsibility.

Preliminary Solution Options

• Recruiting more culturally diverse leaders in the global executive team, therefore, increasing the insight of members in global strategies.

While it is evident that WalMart has learned from the mistake of its market entry in Germany, and is now employing CEO-s with cultural competence for regional roles, the lack of culturally diverse leaders in the global executive team is creating a problem. Increasing communication efforts and effectiveness, while promoting more executives with cultural competence to executive roles would improve the global strategy of the company. While this approach would require a total overhaul of the corporate communication strategy, and take 12-18 months to complete, it would also provide WalMart with sustainable growth opportunities, and a pool of culturally competent talent.

• Increasing collaboration between CEO-s of global WalMart companies, in order to share knowledge about global and local issues and adjust corporate strategies accordingly

Communication is essential to creating regional and global strategies, and aligning individual business unit goals with those of the organization’s. Several authors have concluded that knowledge and competency sharing results in higher overall efficiency and performance of individual units.

• Developing a leadership management program aimed at culturally diverse workers to increase the proportion of diverse executive and middle manager members

This solution would result in several benefits for the company. First of all, it would increase the company’s talent pool, and through knowledge sharing the overall competency of regional and global leaders. The author of the current study assumes that by creating a recruitment and leadership development program in the company aimed at successful managers in the company, the organization could increase its innovative power; something that every international company needs in today’s globalized economy.

• Strengthening the core values of the organization while aligning them with individual systems of beliefs.

Culture and core values within WalMart has an important role. While the company is working on aligning the individual values and goals with the company’s vision on a lower level, it needs to be strengthened on a regional level.

Recommended Solution

From the above options, it is evident that the most effective project is “increasing collaboration between CEO-s of global WalMart companies, in order to share knowledge about global and local issues and adjust corporate strategies accordingly”. As the company internal and external analysis has revealed, the company has already implemented programs that are focused on the career development of culturally diverse employees. Indeed, regional leadership teams now consist of executives who do not only possess business knowledge, but cultural competency, as well. By using the  MBI model, and accepting the premise that well managed diversity within organizations can create an increased synergy, the next step that WalMart needs to take is “Bridging”. It is evident from the company’s diversity-related publications that the “Mapping” of diverse workforce is already complete, and several committees and work groups are created to represent culturally diverse population. Communication structures and models have a huge importance in this model. The final stage of the process would be integration: managing participation, building effective collaboration, and building on ideas.

Reflection and Conclusion

The above research, internal and external analysis of WalMart’s strategies and diversity policies has revealed that the company has a workforce that is more diverse than the average American corporation’s. The author found that – learning from the failure of the company’s market entry strategy in Germany –  WalMart is now recruiting culturally diverse executive leaders for regional CEO positions, and this results in increased diversity of the talent pool. Reviewing the MBI Model of diversity integration, however, it is clear that steps two and three (bridging and integration) still need to be (partly) completed. This is why the author of the current study recommends that WalMart increases the effectiveness of its communication and collaboration systems in order to fully exploit the potential benefits of a culturally diverse workforce and management team.

References

Chemers, M. M. (1997) An integrative theory of leadership. Lawrence Erlbaum Associates, Publishers. London

Cornelissen, J. (2004) Corporate communications. Theory and practice. SAGE.

DiStefano, L., Imon, S., Lee, H. & DiStefano, J. (2004)  Bridging differences: a model for effective communication between different disciplines through conservation training programs for professionals. City & Time 1 (2): 1. Retrieved from http://www.ct.ceci-br.org

Freifield, L. (2014) How the Walmart Leadership Academy become a center of excellence for the global retailer. Training Magazine. Retrieved from http://www.trainingmag.com/content/soapbox-developing-leaders-walmart

Knorr, A. & Arndt, A. (2003) Why did Wal-Mart fail in Germany? University of Bremen.

Kreitz, P. (2007) Best practices for managing organizational diversity. Stanford University. Retrieved from http://www.slac.stanford.edu/cgi-wrap/getdoc/slac-pub-12499.pdf

Samovar, L A, Porter, R E, McDaniel, E R (2011) Intercultural communication: A reader. Cengage Learning.

Shore, L., Chung-Herrera, B., Dean, M., Ehrhart, K., Jung, D., Randel, A., Singh, G. (2009) Diversity in organizations: Where are we now and where are we going? Human Resource Management Review 19 (2009) 117–133

Stevens, F., Plaut, V. & Sanchez-Burks, J. (2008) Unlocking the benefits of diversity all-inclusive multiculturalism and positive organizational change. The Journal Of Applied Behavioral Science, Vol. 44 No. 1, March 2008 116-133

Tharp, B. (2009) Four Organizational Culture Types. Haworth.

WalMart (2013) 2012 Workforce diversity. Retrieved from http://cdn.corporate.walmart.com/6c/56/961e8ab44aefa61054e5b0b1d24c/2012-workforce-diversity-report_130111231924393438.pdf

WalMart. (2014) WalMart Corporate. Retrieved from http://corporate.walmart.com/our-story/leadership/executive-management/

WalMart (n.d.) Statement of Ethics. Retrieved from  https://walmartethics.com/uploadedFiles/Content/U.S.%20-%20English.pdf

WalMart  (2013) Diversity & Inclusion Impact 2013. Diversity MBA Magazine. Retrieved from http://diversitymbamagazine.com/docs/Walmart-2013-D+I-Impact-Report.pdf