American retail giant Walmart is changing its labour model by ditching its tested model of hiring randomly. It is now trying to move into a more investment-oriented model where new recruits will be given more training, paid more and offered rewards to ensure high productivity.
Analysts say, Walmart is actually emulating the Costco model and is moving out of its traditional models. But the focus is the same – getting high productivity without excessive cost.
The economists who have studied the retail sector point to "low-road” and “high-road” employers in the sector. In the first group, the emphasis is on keeping labour costs down, while the other group invests more in workers and reaps big benefits from enhanced productivity.
By seeking the new transformation, cost-conscious Walmart is aiming to take the high road. A report in Forbes magazine, analysed the retailer’s new approach and its main components. It notes that as in the case of Henry Ford’s famous 'five dollar a day' wage model, one motive is better public relations. But bottom-line calculations also matter as employee turnover demands investment from the company.
According to industry estimates, in retail, the standard turnover is 50 percent in the first six months. If Walmart is able to reduce the churn and succeeds in making people stay at least 12 to 18 months, it can save “tens of millions of dollars a year.”
Focus on retention
When Ford used that formula it had to grapple with 50,000 workers a year to retain 13,000 working on the line at any given time. So, the vast recruitment and training costs made sense for it.
The report notes that Walmart is also trying to do the same by seeking to rationalize costs with less churn or attrition. It means, Walmart will stop bottom-fishing in the labour market and improve pay so that people are motivated to stay with it for a longer time.
Another visible prong in the new strategy is training. Unlike the past, all front-line employees such as cashiers, cart pushers and sales associates will now be put on a well supervised on-the-job training program. In the past, training was rudimentary with a bare orientation and safety drills confined to the initial days. But some real job training is still happening at the store, where experienced senior employees are passing down on their expertise to the younger recruits.
Under the new model, workers will be made to stick longer as more investments will be made on them. This, the company hopes to amortise, on a long term when the workforce stays longer with them. The obvious point is – well trained workers can be trusted more for productivity.
In the case of retailer Costco, its workers are paid better than Walmart. But its per unit sales metric for measuring productivity is also pretty tough. That means, when Walmart tries to pay more, just like Costco, it would also mean that expectations on productivity will scale up.
Tapping toy market
Meanwhile, Walmart is betting high on the Star Wars franchise during this holiday season. Having drawn more than 500 toys from the franchise, Walmart is getting ready with a wide range -- from the R2D2 Bop It game to Star Wars Legos.
The toys are coming out just in time to coincide with the euphoria around the new movie’s December release. "We tested from 18 months to 12 years old, let the kids actually touch the items and play with the toys and determine the top 20 items coming out this holiday season," Mark Deisering, store manager said.
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