دراسة حالة منظمات الاداء العالي

Electronic copy available at: http://ssrn.com/abstract=1624245

High Performance Organizations 1

High-Performance Organizations: The Wal-Mart Stores Inc. Case Study

Grace S. Thomson

August 2009

Electronic copy available at: http://ssrn.com/abstract=1624245


High-Performance Organizations: The Wal-Mart Stores Inc. Case Study

Organizational effectiveness is the goal of organizations competing in the changing

landscape of global business (Colquitt, LePine, Wesson, 2009). While profitability sustains a

firm financially, the well-being of the human capital of the organization is equally important to

ensure competitiveness (Carpenter & Sanders, 2008). Collins (2001) posited that effective

strategic leaders are those with the capabilities to drive the transformations of the firm into new

and profitable models. Firms that are able to transition from good to great companies (Collins,

2001) have leaders who demonstrate to be (1) capable individuals, (2) contributing team

members, (3) competent managers, (4) effective leaders, and (5) humble executives. According

to Blanchard (2006) leaders in high performing organizations prioritized the triple-bottom line of

being “the provider of choice, the employer of choice, and the investment of choice” (in Watson,

2007, p. 46). Leaders in high-performance organizations strive to keep their customers,

employees, and investors satisfied, emphasizing that people are always first (Schermerhorn,

Hunt, & Osborn, 2008, p. 22). This study will address the components of the culture and

organizational behavior of Wal-Mart Stores, Inc. in the U.S. to determine if the characteristics of

the firm qualify it as a high-performance organization.

Background

Organizations in the 21st century face rapid changes in the external business environment

that impact the operation of the internal environment (Blanchard, 2006). The demands made by

informed customers, highly-skilled workers, regulators, social activists, and shareholders

increase the pressures on firms to deliver excellent results while satisfying the diverse needs of

these stakeholders (Watson, 2007; Schermerhorn et al., 2004). An understanding of

organizational behavior is necessary to decipher the needs of the individuals and groups within


the organization, and in order to exercise more effective communication, decision-making

processes, and leadership.

Robbins and Judge (2008) stated that organizations with strong cultures influence

employee behavior, reducing turnover and maintaining a high level of job satisfaction in the

workplace. However, strong cultures misled by unethical leaders may result in a bad reputation

for the firm (Carpenter & Sanders, 2008), as confirmed by the Enron and WorldCom scandals of

the early 2000s. Single-minded and overachiever overdrive are common denominators behind

unethical leadership behaviors (Spreier, Fontaine, & Malloy, 2006, p.2).

One of the major topics in the discipline of Organizational Behavior is the study of high

performance organizations (HPO) (Schermerhorn et al., 2004). HPOs strive to get the best in

people as a means to achieve sustainable high performance results. Leaders, who put people first

when setting the organizational goals, inspire their workforce to pursue profitability while

meeting the expectations of all the stakeholders (McClelland & Burnham, 2003). According to

Schermerhorn et al. (2004) high-performance organizations are characterized by five

components (p. 23): “(1) employee involvement, (2) self-directing work teams, (3) integrated

production technologies, (4) organizational learning, and (5) total quality management.”

Strategic leaders must attend to these pieces with equal intensity. If one of them is left out, the

organization will not be a true high-performance organization (HPO).

Wal-Mart Stores, Inc. is the world’s largest retailer, positioned number one in the Fortune

500 list (Wal-Mart, 2008a) with more than $374.53 billion in sales worldwide, and a net income

of $12.9 billion in fiscal year 2008 (Wal-Mart, 2009a). Founded in 1962, Wal-Mart is currently

the largest U.S. employer with 1.4 million workers (Wal-Mart, 2008) and 600,000 worldwide.

According to Beer (2001) Wal-Mart is an exemplary high-performance organization that has


redefined the way retail business is done in the U.S. The importance of Wal-Mart in the

economic activity of the U.S. is undeniable, and consequently its performance is used to

exemplify how successful firms operate. However, contradicting opinions about the business

practices of Wal-Mart have emerged, weakening the qualities of superior performance. Hart

(2007) discussed evidence presented in the Dukes v Wal-Mart case about alleged gender

discrimination in the company, and union representatives of the United Food and Commercial

Workers’ (UFCW) constantly attack Wal-Mart for what they claim represents a threat to market

capitalism (United Food and Commercial Workers, 2009).

While strong arguments exist about the “Wal-Mart effect” (Fishman, 2006, p. 7) that

destroys competitors, lowers wages for the industry’s workforce, and changes communities

worldwide, other scholars have given Wal-Mart the benefit of the doubt (Ghemawat, 2006)

expecting that the firm commits to “both be right, and seem right” (p.43). According to

Ghemawat (2006) a large number of arguments against Wal-Mart are biased and exaggerated,

and objective studies about the firm emerge as necessary. All in all, what seems indisputable is

the influence that Wal-Mart has on the U.S. society, both on the consumers’ side and the labor’s

side. Consequently, the objective study of Wal-Mart’s culture and business practices will shed

light on the conceptualization of this firm as a true high-performance organization (HPO).

Problem Statement

The general problem addressed in this study is that despite the recognition that the

competitive environment of the 21st century requires firms to be aggressive and adaptive to

external changes (Carpenter & Sanders, 2008), firms struggle to balance the demands of all

stakeholders expecting high performance and social responsibility (Watson, 2006). Some firms

categorized as successful and profitable in the past (e.g. Enron, WorldCom) failed the society at


relying on an overdrive towards profits that disregarded ethics and people’s well-being.

Organizational behavior scholars argued for firms to behave as High Performance Organizations

(HPOs), putting people first as a condition to sustain their competitiveness (Schermerhorn et al.,

2004). Research on firms that are deemed successful in becoming High-Performance

Organizations (HPOs) (Beer, 2001) would contribute to the literature about organizational

change and organizational behavior. Hence, Wal-Mart was chosen as object of analysis in this

case study.

The specific problem is that organizations like Wal-Mart, recognized for a low-cost

strategy that benefits millions of customers (Beer, 2001; Ghemawat, 2006; Thomson, 2007), deal

with claims of unfair practices towards employees, competitors, and suppliers (Dube, Lester, &

Eidlin, 2007; Hart, 2007). These arguments, both pro and con, concerning Wal-Mart’s business

practices raise doubts about a plain categorization of this firm as an HPO. Furthermore, despite

the extensive scholarly and non-scholarly literature about Wal-Mart, little research exists that

examines Wal-Mart using a theoretical framework for HPOs.

This qualitative case study will explore the characteristics of organizational behavior and

business practices, as well as financial performance outcomes of Wal-Mart to interpret these

elements under the framework of the “Five components of high performance organizations” by

Schermerhorn, Hunt, and Osborn (2004). This analysis will allow for an understanding of how

Wal-Mart has approached its transition to High-Performance Organization (HPO), and if its

business practices and organizational behavior conform to a sustainable high performance. The

findings of this qualitative research will provide corporate leaders and scholars with valuable

input regarding key elements of successful HPOs in the U.S.


Purpose of the Study

The purpose of this qualitative case study is to explore the characteristics of

organizational behavior, business practices, and financial performance of Wal-Mart Stores Inc.,

using content analysis, to identify the common themes that may lead to categorize the firm as a

High Performance Organization (HPO). Schermerhorn, Hunt and Osborn (2004) defined HPOs

using five components: employee involvement, self-directing work teams, total quality

management, organizational learning, and integrated production technology. This study will

examine business practices that could fit in the definition of HPO for Wal-Mart Store Inc.

Data about organizational behavior and business practices will be collected from Wal-

Mart’s corporate website, scholarly journals, and specialized financial publications. Data about

financial performance will be extracted from Wal-Mart’s annual reports, financial analysis

databases (e.g. Mergent Online, Yahoo Finances) and SEC filings. Additionally,

communications and statements issued by top executives of Wal-Mart to shareholders and the

public will be analyzed. These data will be triangulated to provide a comprehensive snapshot of

Wal-Mart’s culture, practices, and performance. Qualitative case studies are appropriate when

the researcher seeks an in-depth understanding of a phenomenon (Creswell, 2008). This case

study will describe and interpret manifest and tacit elements of the business practice,

organizational behavior and financial performance of Wal-Mart within a model of High

Performance Organizations (Schermerhorn et al. 2004).

Significance of the Study

The significance of this qualitative case study about Wal-Mart Stores Inc. resides in the

analysis of the traits that characterize the operation, organizational behavior, and performance of

Wal-Mart Stores, Inc., to explain if it reflects the components of High Performance


Organizations. This study will add to the scholarly literature in organizational behavior,

organizational culture, and strategic leadership, because it provides a theoretical approach to the

description of Wal-Mart as an HPO.

In the field of leadership, this research study makes important contributions in the

identification of characteristics of strategic leadership that have led Wal-Mart to be recognized as

a successful global organization, based upon the five components of HPOs proposed by

Schermerhorn et al (2004). Moreover, the study seeks to demonstrate how Wal-Mart has faced

the challenges that are associated with an organizational change derived from becoming an HPO

(Schein, 1997). The findings of this case study will provide corporate leaders and scholars with

knowledge about business practices that might be applicable in their organizations and fields of

research, respectively.

Nature of the Study

This qualitative case study explored data gathered from public documentation available

on Wal-Mart Stores Inc, statements of the top executives of the firm, and audited financial

statements for the past five years. All the sources used in this study are secondary and are

publicly accessible through Wal-Mart’s corporate website, annual reports to Wal-Mart’s

shareholders, statements of the CEO in the media, SEC filings, scholarly journal articles, website

of the United Food and Commercial Workers’ (UFCW), and financial analysis databases such as

Mergent Online.

The qualitative case study design was selected for this research as it allows the researcher

to explore the characteristics of organizational behavior, business practices, and financial

performance of Wal-Mart Stores Inc., with intensity and thoroughness (Schermerhorn et al.,

2004). The data will be analyzed using content analysis of the materials collected from public


sources to identify the common themes and accomplish the goals of the research, which are to

identify characteristics that may appear to categorize Wal-Mart Stores Inc. as a High

Performance Organization (HPO). Most studies on Wal-Mart relate to its strengths as a major

retailer in the U.S. and others, less favorable, depict this organization as a threat to American

capitalism. Studies that provide an in-depth analysis of Wal-Mart’s characteristics using a

conceptual framework for HPOs are non-existing.

Research Questions

The significance of the economic impact of Wal-Mart in the U.S. society and the

countries where it operates (Dube et al., 2007) appears to be blurred by contradicting opinions

about Wal-Mart’s corporate practices, culture, and contributions to the society (Beer, 2001;

Fishman, 2006; Ghemawat, 2006; Kaliprasad, 2007). To shed light in this debate, the following

research question was formulated to guide the research case study: What, if any, business

practices, organizational behavior, and financial performance of Wal-Mart Stores Inc. are

indicative of a High Performance Organization (HPO)? This study will provide a significant

contribution to the literature in organizational behavior, culture, and strategic leadership, through

the identification of Wal-Mart Stores Inc’s characteristics and their fit into one or more of the

five components of the HPO model (Schermerhorn et al., 2004).

Conceptual or Theoretical Framework

Globalization has opened the borders to competition, and domestic firms face the

challenges and opportunities of new competitors, new suppliers, and foreign workforces.

Multinational corporations such as Wal-Mart are present in 13 countries (Wal-Mart, 2008a)

employing more than 600,000 people. Advances in technologies increase the speed of

information and the capacity of response of businesses but also increase the risks of technology


and cyber attacks (Goodman & Ramer, 2007). E-commerce and e-business have transformed

brick-and-mortar enterprises into more dynamic businesses, and has created a new breed of

entities (i.e. dot.coms) requiring new skills and competencies (Schermerhorn et al., 2004).

Organizations are pressured to deliver high performance results to respond to customer

expectations, a changing workforce, and the changes in the organization itself (e.g. downsizing,

reengineering) (Schermerhorn, et al., 2004). Beer (2001) defined a set of four roles for managers

and leadership teams in the organization to complete the HPO transformation process (p. 244-

246): (1) create a compelling and balanced organizational development direction, (2) manage

expectations about financial performance, (3) involve unit managers in leading change and

encourage learning from that experience, and (4) promote self-reflection at the top management

level.

Brown, Reich, and Stern (1993) conducted a research on employees of five U.S.

companies to examine the experience of the workforce in the transition to a Security-employee

involvement-training model (SET). The findings showed varied indexes of security, with

employees in two of the firms scoring low given the recent lay-off experiences in those sites. The

indexes of employee involvement also varied with the type of firm. In firms with high technical

orientation, workers scored higher in problem solving; in firms with customer service

orientation, teamwork scored even higher. Firms with influence in managerial decisions scored

higher in the sub-index of involvement, as well. Firms that had formal and informal training

scored higher in the Training Index.

Schermerhorn et al (2004) argued that high performance organizations (HPOs) thrive in

environments where customer expectations and workforce are changing. HPOs emphasize the

development of intellectual capital (p. 22). High performance organizations are characterized by


involving their employees, empowering them to work in self-directed teams, promoting

organizational learning, supporting total quality management, and integrating production

technologies. Blanchard (2006) posited that HPOs are known for their capacity of response,

flexibility and “nimbleness” (p. 4). Servant leadership is the engine that makes the transition

possible, defining a vision, and constructing a visionary culture that will outlive the leader

(Blanchard, 2006).

Research on High Performance Organizations is relatively less abundant than research on

organizational culture or leadership topics. A quick search in an electronic database such as

EBSCOhost about these three terms yielded interesting results. When High-Performance

Organization(s) was used as the “title” keyword, a total of 81 documents were listed between

1984 and 2008; only 59 of them were peer-reviewed. The number of studies on leadership

exceeded 47,400 between 1923 and 2009, with only 22,900 peer-reviewed. The query for

research on organizational culture resulted in 1332 studies between 1973 and 2009, with 1,153 of

them peer-reviewed. This brief analysis provides an initial idea of the valuable contribution of

this case study to the literature on HPOs.

Definitions

High-performance organization (HPO). Organizations with the ability to respond to the

demands of the market by strengthening internal capabilities and putting people first

(Schermerhorn et al., 2004). High performance organizations are characterized for a nurturing,

supportive, and positive work environment (Kaliprasad, 2007).

Strategic leadership. Referred as the role of managers who oversee the entire

organization and make decisions that impact the overall performance, “competitiveness,

innovation, strategic changes, and survival” (Carpenter & Sanders, 2008).


Organizational Culture. Schein (1989) defined this term as the shared set of values that

the members of an organization hold as basic assumptions, distinguishing the firm from others.

Organizational effectiveness. This concept comprises the achievement of financial goals

and the level of quality of work life of the members of the organization (Schermerhorn et al.,

2004).

The Wal-Mart Effect. A coined definition by Fishman (2006) to refer to the impact of

Wal-Mart on wages and cost reduction generated directly and indirectly on competitors and

suppliers of new markets where Wal-Mart accesses.

Assumptions

This qualitative case study will be conducted under the assumption that the publicly

available secondary data about Wal-Mart Stores Inc, that will be used to describe, analyze, and

evaluate the characteristics of this organization, are true representations of the business practices,

organizational behavior, and financial performance of the organization. The financial statements

and annual reports used in the analysis of financial performance are assumed to be accurate and

prepared based on the regulations of the SEC and other pertinent official institutions.

Scope, limitations, and delimitations

This research is limited to the analysis of public information about Wal-Mart Stores Inc

in the United States, available through public secondary sources. Wal-Mart was selected as

object of this study because of its recognized economic relevance in the U.S. market as one of

the major retailers and top employers in the nation. Data for this study is limited to the business

practices, organizational behavior, and financial figures disclosed in the annual reports and

communications published by Wal-Mart in its corporate website. Journal articles, SEC filings,


specialized industry reports and other expert analysis of Wal-Mart will also be collected for this

study, and their validity is limited to the reliability of the authors and sources.

The study is delimited by the information that Wal-Mart has made available in the last

five years about its corporate practices, organizational behavior, and financial performance.

Additional information deemed relevant to illustrate the characteristics of High Performance

Organizations (HPOs) of this firm will be included. Most data will relate to the activities of the

firm in the past five years, but when necessary the analysis will also include references to

previous years, specifically when describing the profile of Wal-Mart’s founder.

Summary

This qualitative case study will describe and analyze the corporate practices,

organizational behavior, and financial performance of Wal-Mart Stores, Inc. in order to identify

whether they conform to the components of High Performance Organizations (HPOs). The

findings of this study will seek to identify the characteristics of Wal-Mart Stores Inc that best

resemble the five components of HPOs as defined by Schermerhorn et al (2004). According to

Kaliprasad (2007) high performance organizations are known for providing a supportive

environment to their workforce, so that they can develop their capabilities at full potential and

contribute to the performance of the firm. Ghemawat (2006) contended that Wal-Mart made

significant contributions to the economic activity of the U.S., and to the welfare of the general

population.

Although Wal-Mart has been exemplified as a High Performance Organization (Beer,

2001), little research has been done to provide a theoretical framework of analysis of these

claims. Chapter 1 provided a rationale for the selection of Wal-Mart as the case study of this

research. Chapter 2 will provide a literature review that will address organizational behavior


theories in relationship with High-performance organizations (HPO), alternate models to

conceptualize HPO, components of HPOs, and the aspects of organizational effectiveness and

culture associated with HPOs.

Chapter 2 Literature Review

Chapter 1 addressed the shift that organizations in the 21st century have been forced to

make to respond to the rapidly-changing external environment. Successful organizations are

transforming their internal processes, and paying attention to the needs of their workforce and

transitioning to High Performance Organizations (HPOs). Chapter 2 will present a review of the

literature related to Organizational Behavior, using a chronological approach that depicts the

evolution of this discipline. This section will also include research on various models that

explain the components of High Performance Organizations, and the aspects of organizational

culture and organizational performance associated with HPOs.

Documentation

For the purposes of this qualitative research study, data will be strictly collected from

secondary sources publicly available on the Worldwide Web. Information about the business

practices, organizational behavior, and financial performance of Wal-Mart Stores Inc., for the

past five years will be the basis of this study. The literature review about the conceptualization of

High Performance Organizations was retrieved from the University of Phoenix Library online,

using EBSCOHost, ProQuest and other available databases. Information from textbooks will also

be included as well as Harvard Business Review articles that are formally non-peer reviewed.

Literature Review on Organizational Behavior

Organizational Behavior (OB) is a discipline of management that studies how individuals

and groups behave in the organization (Schermerhorn, Hunt, & Osborn, 2004). Colquitt, LePine,


and Wesson (2009) defined it as a “field of study devoted to understanding, explaining, and

ultimately improving the attitudes and behaviors of individuals and groups in organizations” (p.

5). Robbins and Judge (2008) added the structure component into the study of OB and explicitly

indicated that the knowledge about individual and group behavior must be used to improve

organizational effectiveness.

The evolution of organizational behavior as a discipline goes back to the early 1920s,

with the classical views about division of labor and tight mechanisms of control (Bowditch &

Buono, 2003). In the 1930s the neoclassical school of management refocused the interest of

theorists toward human relations and the social person (Bowditch & Buono, 2003). The theories

of Maslow “Hierarchy of needs theory,” McGregor’s Theory X and Y of motivation (1960, in

Robbins & Judge, 2009), and the two-factor theory of Herzberg (1959, in Robbins & Judge,

2009) and Barnard’s (1937, in Scott, 2003) theories of motivation were the most important

contributions of this era. Despite the emphasis on the individual, the consideration of

environmental forces was still missing.

In the 1960s, the modern school of management emerged and focused on systems theory,

contingency theory, and organizational behavior theory missing in previous eras (Bowditch &

Buono, 2003). Shifts in the economic activity from production-based to service-based firms

highlighted the importance of information systems and technology. Lawrence and Lorsch (1967)

were precursors of the contingency theory of organizations that described the relationships

between the internal and external environment of the firm. The study of organizational behavior

as a discipline and organizational design as a concept emerged as important ideas in this school.

Information systems were introduced as part of organizational design, to reduce the internal

uncertainty of tasks or processes, and to assist decision-makers with adequate data for strategic


leadership (Galbraith, 1974). In addition to the consideration of open systems, and organizational

design, modern theorists emphasized situational or contingent leadership (Bowditch & Buono,

2003).

Paradigm Shift in Organizational Behavior

A paradigm shift of organizational behavior started in the 1980s with economic and

organizational processes that gradually changed the speed of business (Colquitt, LePine, &

Wesson, 2009). Schermerhorn et al (2004) posited that organizations in the 21st century face

challenges of a new era, characterized by rapid change, at times frustrating and disorienting.

High employee mobility, outsourcing, and contingent workers impact the way the workplace

operates (Bowditch & Buono, 2003). The understanding of organizational behavior becomes

more essential than ever before to meet the needs of the workforce (Schermerhorn et al., 2004).

Robbins and Judge (2008) discussed the challenges that organizations must undertake to

respond to globalization from the employee perspective, by increasing the firm’s ability to

manage a flexible and diverse workforce, improving people skills, and encouraging innovation

and change. From the customer perspective, organizations are urged to improve quality,

productivity and customer service, goals that need the participation of employees as executors

and as planners of those changes (Bowditch & Buono, 2003).

Literature Review about High-Performance Organizations

The changes in the global environment, the emergence of new technologies, and the

shifts in the profile and preferences of the workforce is pressuring organizations to become more

competitive in order to survive. High Performance Organizations (HPOs) are a new type of

organization designed purposefully with the goal of realizing the potential of their people to

create organizational capabilities that result in sustainable high performance outcomes


(Schermerhorn et al., 2004). Buytendijk (2006) conceptualized HPOs as firms that are attentive

to the market, retain their best people and are highly responsive to the external environment.

Kaliprasad defined HPOs as organizations that “remain responsive to the marketplace

expectations, while also sustaining the behavior required to meet these expectations” (p. 31).

Kaliprasad (2007) expanded the concept of HPOs to high performance cultures, designed to

achieve business excellence.

The Security-Employee Involvement-Training (SET) Model

Early research on high performance organizations denoted the formulation of the SET

system (Brown, Reich, & Stern, 1993) that stands for Security, Employee Involvement, and

Training. According to Brown et al, (1993) these three elements interact and reinforce each

other: Job security reinforces the involvement of employees, as they feel confident that their

contributions to the organization will maintain them in their jobs. Similarly, employment security

strengthens the willingness of the firm to invest in training, while employee involvement is

enhanced by the interest of the firm in developing the employees’ competencies. The major

critiques to SET relate to its inadaptability to new technologies, the demise of union power, the

increased stress imposed on employees, and the reduction of salaries in high-paid workers

(Brown et al., 1993, p. 248). Brown et al (1993) found that the economic environment affects the

security element of the model, when firms must resort to laying-off employees, or close plants

given a macroeconomic crisis. In a positive economic environment, the SET system works well

because employees reciprocate job security with loyalty, productivity, and involvement.

Buytenkijk’s Model of Five HPO Characteristics

Buytendijk (2006) conducted a case study to identify the common traits in HPOs using a

corporate performance management approach (CPM). The findings of the study showed that


firms shared five characteristics: (1) Clear mission and ambitious targets, (2) Shared values

internally and externally (3) Impeccable execution, (4) agility and (5) Common business model

across the organization. The business model of the HPO must be communicated throughout the

organization. Data about performance indicators must be shared with middle managers and

employees to enable a common understanding of the strategy.

Buytendkijk (2006) suggested four ways to improve the agility of a firm (p. 29): (1)

centralization of processes, data, and systems by the IT division, (2) smart-sourcing or

standardizing product components to respond with new product developments in no time; (3)

channel mastering in operating just-in time inventory (e.g. Wal-mart); and, (4) Project-based

management that creates teams without the rigidity of the organizational structure. The

effectiveness of centralization will depend on the firm. For some, centralization kills creativity,

for others, it facilitates response.

Blanchard HPO SCORES model

Blanchard defined HPOs as “enterprises that produce outstanding results with the highest

level of human satisfaction” (p. 4). Six elements were identified by Blanchard in the HPO

SCORES model (p. 4): “(1) shared information and open communication, (2) compelling vision,

(3) ongoing learning, (4) relentless focus on consumer results, (5) energizing systems and

structures, and (6) shared power and high involvement. This model is about leadership infusing

energy, excitement, and heightened sense of purpose in the organization, as well as promoting

organizational learning, empowerment, value, and respect (Blanchard, 2006).

Kaliprasad’s Sustainable High Performance Culture Model

According to Kaliprasad (2007), the creation of a HPO is based on five success factors

(p. 31): (1) perception of the marketplace by senior leaders, (2) shared mission, vision, values,


and strategies, (3) leadership practices, (4) employees attitudes and behaviors, and (5) enabling

infrastructure. This model operates in a sequence from components 1 through 4, while

component 5 (infrastructure) supports the other four; altogether comprising the organizational

culture. The firm receives signals from the marketplace and responds to those signals by using its

internal capabilities. The end-result is customer loyalty, and business performance (Kaliprasad,

2006, p. 31). Kaliprasad (2007) recommended to evaluate the performance gaps between each

pair of components of the model: Gap 1, between the perception of leaders and the reality of the

marketplace; gap 2, between the perception of senior leaders and the vision and mission of the

organization; gap 3, between the mission and vision statements and the leadership practices; gap

4, between leadership practices and employee behavior; and gap 5, incompatibility between

infrastructure and the four behaviors that sustain high performance (p. 32).

Schermerhorn, Hunt, and Osborn’s Model of High Performance Organizations

Schermerhorn et al (2004) defined High Performance Organizations as firms with a

design of responsiveness to the external environment, founded in the realization of people’s

competencies. According to Robbins and Judge (2008) firms must be ready to deal with the

unpredictability of the environment and be willing to become networked organizations, while

nurturing a work environment that is oriented towards a positive organizational behavior (p. 25).

Positive organizational behavior is a new concept that focuses on developing positive thoughts

and perceptions about the organization on the employee (Roberts, Dutton, Spreitzer, Heaphy &

Quinn, 2005). In this context, HPOs appear better equipped to generate positive behaviors from

their workforce.

The overarching concept in the construction of HPOs is the emphasis in intellectual

capital (Schermerhorn et al., 2004). Ulrich (1998) defined intellectual capital as “the


commitment and competence of workers that is embedded in how each employee thinks about

and does work and in how an organization creates policies and systems go get work done” (p.

15). Schermerhorn et al (2004) defined intellectual capital as “the sum total of knowledge,

expertise, and dedication of an organization’s workforce” (p. 22).

Components of High Performance Organizations

Schermerhorn et al (2004) proposed a simplified model to operationalize the HPO

concept into five components: (1) employee involvement, (2) self-directing work teams, (3)

integrated production technologies, (4) organizational learning, and (5) total quality

management. Figure 1 illustrates the components of the model.

Figure 1. Schermerhorn, Hunt, and Osborn (2004) Five Component Model of HPOs

Employee involvement. The involvement of employees in decision-making processes was

discussed by Brown et al (1993) in the seminal SET model. Schermerhorn et al (2004) expands

the concept and proposes to view it as a continuum of involvement, reflected in low, moderate

and high involvement. Low involved employees simply do their job as instructed; moderately-

Intellectual Capital

Employee involvement

Self-directing

Total Quality Management

Organizational Learning

Integrated Production Technology

High Performing

Organization


involved employees participate in quality circles, task forces, and suggestion boxes; highly-

involved employees are empowered with decision-making responsibilities on a daily basis. High-

involvement work systems are positively associated with higher employee satisfaction and cost

reduction (Scotti, Behson, Farias, Petzel, Neumam, Keashly, & Harmon, 2003)

Self-directing work teams. These workgroups are responsible of making decisions related

to planning, execution and evaluation (Schermerhorn et al., 2004). HPOs strive to integrate the

work of teams seamlessly, to help them complete their tasks, and respond to the customer

demands. Self-directing work teams affect team competence positively compared to regular

teams (Kauffeld, 2006). Goodman, Devadas, and Hugson (in Schermerhorn, et al., 2004) found

strong effects in employee satisfaction and commitment, and moderate effects on performance.

Integrated Production Technologies. The adequate job design and the use of information

systems to facilitate the integration of the manufacturing and service processes are key elements

in HPOs. The use of technology to monitor just-in-time inventories, and the use of computers for

design, service, control, and integration of the business functions is critical to provide agile

response (Schermerhorn et al., 2004). The operation of JIT systems will require firms to change

the flow of information to be timely, simple, and adaptive to changes (Eker & Pala, 2008).

Organizational learning. Organizations that integrate information into their systems and

processes and use it to respond to future situations promote organizational learning. Like

Buytendkijk (2006), Kaplan and Norton (2008) emphasized the existence of a double loop of

management, where the corporate strategy is reflected in indicators defined by top management

(first-loop of management). Any changes in the organization strategy resulting from changes in

the environment represent the second loop of management and are documented in a Balance

Scorecard (Kaplan & Norton, 2008). Organizational learning takes place when the firm identifies


the changes and responds to them after analyzing and questioning them. Operational and

strategic meetings are conducted to brief managers about the execution of the strategy make

correctives where necessary (Kaplan & Norton, 2008).

Total quality management. Firms committed to respond to customer expectations in this

era of strong competition must be cognizant of the need to offer high-quality products and

services. According to Eker and Pala (2008) TQM produces value for an organization, increasing

the understanding of customers and suppliers needs, improving internal communication, and

employee involvement in problem solving. Firms reduce errors and unnecessary waste (Powell,

in Eker and Pala, 2008, p. 43). Employees involved in TQM participate actively in quality

planning and monitoring (Schermerhorn et al., 2004), impacting learning and performance (Eker

& Pala, 2008).

Challenges faced by HPOs

Schermerhorn et al (2004) posited that HPOs face challenges of internal integration,

redefinition of managerial roles, leadership commitment, and the influence of the external

environment. Brown et al (1993) stated that the external macro-economic environment

influenced heavily the outcomes of high performance firms. Senior managers and leaders of the

organization have the responsibility to lead the transformation of the firm into HPO with

transparency (Beer, 2001). The transformations that take place in the rest of the organization

must also include self-reflection and change in the top management team (TMT). Role modeling

will assist top managers in exerting influence on lower levels of the organization to buy in the

change.


Conclusions

A study of the evolution of management theories and practice, accounts for the shifting

emphasis that societies have given to individuals and groups in the organization. Different

models of HPOs presented in this chapter emphasized job security, employee involvement, and

training (SET) for improved performance (Brown et al., 1993). Blanchard (2006) proposed an

energizing model of HPO SCORES that is based on the ability of the leader to set a vision and

embrace servant leadership. Kaliprasad (2007) argued for a model of high performance, based on

bridging gaps between the perceptions of the market, the leader and the employees.

Schermerhorn et al (2004) offered a simple model of five components of HPOs:

employee involvement, self-directed work teams, integrated production technology,

organizational learning, and total quality management (Schermerhorn et al., 2004). This model

encompasses the discussion of employee involvement by Brown et al (1993), management of

megadata purported by Buytenkijk (2006), the role of teamwork (Beer, 2001; Kaliprasad, 2007),

and the role of TQM in improved performance (Eker & Pala, 2008). The literature review

evidenced that most discussion has remained at the theoretical level. The purpose of this study is

to bridge the theory through an application to the analysis of the fit of Wal-Mart Stores Inc. as a

HPO.

Summary

Organizations that operate in the competitive environment of global business in the 21st

century face a myriad of challenges of socio-economic, technological, ethical, and organizational

nature. The transformations that organizations undergo to become HPOs are supported by a

philosophy of high performance culture (Kaliprasad, 2007) that prioritizes intellectual capital


(Ulrich, 1989). High Performance Organizations (HPOs) are led by top managers who balance

the sophistication of systems and processes, with caring for their people (Buytendkijk, 2006).

HPOs face challenges in internal integration and realignment of managerial roles, while

attending to the influence of the external environment. The readiness of the firm and the

conviction of the need for change is what differentiate HPOs from their competitors. Chapter 2

presented an analysis of the evolution of the organizational behavior concept, the paradigm shift

in organizational behavior, and a discussion of various models that explain the components of

HPOs. Chapter 3 will comprise the research methods, research design, data collection methods,

and characteristics of population and sample for this research.


Chapter 3: Methods

The purpose of this qualitative case study was to explore and identify the characteristics

of organizational behavior, business practices, and financial performance of Wal-Mart Stores

Inc. that may identify the firm as a High Performance Organization (HPO). This analysis started

by identifying information about employee involvement, self-directing work teams, integrated

production technology, organizational learning, and total quality management that were evident

in Wal-Mart stores. These five elements define high performance organizations (HPO) according

to Schermerhorn, Hunt, and Osborne (2004). Next, the financial performance of the organization

was examined for the past five years only to the extent of identifying the evolution of Wal-

Mart’s profitability to verify if it met the 30 to 50% increase expected in HPOs (Schermerhorn et

al., 2004). The information collected about Wal-Mart was limited to these six elements. This

chapter presents the explanation of the research design, instrumentation, data collection and

analysis, and confidentiality.

Research Method

A qualitative case study is appropriate in business research, when the purpose is to

explore a phenomenon using multiple sources such as “financial reports, archives, and budget

and operating statements, including market and competition reports” (Ghauri & Gronhaug, 2005,

p. 115). Case studies are recommended when the researcher seeks to study a case from many

points of view and interpret and integrate them into a theoretical framework (Ghauri &

Gronhaug, 2005). Single case studies provide an opportunity to conduct an in-depth exploration

of a critical case by looking at it from different dimensions.


Research Design and Appropriateness

Given the relevance of Wal-Mart Stores in the business environment of the United States

and the countries where the firm operates (Fishman, 2006; Ghemawat, 2006), an exploration of

its performance and practices became pertinent. The research question guiding this study was:

What, if any, business practices, organizational behavior, and financial performance of Wal-Mart

Stores Inc. are indicative of a High Performance Organization (HPO)? Single-case embedded

designs are appropriate when the research is focused on a particular case that is used to test a

theoretical framework (Ghauri & Gronhaug, 2005).

A single case embedded design allowed the researcher to collect, evaluate, verify and

synthesize evidence about Wal-Mart Stores and its multiple departments. The theoretical basis of

Schermerhorn et al’s Five Component Model of HPO to identify the characteristics of the firm

that revealed potential HPO components. Wal-Mart’s internal information, previous studies, and

articles about Wal-Mart were analyzed to find common themes that provided evidence of

characteristics of HPOs.

Population

The population of this study was comprised solely by Wal-Mart Stores Inc., including

headquarters and offices across the United States. The operations of Wal-Mart overseas were not

included in this study, as it would imply additional considerations of cross-cultural differences

that should be part of a separate research. Publicly available data about Wal-Mart Stores’

business practices, organizational behavior, and financial performances were collected from the

annual reports of the firm, and complemented with journal articles and specialized reports about

the organization.


Informed Consent

Given that the data about Wal-Mart Stores comprised information reported by Wal-Mart

in their annual reports and corporate website. Statements by the CEO of the organization and

other representatives were extracted from letters to shareholders or communications to the

public. Other information about Wal-Mart was extracted from journal articles and specialized

reports about the firm. The study did not conduct interviews or any personal contact with Wal-

Mart staff.

Sampling Frame

This qualitative case study was focused on Wal-Mart Stores Inc. and its operations in the

United States as subject of analysis; therefore, the sample and the population of this study were

the same. Data about the business practices, organizational behavior and financial performance

of the organization were explored, identified, and analyzed to match the description to the

characteristics of High Performance Organizations, according to the Five Component Model of

HPO (Schermerhorn et al., 2004).

Confidentiality

Given that this qualitative case study did not use personal interviews or face to face

contact with executives or staff of Wal-Mart, statements of confidentiality were not required.

Data about business practices, organizational behavior and financial performance were extracted

from the annual reports, corporate website, journal articles, and other studies about Wal-Mart

available online and in hard copies. These sources provided sufficient information to identify

characteristics that could categorize Wal-Mart as a HPO.


Geographic Location

This qualitative case study did not require face-to-face interviews with Wal-Mart’s

employees or executives or any other human subjects. Consequently, no geographic location was

necessary. All the data for this study was collected from the WorldWide Web, from the

University of Phoenix online library, and from the personal library of the researcher located in

Henderson, Nevada.

Instrumentation

Given that this research was conducted using secondary sources and publicly available

data, no instrument was applied to Wal-Mart’s staff or executives. The information about

business practices, organizational behavior and financial performance of this firm were identified

from data available through Wal-Mart’s corporate website, journal articles, and other specialized

publications. These data were collected and categorized into five common themes that define

HPOs (Schermerhorn et al., 2004): employee involvement, self-directed work teams, integrated

production technology, organizational learning, and total quality management. Data about Wal-

Mart’s net income, sales, and return on investment for the years 2002-2009 were also recorded.

Data were analyzed, compared and contrasted between the different sources to explore the

perspectives about Wal-Mart as a HPO.

Data Collection

Data collected for Wal-Mart Stores Inc originated from secondary sources. These data

included information about business practices, organizational behavior, and financial

performance of the firm. Data were collected from diverse sources: Wal-Mart’s corporate

website provided information on annual report, communications to shareholders, career

opportunities, organizational culture, market positioning, business practices, business ethics, and


other corporate information that configure business practices and organizational behavior.

Scholarly journal articles and specialized reports about Wal-Mart presented information about

the participation and influence of the firm in the U.S. market. Opinions from supporters and

contenders of Wal-Mart publicly available on the WorldWide Web were also collected.

Secondary sources are an effective method to collect historical data for a case study

(Ghauri & Gronhaug, 2005). Publicly available sources reduce the time and cost of data

collection, while providing sufficient data to answer the research questions (Ghauri & Gronhaug,

2005). However, secondary data may provide limited information for the current research,

because the objectives of the original research could have been different. This requires caution

by the researcher when attempting comparisons (Creswell, 2008).

Data about financial performance, referred to annual net income, sale revenue, and return

ratios, was found in Wal-Mart’s annual reports and SEC filings. The financial data for 2002

through 2008 were entered in a table that presented the evolution of the financial performance.

According to Schermerhorn et al (2004) HPOs achieve growth in the bottom line by 30% to 50%

over three to five year-periods (Schermerhorn et al., 2004). Financial data collected for this study

included, annual net income, sales revenue, and return ratios.

Data Analysis

Scholarly journal articles and specialized reports that presented information about Wal-

Mart’s business practices, organizational behavior, and financial performance were included in

this study. Statements issued by the CEO and the top management of Wal-Mart, available on the

corporate website, in interviews, or in letters to the shareholders and the public were also

collected. Financial information for the years 2002 through 2008 were extracted from the annual

reports and presented in tables.


The data extracted from these diverse sources reflected the participation and influence of

the firm in the labor market, in retail practices, in the socio-economic environment of the states

where it operates. All these statements were entered in tables organizing the information under

the five themes underlying the HPO model (Schermerhorn et al., 2004, p. 23): (1) employee

involvement, (2) self-directing work teams, (3) integrated production technology, (4) total

quality management, and (5) organizational learning.

After collecting the data from different sources: Wal-Mart corporate website, scholarly

journals, specialized publications, periodical, public statements, and textbooks, the following

steps were conducted in data analysis. The first step was the organization of data in tables under

each of the five components of HPOs. The data were analyzed to identify the themes of

employee involvement, self-directing work teams, integrated production technology,

organizational learning, and total quality management. Any article identifying Wal-Mart’s

business practices, organizational behavior, and financial performance was analyzed to discover

common themes. In a second step, data were analyzed again for triangulation. In this step the

researcher identified similarities, contradictions, or new data emerged from the sources. This

procedure ensured a balanced discussion of the characteristics demonstrated by Wal-Mart, as

perceived by the original authors and the researcher. Data were aggregated within each

component of HPO and presented in a summary table.

The third step in data analysis related to the financial performance indicators of sales

revenue, net income and return on investment ratios for years 2002 through 2008. These data

were entered in a table to compute the annual growth rate in net income. The purpose of this step

was to show the evolution of the bottom line of the firm and identify if the annual growth

corresponded to the expectations for HPO organizations (Schermerhorn et al., 2004). Given that


Wal-Mart experienced a change in CEO in November 2008 (Wal-Mart, 2008e), the analysis

considered the management styles of both Lee Scott and Mike Duke.

Validity and Reliability

Qualitative case study research emphasizes a deductive approach in the research process.

The validity of the findings in this type of research depends “solely on the quality of logic

employed in the study and precise measurement” (Ghauri & Gronhaug, 2005). According to

Creswell (2008) the validity of a research is given by the degree to which the researcher is able

to make inferences from the findings of a sample or population. In qualitative studies the purpose

is to “understand, gain insights and create explanations (theory)” (Ghauri & Gronhaug, 2005, p.

155). Consequently, validity relates to how well the description provided in the research reflects

the facts (descriptive validity), if the interpretations of concepts are correct (interpretative

validity), or if the underlying theory is adequate to explain the phenomenon (theoretical validity).

Validity also relates to whether the findings about HPO’s characteristics found at Wal-Mart are

generalizable to others (generalizable validity) or not. All these types of validity must be

demonstrated in the research report (Ghauri & Gronhaug, 2005).

Reliability in a research study deals with the stability and consistence of a measure

(Ghauri & Gronhaug, 2005; Creswell, 2008). Reliability is a condition for validity, because if the

scores or measurements are not reliable, the measurements are not valid. The accuracy of the

secondary sources used in this qualitative case study could not be controlled by the researcher;

therefore, the reliability of the data is limited to the reliability of the source or the original

researcher (Ghauri & Gronhaug, 2005). In the case of this research, the annual reports issued by

Wal-Mart include forward-looking statements, or subjective statements about their performance

and practices. According to Cooper and Schindler (2001) once the researcher uses secondary


data, the reliability of those data become the researcher’s responsibility. Consequently, non-

scholarly journal articles, blogs, or magazines articles were not used in this study.

Summary

This qualitative case study with single-case imbedded design had the purpose of

describing, analyzing, and identifying characteristics of business practices, organizational

behavior, and financial performance or Wal-Mart Stores Inc. that may resemble the five

components of High Performance Organizations (HPOs) (Schermerhorn et al., 2004). The data

collected about Wal-Mart Stores were analyzed to identify common themes emerged from the

different data sources that described employee involvement, self-directing work teams,

integrated production technology, organizational learning, and total quality management at the

firm.

Data were collected from publicly available data from the Wal-Mart corporate site,

annual reports, statements and letters to the public, from scholarly journal articles, SEC filings,

and specialized publications about this firm. Data about Wal-Mart’s financial performance for

the period 2002-2009 was also collected to analyze and determine whether it matched the

characteristics of growth in the bottom line of HPO firms.

The population and sample for this study was comprised solely of Wal-Mart Stores Inc

headquarters and offices in the United States. The data collected about the firm were organized

in matrices that categorized the statements, practices, and reports about Wal-Mart within each of

the five components of HPOs. Chapter 4 presents the report about the results of the data analysis.


Chapter 4: Presentation and Analysis of Data

The findings of this qualitative case study about Wal-Mart Stores Inc are presented in this

chapter, comprising an in-depth review of the business practices, organizational behavior, and

financial performance of the firm. Data were collected from publicly available sources issued

directly by Wal-Mart through its corporate website, or indirectly through scholarly studies and

specialized reports about the firm. Chapter 4 presents the findings and analysis of the data

collected in order to answer the main research question: What, if any, business practices,

organizational behavior, and financial performance of Wal-Mart Stores Inc. are indicative of a

High Performance Organization (HPO)?

McMillan and Schumacher (2006, p. 365) suggested an inductive process for data

analysis of qualitative data divided in four phases: (1) data recording, (2) data coding, and

categorizing, (3) identification and validation of patterns (themes/concepts), and (4) narrative

structures and visual representations. These phases overlap and the researcher moves back and

forth across them until the analysis is considered complete.

The data collected are organized in tables and illustrations containing the five

components of HPOs, based on the Schermerhorn et al’s (2004) model. The phenomena under

study are the characteristics of employee involvement, self-directing work teams, integrated

production technology, organizational learning, and total quality management at Wal-Mart that

could resemble the components a HPO. The analytical style used by the researcher is one of high

intellectual rigor and combined with the subjective interpretation that characterizes qualitative

research (McMillan & Schumacher, 2006).


Wal-Mart Business Description

Wal-Mart Stores is considered the most important mega-retailer in the world (Marketline,

2009a) with operations in the 50 states and U.S. territories and 15 countries worldwide. Wal-

Mart offers a broad set of products and services that include the traditional grocery section,

electronics, apparel and entertainment, photo services, vision center services, pharmacy, health

and wellness, and home furnishing (Marketline, 2009a). In 2007, Wal-Mart expanded into

banking services and remittances (Associated Press, 2007).

Wal-Mart Stores operate three main business segments: Wal-Mart US, Sam’s Club, and

international segment (Wal-Mart, 2008a). In the U.S. segment Wal-Mart manages 4,284

locations in different retail formats, categorized according to size and type of products and

services offered: discount stores, supercenters and neighborhood markets (Marketline, 2009a).

Discount stores have an average size of 108,000 square feet; Supercenters average 260,000

square feet, and neighborhood markets average 62,000 square feet (See table 1). Wal-Mart

operates 602 Sam’s Clubs with locations that average 132,000 square feet with products for both

businesses and individuals.

Table 1 Wal-Mart: Number of Stores by Type and # of States

Type of Unit # # states U.S. Segment Discount stores 861 47 Supercenters 2,664 48 Neighborhood markets 153 16 Total U.S. segment 4,284 Sam’s Clubs 602 48 Marketside 4 1

As of July 31, 2009. Source: http://walmartstores.com/Investors/7610.aspx


In the international segment, Wal-Mart operates 3,760 locations in 15 countries (Wal-

Mart, 2009c) in different modality of ownership: wholly owned subsidiaries in seven countries,

majority-owned subsidiaries in five, and joint ventures in two (See table 2).

Table 2. Wal-Mart: International Locations by Country and Ownership

Country # Country # Wholly-owned Majority-owned

subsidiaries

Argentina 32 Honduras 53 Brazil 359 Costa Rica 170 Canada 312 Guatemala 164 Japan 371 El Salvador 75 Puerto Rico 56 Mexico 1,262 United Kingdom 364 Nicaragua 54 Chile 229 Joint-ventures Other controlled

subsidiaries

China 154 China 104 India 1

As of July 31, 2009. Source: Marketline (2009a); Wal-Mart (2008f)

In addition to the traditional brick-and-mortar operation, Wal-Mart successfully

implemented the online retail division -walmart.com- since 1996 and integrated it with its on-site

locations through the “site-to-store” program in 2007 (Thomson, 2007). Another new concept

was introduced in 2008 with the opening of “marketside” stores that offer restaurant-type food at

affordable prices, with emphasis in organic meals, bakery, and deli products (Retail Week,

2008).

Wal-Mart is the largest private employer in the U.S. with more than 1.4 million

associates (Wal-Mart, 2008a). The diversity of the workforce is reflected in a significant

proportion of minority employees (See table 3) and an important participation of women (62%)

and seniors (25.4%). Hispanics comprise 11.8% of all associates, whereas African American


represents 18.4% of the workforce. A total of 1.1 million associates are insured (Wal-Mart,

2008a).

Table 3. Wal-Mart: Composition of the Diverse Workforce

Diverse group # % Hispanics 165,000 11.8 African American 251,000 18.4 Asian Americans 39,000 2.8 Pacific Islanders 5,000 0.35 Native Americans 16,000 1.1 Age group Seniors (> 50 years old) 355,000 25.4 Gender Female 856,000 61 Male 544,000 39 TOTAL 1,400,000

Source: Wal-Mart (2008a) Corporate Facts.

Wal-Mart Stores History and Organizational Behavior

History

Wal-Mart Stores Inc. was founded in 1962 in Rogers Arkansas, by Sam Walton, a

visionary entrepreneur who expanded his emporium to 24 stores and $12 million in sales in five

years (Wal-mart, 2008f). A major expansion in the infrastructure of the firm took place in the

1970s when the chain opened stores in Kansas, Louisiana, Missouri and Oklahoma and went

public in the New York Stock Exchange. By the end of the decade Wal-mart had more than

21,000 associates working in its 125 stores, and was recognized as the first firm in the United

States that reached $1 billion in sales in such short tenure.

In the 1980s Wal-Mart consolidated as top retailer according to Forbes magazine for the

fourth consecutive year. The services offered by Wal-Mart expanded to pharmacy, and photo

services, auto service centers and jewelry (Wal-mart, 2008f). At the celebration of its 25th

anniversary in 1987, Wal-mart had already 200,000 associates, 1,198 stores and sales for $15.9


billion and was the pioneer in retail technology, with the implementation of private satellite

communication and bar-code systems in all its stores (Wal-mart, 2008f). The first Supercenter

was opened in 1988.

After almost 3 decades, and as result of its leadership in the retail market, Wal-Mart

made the challenging move of launching its own private label: Sam’s American Choice,

introduced in 1991. Wal-Mart continued growing in size and influence and in 1991 made its first

international incursion in Mexico City and Puerto Rico (Wal-Mart, 2008f). The international

business division was created in 1993 to oversee the entry into Canada, Hong Kong, Argentina

and Brazil, along with a successful joint-venture agreement to operate in China. At the end of the

decade, Wal-Mart would enter Germany and Korea. By 1995, Wal-Mart had 1,995 stores, 239

Supercenters, 433 Sam’s Clubs in the 50 states of the union; and 276 international stores. Wal-

Mart’s world-wide sales reached $93.6 billion, with 675,000 associates. Wal-Mart became the

largest global employer with 1,140,000 associates worldwide, with more than 680,000 in the

United States and 115,000 internationally. By the end of 1990s, Wal-Mart was serving an

average 90 million customers per week (Wal-Mart, 2008f) both on-site and online. The first

online experience for Wal-Mart was launched, and formally implemented in 2000 with the

creation of walmart.com.

The 21st century marked the consolidation of Wal-Mart as a market leader, online

retailer, and social responsible firm. In a joint venture with Accel Partners in Palo Alto,

California, Wal-Mart created walmart.com (Thomson, 2007). Fortune magazine included Wal-

Mart as “Global Most Admired All-Stars” in 2000 and 2006 (Fortune, 2006) and one of the

“Most Admired Companies” in the U.S. in 2000, 2003, 2004 (Wal-Mart, 2008f). By 2005, Wal-

Mart had 6,200 stores worldwide, $312.4 billion in sales, and 1.6 million associates in 16


countries. The number of customers served by Wal-Mart in 2006 reached 176 million, while

more units opened in Japan and Central America. Sales continued to boost as Wal-Mart opened

the 3,000th store in Brazil in 2008 (Marketline, 2009a) to expand its wholesale chain

management system. As of 2009, Wal-Mart has reached 2.1 million associates worldwide in

8,044 stores (Wal-Mart, 2008f).

Wal-Mart’s Financial Performance

Since its foundation in 1962, Wal-Mart stores experienced dramatic growth in sales and

size. According to CEO Scott, Wal-Mart has generated shareholders’ return equivalent to

200,000 since 1969 when the firm went public (Scott, 2008). Wal-Mart achieved net sales of

$401 billion in fiscal year 2009, representing 8.2% increase over 2008. The net operating income

recorded $22.8 billion with net profit $13.4 billion, a 3.6% and 5.5% increase over 2008

(Marketline, 2009b). The drivers of this growth in revenue are both an increase in customers and

increase in the average transaction amount (Marketline, 2009b; Mergent Online, 2009). Table 4

shows the evolution of net sales, operating income, net income, and total assets for the period

2002-2009.

Table 4 Wal-Mart Stores: Indicators of Financial Performance (2002-2009)

In billions (except ROA)

1/31/09 1/31/08 1/31/07 1/31/06 1/31/05 1/31/04 1/31/03 1/31/02 Net Sales 401.2 374.5 345.0 312.4 285.2 256.3 244.5 217.8 Operating income

22.8 22.0 20.5 18.5 17.1 15.0 13.6 -

Net income

13.4 12.7 11.3 11.2 10.3 9.1 8.0 6.7

Total Assets

163.4 163.5 151.2 138.2 120.2 104.9 94.7 83.5

ROA 8.2% 7.8% 7.5% 8.1% 8.6% 8.7% 8.4% 8.0% Source: Mergent Online


All the indicators of financial performance of Wal-Mart have increased in the 2002-2009

period, with exception of total assets that showed a slight decrease between 2008 and 2009. Net

sales have reported an average of $304 billion per year during the period of analysis, for a

maximum of $401.2 in fiscal year 2009 and a minimum in fiscal year 2002. Net operating

income also showed a upward trend for an average of $18.5 billion, a maximum of $22.8 in 2009

and a minimum of $13.6 in 2003. Reports for 2002 operating income were unavailable. Net

income registered an average of $10.34 billion, with a maximum of $13.4 in 2009 and a

minimum of $6.7 in 2002. The return on assets (ROA) computed by dividing net income by total

assets shows fluctuation during the period of analysis, for an average of 8.2%, within the limits a

minimum 7.5% in 2007 and a maximum of 8.7% in 2004. For better analysis of these results,

table 5 presents the same information but expressed in annual growth rates.

Table 5 Wal-Mart Stores: Annual Growth Rates in selected Indicators of Financial

Performance (2002-2009)

2008-2009

2007-2008

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

Net sales 7.1% 8.6% 10.4% 9.5% 11.3% 4.8% 12.3% Operating income 3.6% 7.3% 10.8% 8.2% 14.0% 10.3% - Net income 5.5% 12.4% 0.9% 8.7% 13.2% 13.8% 19.4% Total assets -0.1% 8.1% 9.4% 15.0% 14.6% 10.8% 13.4% ROA 5.6% 3.9% -7.8% -5.4% -1.2% 2.7% 5.3%

Source: Mergent Online (2009)

The growth rates of net sales shows the fluctuation of this indicator in the past seven

years for an average of 9.1%. The period of greater growth was 2004-2005 with 11.3%, being

2008-2009 the second lowest rate of net sales growth, after 2003-2004. The rates for net income

show an erratic evolution, for an average of 10.6%, a minimum of 0.9% and a maximum of

19.4% in the 2002-2003 period. The growth in net income recorded in 2008-2009 is again the

second lowest of the period after 2006-2007. The total assets of the corporation show a parabolic


behavior of increase during the 2002-2004 period, a maximum of 14.6% in 2004-2005 and a

gradual decline up to 2009. The return on assets has also experienced erratic growth rates, for an

average of 0.4%. The maximum growth in ROA was recorded in the 2008-2009 period,

explained by the decrease in total assets, denominator of the quotient.

The Wal-Mart Culture

The culture of an organization represents the set of shared values held by a majority of

the members of the firm (Robbins & Judge, 2008). Schein (1997) purported that the leader of an

organization is a culture builder. At Wal-Mart, the culture of service espoused by their members

was inherited from Sam Walton, and passed on generations of associates and managers for the

past 4 decades. Wal-Mart’s leaders are proud of the humble start of the organization and its

dedication to “touch and improve the lives of millions of people around this world every single

day” (Scott, 2006, para. 18).

The basic assumptions of the Wal-Mart culture are expressed in 3 beliefs: “(1) respect for

the individual, (2) service to our customers, and (3) striving for excellence” (Wal-Mart, 2009e,

para. 2). Each of these basic assumptions is linked to values that are unique to the organization.

Figure 2 presents the Wal-Mart values for each belief (Wal-Mart, 2009e).

Manifest expressions of the culture of Wal-Mart are evident in a number of rituals

conducted in its stores worldwide. The use of people greeters was implemented in 1983 in all

locations (Wal-Mart, 2008f). The Wal-Mart cheer or chant was introduced in 1975 to all

associates inspired by a visit of Sam Walton to Korea (Wal-Mart, 2008f). These artifacts of

culture are practiced with certain variations in China, where an egalitarian management is

supported (Davies, 2007).


Diversity and employee relations are espoused as a priority by Wal-Mart (Wal-Mart,

2009, para. 1). The firm has been recognized with accolades such as the “Top 25 Diversity

Recruitment Program” by the Hispanic Business magazine, and the “Ron Brown Award” for its

work in hiring and promoting positive employee relations among associates of diverse

backgrounds (Wal-Mart, 2008f).

Figure 2. Wal-Mart: Basic Beliefs and Values (Wal-Mart, 2009e)

Wal-Mart Business Practices

Wal-Mart Stores has accumulated a customer base estimated in 80% of households in the

U.S. (Global Insight, 2007). Experts estimate that the prices strategies used by Wal-Mart have

reduced the consumer price index by 3% between 1985 and 2006 (Global Insight, 2007). The

savings generated by Wal-Mart operations are calculated in $200 billion per year in the U.S.

(Mallaby, 2005). The entry strategy of Wal-Mart to communities in the U.S. is justified by their

leaders’ belief that working families have to be served, and that rural communities deserve to be

Respect for the individual

Servant leadership

Open door Accountability

Open communications People development

Trust Humility Caring

Teamwork Empowerment Confidentiality

Listening Diversity

Service to our customers

Friendly atmosphere Pleasant shopping

experience Everyday low prices

Aggressive hospitality Sundown rule

Satisfaction guaranteed Sense of urgency The 10-foot rule

Community minded Quality always!

Striving for Excellence Continuous

improvement Dissatisfaction with

the status quo Results oriented Integrity always! Competitive spirit

Sustainability Failure allowance

Risk-taking encouraged

Expense control Change agents

Compliance with the laws


attended (Scott, 2006). Opposing voices challenge this espoused belief pointing out that Wal-

Mart is rather accumulating power on “behalf of us, the ordinary people” (Fishman, 2004, p. 19)

Business strategies that have supported Wal-Mart’s success in the U.S. market include

the “Every Day Low Price” (ELDP) program that guaranteed the lowest prices in everyday

items; the “rollback” tactic to justify clearance prices; and, the “store-within-a-store” initiative,

and the “store of the community” programs aimed at connecting each store to the community by

fitting the demographics and assorting merchandise accordingly (Thomson, 2007). The “save

even more” strategy offers customers to match or reduce the price of any competitor on selected

items (Marketline, 2009b).

In 2008, Wal-Mart introduced the new motto: “Save money, live better” (Wal-Mart,

2009f) that promotes one of Sam Walton’s espoused values. An interactive website informs the

public about the amount of savings received by American households every second since

January 1, 2009, and receives input from customers about their savings and live experiences. The

influence of Wal-Mart in the U.S. economy is insurmountable and seems to respond to Sam

Walton’s quote: “There’s only one boss. The customer” (Wal-Mart, 2009f, para. 1).

Wal-Mart’s Leadership

The history of Wal-Mart is not complete without Sam Walton’s profile. The iconic

influence of Sam Walton has inspired staff and management at Wal-Mart for decades, like a

specter that influences decisions and actions of Wal-Mart’s stakeholders (Boje, Rosile, & Grace,

2006). Described as a servant leader with a genuine interest for people (Wal-Mart, 2009d),

Walton was awarded with the Medal of Freedom by President George H.W. Bush in 1992. Sam

Walton’s espoused values about providing best living for his customers are reflected in the

following statement: “If we work together, we’ll lower the cost of living for everyone. We’ll


give the world an opportunity to see what’s it like to save and have a better life” (Wal-Mart,

2009c, para. 2). Wal-Mart’s associates and managers follow a servant leadership style, with

managers visible in the sales floor, distribution centers, and headquarters (Wal-Mart, 2009d).

The dynamism and consistent growth of Wal-Mart is coupled with the long tenure of its

top executives. As of 2009, Wal-Mart has had only 4 CEOs: Sam Walton (1962-1988), David

Glass (1988-2000), Lee Scott (2000-2009), and Mike Duke (2009-). In the period of analysis of

this research (2002-2009) the focus is on the business practices directed by CEO Scott. Scott

demonstrated the attributes of servant leadership. Servant leaders have elements of

transformational leadership as well (Greenleaf, 2003) and are able to inspire others with their

own service. The new CEO Mike Duke, installed in February 2009, said about Scott: “Lee has

led Wal-Mart with humility and grace, and has been a worthy successor to his predecessors, Sam

Walton and David Glass” (Duke, in Wal-Mart, 2008e, para. 7). Rob Walton, son of Sam Walton,

also praised Scott’s persona, saying: “Lee brought a remarkable focus to our mission of saving

people money so they could live better, and a heightened sensitivity to Wal-Mart’s role in the

world” (Walton, in Wal-Mart, 2008e, para. 8).

Social responsibility

Wal-Mart expresses its commitment to charitable causes through diverse mechanisms. In

1998 and 2000, Wal-Mart won the accolade of No. 1 Corporate Citizen in America for its annual

charitable contributions and community involvement (Marketing Supported Employment

Network, 1999). Wal-mart received the “Corporate Patriotism Award” to recognize its

dedication to support the families of military members. In 2005, as a result of Hurricane Katrina,

Wal-Mart launched a project of in-store health clinics to provide health care to local uninsured

residents. According to the statistics provided by Wal-Mart (Scott, 2006) up to 40% of the


patients were uninsured, approximately 20 to 40% were emergency cases, and between 10 to

20% of patients would have remained without attention if the clinic was not available.

In 2007 Wal-Mart became part of a partnership denominated “Better Health Care

Together” that brings together business leaders, labor leaders and public offices to improve the

health care system in America by 2012 (Better Health Care Together, 2009). Firms like AT&T,

General Mills, Qwest, and Intel are part of this organization (Marketline, 2009a). Manifestations

of organizational learning at Wal-Mart are constantly

Concurrently, Wal-Mart has taken concrete actions to participate in the economic

development of communities in the U.S. The “Jobs and Opportunity Zones” (JOZ) program

engages Wal-Mart with local businesses, minority and women-owned businesses, chambers of

commerce in the preparation of grants to benefit residents of 10 zones (Wal-Mart, 2009c). Stores

located in “Chicago; Cleveland; Decatur, Ga.; East Hills, Pa.; El Mirage, Az.; Indianapolis;

Landover Hills, Md.; Portsmouth, Va.; Richmond, Ca.; and Sanger, Ca.” (Wal-Mart, 2009c) are

anchors of the JOZs. More stores are programmed to open in 2009.

Analysis of Components of High Performance Organizations

Employee Involvement

Employee involvement in High Performance Organizations refers to the degree of

delegation and empowerment given to the workforce (Schermerhorn et al., 2004). Low-involved

employees are those focused on doing their job and occasionally providing their opinions

through suggestion boxes. Parallel involvement implies that employees participate in discussions

or quality circles. Moderate involvement comprises “participative management” (Schermerhorn

et al., 2004, p. 23) or increased daily responsibilities. High-involved employees are empowered

to make decisions about their own jobs and about ways of satisfying their customers.


Employee involvement has been claimed as a tenet of Wal-Mart’s corporate culture

(Longo, 1989) with managers involving associates in decision-making. Rituals like people

greeters originated from an associate in Louisiana and were implemented at the local, district,

and national level since. Examples of employee involvement at Wal-Mart include the promotion

of diversity through the Associate Resource Groups (ARG) founded in 2005 to provide

opportunities of “business development, professional development, and heritage” (Wal-Mart,

2008d, p.1).

Business development: associates participate in roundtable discussions, focus groups, and

partnerships with merchants, feedback about product development, and referrals for recruitment,

mentoring and on-boarding of new recruits.

Professional development: associates organize workshops for their peers, host wellness

fairs, develop leadership programs and career workshops for all associates.

Heritage: associates promote diversity through events that increase awareness about

cross-cultural identity.

Another example of employee involvement was launched in 2007. The “Personal

Sustainability Project” PSP (Wal-Mart, 2007) is an organizational development initiative created

by Wal-Mart’s associates to “develop individual goals to improve their health and wellness and

the health of the environment” (Wal-Mart, 2007, para. 2). The program empowers associates to

educate their peers on sustainability, healthy food choices, volunteerism and environmentally-

friendly practices (Robbins & Judge, 2008). A total of 20,000 associates are part of the PSP and

have achieved personal goals of weight loss, recycling, fitness, and smoking cessation.


Wal-Mart has created a separate website called “Work smart. Live Better” to provide

information about recruitment opportunities across the United States. The opening statements in

this site say (Wal-Mart, 2008f, para. 2):

Think of the opportunity for you. At Wal-Mart, we’re a lot of things to our

customers, but we’re even more to our Associates. You see, as an Associate with

the world’s largest retailer, you’ll impact more than just the store you work in.

You’ll be empowered to leave your mark on an entire industry. And as a Wal-

Mart Associate, you’ll be at the leading edge of Wal-Mart’s continuous efforts to

offer the best in retail to the neighborhoods we serve.

The site publicizes the opportunities for promotion, with statistics about 75% of

managerial positions held by former hourly employees. Contrasting Wal-Mart’s executives

statements about career opportunities, Lichtenstein (2005) found that internal promotions were

limited and that new management recruits came from MBA schools with “modest career

expectations” (para. 11), willing to work for an annual salary of $25,000.

Parnell and Lester (2008) argued that Wal-Mart “takes advantage of blue collar workers”

(p. 15) and that in some cases, pressures from unions have forced Wal-Mart to grant concessions

that hinder the majority of their employees. Will (2006) estimated that for each 100 jobs that

Wal-Mart created 50 retail jobs were lost. In a study about the impact of Wal-Mart in the labor

market, Dube, Lester, and Eidlin (2007) calculated a loss of $5 billion in the retail sector

influenced by the entry of Wal-Mart in new markets.

Self-Directing Work Teams

High performance organizations are known for their emphasis on empowering their

workforce to plan, do, and evaluate action plans (Schermerhorn et al., 2004). For a successful


performance of self-managed teams organizations have to invest in training and technology,

while championing a culture where the staff is trusted to solve daily problems without direct

supervision (Heskett, 2006). Wal-Mart claims that its workforce is led by managers who are

servants in the first place (Wal-Mart, 2009d) and that managers become mentors of the

employees, improving workplace morale and supporting teamwork.

The Wal-Mart chant created by Sam Walton to motivate the workforce is reported to

increase the trust and unity among associates (Robbins & Judge, 2008). The purpose of this ritual

was to maintain “a small-family spirit” (p. 564). These manifestations of the Wal-Mart culture

seem to put people first (one of the characteristics of HPOs) (Schermerhorn et al., 2004).

Hart (2007) categorized Wal-Mart’s structured as highly centralized, where each

geographic region has a regional personnel manager who operates from headquarters. These

managers travel constantly within their regions to monitor policies, to recruit and select store

managers. Lichtenstein (2005) argued that Wal-Mart has created a culture of coercion to

encourage performance on first-line managers. Lichtenstein (2005) argued that Wal-Mart uses

ideology management to perpetuate the centralized beliefs emanated from Bentonville’s

headquarters. As part of this centralization, each region and city hosts “corporate cadres”

(Lichtenstein, 2005, para. 9) where managers and assistant managers are responsible to meet the

defined targets set up by the corporate headquarters.

Heskett (2006) pointed out that firms that promote the functioning of self-managed teams

usually pay higher wages and higher benefits than the rest of the industry. When comparing

Cotsco and Wal-Mart’s salary levels, Heskett (2006) found that Wal-Mart might have involved

their employees successfully through less compensation but higher social costs. Additionally, as

Lichtenstein (2005) argued, centralized organizations are reluctant to let go their command and


control. In the case of Wal-Mart, critiques aim at a purposeful recruitment process of low-skilled

individuals for whom the firm has no intentions to invest.


Wal-Mart is recognized as a leader in supply chains (Ehring, 2006). The integration of

logistics and information systems gives Wal-Mart a competitive edge in supply chain

management (Thomson, 2007). This organization has remained at the top of technology

innovations. Bar-code scanning technology was implemented at the end of the 1980s to expedite

the merchandising process (Wal-Mart, 2008f, p. 1) and by 2005 Wal-Mart was the first in

adopting electronic product codes (EPC) in 1,000 locations nationwide. This innovation saved

the firm 63% in restocking time (Thomson, 2007).

According to Ehring (2006) Wal-Mart is the “best supply-chain operator of all time in the

U.S.” (p. 115). Wal-Mart is able to maintain a low-price strategy through efficiency in

distribution channels leveraged by its scale. Wal-Mart supports its mega-retail operations with

121 distribution facilities in the U.S., the majority of them operated by the firm (106), while

others are owned and operated by third parties. To support the operations of Sam’s Club 26

distribution facilities are managed by Wal-Mart, 8 of them owned by the firm. These distribution

channels transport 81% of the total merchandise sold in Wal-Mart stores and 65% of Sam’s

Club’s purchases; the remaining is distributed directly by suppliers (Marketline, 2009a).

Wal-Mart employs 75,000 associates in the logistics and information division to manage

the largest database of any commercial firm, compared only to the Pentagon’s system

(Marketline, 2009b). The majority of IS developments are completed in-house, giving Wal-Mart

greater flexibility and low-cost advantage (Thomson, 2007). Wal-Mart was the first firm in

installing the largest private satellite communication system in the U.S. in 1987, to keep stores


communicated using “two-way voice, data, and one-way video communication” (Wal-Mart,

2008f, p. 1).

Trust and effective execution are the two characteristics of Wal-Mart that make it a high

performer. According to Ehring (2006) successful partnerships with suppliers, such as Procter &

Gamble, are a demonstration of how adversarial relationships can evolve positively towards the

satisfaction of mutual consumers. To do this, Wal-Mart integrated its actual demand information

(POS) with consumer data managed by Procter & Gamble to inform retailing and product

development decision, respectively (Ehring, 2006).


Organizational learning relates to the ability of the firm to adapt to the changes in the

environment (Schermerhorn et al., 2004). High performance organizations use information

systems to collect data from the market to predict changes and respond to them (Brown, Reich,

& Stern, 1993). Wal-Mart’s culture is acknowledged as one open to change and innovation,

highly adaptive and aggressive (Beer, 2001; Fishman, 2006; Bernstein, 2006).

Wal-Mart’s leadership believes in innovation and experimentation as key elements of the

success of the firm.CEO Scott was a strong advocate for change: “Change is woven into the

Wal-Mart culture” (Scott, 2006, para. 20). In one of his most inspiring speeches before Wal-

Mart’s shareholders, CEO Scott laid out a transformative plan for Wal-Mart in 2006 called the

“Out in Front” comprised of five pillars (Scott, 2006):

(1) Broaden Wal-Mart’s appeal to their customers.

(2) Make Wal-Mart an even better place to work.

(3) Improve business operations and efficiency.

(4) Drive growth in international business.


(5) Be a valuable member of every community Wal-Mart serves.

Wal-Mart’s flexibility to enter new markets, trying to understand their culture and habits

is evident in the number of new store opening each year. Cavusgil et al (2008) found that Wal-

Mart used an efficient strategy of localization that allowed the firm to connect to its potential

customers. Important developments in organizational learning were implemented by Wal-Mart,

through the experiential stores, where Wal-Mart managers gather data about patterns of

consumption in Hispanic neighborhoods, other minority groups, rural areas, and baby-boomers

(Scott, 2006). These initiatives were highlighted by CEO Lee Scott in the “Out in Front” strategy

launched in 2006.

The perpetuation of organizational learning at Wal-Mart is possible through the creation

of programs, such as the International Leadership Development Program that provides store

managers and teams with cross-cultural skills (Carpenter & Sanders, 2008). This program

assisted in the promotion of the three main ingredients of their culture: The Every Day Low Price

strategy, brand names and ethical standards (Thomson, 2007). Failures also comprise

organizational learning for Wal-Mart. Despite its success in replicating strategies such as Every

Day Low Prices (EDLP) in United Kingdom, the organizational culture of Wal-Mart clashed

with the competitive German market (Fernie, Hahn, Gerhard, Pioch, & Arnold, 2006). However,

as stated by CEO Scott “Wal-Mart’s marketplace is the world” (Scott, 2006, para. 54) and that

implies that the firm must be in constant learning with each store opening.


The literature about Total Quality Management stresses the importance of “high-quality

results, continuous improvements, and meeting customer needs” (Schermerhorn et al., 2004). At

Wal-Mart quality circles have been implemented to ensure that the customers receive the best


quality at the lowest prices possible (Ehring, 2006). CEO Scott (2006) emphasized the

importance of increased efficiency in the inventory management, by reducing inventory in

warehouses, decreasing shipping times to customers, and making sales floors more appealing.

These simple measures have the effect of less expenses in storage, “more consistent pricing, and

lower labor and transportation costs” (Scott, 2006, para. 50).

According to Stanley (2007) Wal-Mart is a leader in the competitive retail industry,

having transformed business processes and operations at the domestic and international level.

Wal-Mart’s efficiency in operations has the sole purpose of giving customers what they want at

the lowest price possible. Fishman (2006) coined the term Wal-Mart effect to define the impact

of the entry of Wal-Mart on competitors, suppliers and manufacturers in new markets. The

impact propagates throughout the “vertical supply chain” (Fishman, 2006, p. 358) influencing

employment and business conduct standards.

Although quality and cost are seen as mutually exclusive, Wal-Mart has blended them

efficiently and has committed to make investments in proprietary knowledge and processes in its

relationship with suppliers (Ehring, 2006). By sharing knowledge with its suppliers, Wal-Mart

has been able to offer quality and low costs to its customers. Innovative changes were

implemented by Wal-Mart in 2008, with the creation of the Wal-Mart Smart Network, a close-

circuit system that provides customers with information about products and services in-store

(Marketline, 2009a). Another example of total quality management at Wal-Mart is the “site-to-

store” program that gives customers the opportunity to order online and pick up at store. This

program has reportedly generated additional $60 in-store spending per customer at pick-up

(Edelson, 2007). Wal-Mart was the first to implement a retail media network in 2,700 stores,

using Internet Protocol Television (IPTV) to provide in-store information to its customers in the


U.S. This sophisticated system allows Wal-Mart to control 27,000 screens in selected locations

(Marketline, 2009a). While most integrated technologies usually occurs at the back-end of the

channel (in design or production), the idea of connecting customers with the products and

services Wal-Mart offers, serves the purpose of providing value added and increasing customers’

trust (Ghemawat, 2006).

Summary

The data collected about business practices, organizational behavior and financial

performance of Wal-Mart Stores showed contrasting opinions about the organization. While

Wal-Mart’s corporate website provides positive information about the culture, business practices

and promotion of diversity and interest for people, some analysts question the power and

influence of the firm in the United States and abroad. According to Ghemawat (2006) Wal-Mart

is an exemplary high-performance organization that has transformed the retail business; for

others, like Fishman (2006) Wal-Mart is a mega-retailer with a distorted focus on control and

disregard for the human capital.

The perceptions about Wal-Mart Stores Inc were retrieved from releases located in the

corporate website, communications and reports of top management to shareholders, journal

articles, and financial reports. These sources contained information about the firm from its

foundation but mainly focused on the 2002-2009 period. The findings of the content analysis of

these sources were organized according to the five components of Schermerhorn et al’s (2004)

HPO model for comparison and contrast to answer the research question: What, if any, business

practices, organizational behavior, and financial performance of Wal-Mart Stores Inc. are

indicative of a High Performance Organization (HPO)?


The analysis of the data collected suggested that Wal-Mart demonstrates strong

integrated production technologies, and organizational learning, unclear manifestations of

employee involvement and total quality management; and inexistent self-directed teams. The

analysis of the financial performance of Wal-Mart showed that the firm has experienced an

upward trend in net income in dollars in the 2002-2009 period, but erratic behavior in terms of

growth rates, fluctuating between 0.9% and 19.4% annually. The literature suggests that HPOs

reach growth of 50% in a period of 3 to 5 years (Schermerhorn et al., 2004) since

implementation of the five components of the model.

Chapter 5 presents the interpretation of the findings of this study along with conclusions

that integrate the literature review and the data analysis. Recommendations derived from the

results of the case study as well as suggestions for future research are also included in chapter 5.


Chapter 5: Conclusions and Recommendations

This qualitative case study had the purpose of exploring the business practices,

organizational behavior, and financial performance of Wal-Mart Stores Inc. to identify how they

could reflect the components of High Performance Organizations (HPOs). The results of the

research presented in chapter 4 were used to see if the statements reported by Wal-Mart in

corporate website, opinions of scholars and analysts, supporters and detractors of Wal-Mart

evidenced some of the characteristics of High Performance Organizations.

Data from annual reports, communications, and speeches of members of top

management, scholarly journal articles, and specialized reports about the firm were collected,

processed, analyzed, and interpreted to identify the business practices, organizational behavior,

and financial performance of the firm. Statements by the former CEO Lee Scott and current CEO

Mike Duke comprised a significant portion of the data analyzed in this chapter. Financial data

was extracted from the annual reports of the firm, SEC filings, and industry analysts such as

Mergent Online and Marketline. The findings of this study suggest that Wal-Mart Stores Inc.

demonstrate the majority of components of High Performance Organizations in different degrees

of manifestation.

Conclusions

Wal-Mart Stores Inc. is recognized as the largest mega retailer in the world (Ghemawat,

2006). The influence of Wal-Mart in the business environment of the United States is

undeniable. Wal-Mart is recognized as the major employer in 24 of 50 states of U.S. employing

more than 2.1 million associates (Fishman, 2006; Wal-Mart, 2009a). Wal-Mart provides benefits

for the average American household in an estimated up to $2,300 per year (Global Insight,

2007). The entry of Wal-Mart in any geographic location derives in direct price effects in its


stores and indirect effects through influence on competitors that try to match its low prices

(Hausman & Leibtag, 2007). Prices offered by Wal-Mart are estimated in 15 to 25% lower than

the industry, with effects for competitors and for the economy in general (Hausman & Leibtag,

2007).

High performance organizations are characterized by five components (Schermerhorn et

al., 2004, p. 22): employee involvement, integrated production technologies, total quality

management, self-directed work teams, and organizational learning. Wal-Mart shows some

manifestations of these components through statements such as: “invest in people”, “improve

people’s lives”, “commitment to our workforce”, “focus on working families”, “innovation”,

“adaptive to change”, “promotion of diversity”, “strong culture”, “team collaboration”, “become

part of the community”, “efficiency in supply chain management”, “largest employer”, “Wal-

Mart effect”, “everyday low prices”, “work smart, live better”. “humility”, “caring”,

“empowerment”, “community minded”, “integrity always”, “risk-taking”, “continuous

improvement”, and “servant leadership”. Negative characteristics associated with Wal-Mart

included: “centralized organization”, “negative effect in the retail sector”, “loss in retail jobs”,

“absence of opportunity for advancement”, “take advantage of blue collar workers”, and “higher

social costs”.

The data analysis showed that Wal-Mart shows characteristics associated with two

components of HPOs: integrated production technologies, total quality management, and

organizational learning. The analysis also confirmed that although top executives of the firm

espouse the interest for individuals, service to customers, and excellence (Wal-Mart, 2008f)

employee involvement is yet to be championed by the firm as a priority. The results also showed

that despite the recognition of top management about the importance of teamwork and


empowerment, any reference to self-managed teams is not manifest. While the logistics,

information systems, and supply-chain management divisions work in coordination to achieve

efficiency in the distribution channels, these efficiencies are not transmitted to the rest of the

divisions. Critics of Wal-Mart (Fishman, 2006; Hart, 2007) asserted that the high degree of

centralization of the firm limits any initiative of empowerment or self-management.

Review of Components of HPO identified in Wal-Mart Stores Inc.

High performance organizations (HPOs) are characterized for putting people as a priority.

These organizations infuse positive organizational behavior in their members promoting personal

and organizational growth (Roberts et al., 2005). The path towards high performance is based

upon the development of intellectual capital, which is the composite of the expertise, knowledge

and insight of the workforce (Schermerhorn et al., 2004).

Schermerhorn, Hunt, and Osborn (2004) proposed a model of five components to define

High Performance Organizations (HPOs): (1) employee involvement, (2) self-directing work

teams, (3) integrated production technologies, (4) organizational learning, and (5) total quality

management. The five pillars of transformation espoused by CEO Lee Scott in 2006 have

implications for the categorization of Wal-Mart as a High Performance Organization. Each pillar

had specific action items that emphasized the commitment to people above all, an important

element of the Wal-Mart culture (Ghemawat, 2006) as well as business practices to keep the firm

competitive. Scott emphasized the aggressiveness of the strategy, yet the accessibility and caring

(Scott, 2006). All these are characteristics of HPOs (Beer, 2001; Kaliprasad, 2007).

Table 6 presents a detail of the action plans linked to each pillar as stated by CEO Scott

and linked to one of the five components of HPOs (Schermerhorn, et al., 2004). The analysis of

the statements and actions taken at the time of CEO Scott’s speech revealed the presence of at


least four of the five components of HPOs (Schermerhorn et al., 2004): organizational learning,

total quality management and integrated production technologies. In this speech, Scott did not

make reference to employee involvement, and only at very low degree, mentioned self-

management teams (See table 6).

Table 6. Alignment of Wal-Mart’s “Out in Front” Plan and HPO Components

Pillars HPO component Results (1) Broaden Wal-Mart’s appeal to their

customers. • In-depth market research to understand

customers o Experimental stores: Evergreen

Park store in Chicago to understand “urban and multi-cultural customers” (Scott, 2006, para. 43)

o Experimental stores: Plano, Texas “teaching us a lot about appealing more to women and affluent customers” (para. 45).

o New experimental stores to understand: Hispanic, rural, and baby boomers

• Offer exclusive merchandise to loyal customers and new customer base: Expansion of Exsto urban men’s clothing line to 300 stores.

• Organizational learning

• Chicago: Sales per square foot 25% higher than other areas

• Texas: Gross profit per liner foot 24% higher than other stores.

• Exsto products sold out in 10 days

(2) Make Wal-Mart an even better place to work.

• Offer good jobs and opportunities for advancement

• Commitment to diverse workplace • Investment in people • Accessible health care for eligible full-

time and part-time associates and their children. o Low premiums ($23 per month),

co-pays as low as $3. o No lifetime maximum in health

plan after one year. • Coverage for catastrophic medical

• Overarching concept in HPO: People are crucial resource.

• Associates survey in 750 stores, Sam’s clubs and distribution centers: 90% participation rate. Engagement scores: 6 – 8 points (out of 10)


expenses. (3) Improve business operations and

efficiency. • Investment and inventory management • Partnership between Sam’s inventory

team and information system division o Inventory reduction in back-rooms o Uncluttered aisles in sales floor o Elimination of inventory not

affordable by customers o Shipping time reduction from

suppliers to customers • Logistic team ensures “to have the right

product, in the right place, right when our customers need it” (para. 51).

• Integrated production technology

• Self-directing work teams

• Total Quality Management

• Inventory reduction: 2% in U.S. stores

• Profit $2.2 billion in 2006

(4) Drive growth in international business. • Aggressive international expansion:

o New international markets: India. Visits of Wal-Mart executives to potential customers’ homes.

o Sourcing opportunities, and increased efficiency in global supply chain.

o Increase U.S. exports. • “With each store we open, our company

has the opportunity to learn and grow” (para. 55).


• Integrated production technology

• International sales in 2006: 23% increase.

• China, Brazil, Argentina, and Mexico leaders in increased operating income.

(5) Be a valuable member of every community Wal-Mart serves.

• Strive to become valuable member of the communities served. o Local philanthropy: $200 million

in 2005- 90% locally. • Lessons from Katrina-

o In-store health clinics for uninsured patients.

o Additional leases for 50 health clinics.

• Environmental sustainability o “No idle” policy for trucks o High-efficiency generators o Sandwich bale program for plastic

recycling


• Savings $26 million • Conservation: 10

million gallons of diesel.

• Reduction 100,000 tons of carbon dioxide.

• Collection 150 truckload of plastic, $1.1 million in recycling revenue.

Source: CEO Lee Scott speech in shareholders’ meeting 2006 (Scott, 2006).


Regarding the fist pillar of transformation, Mc Williams (in Parnell, 2007) argued that

Wal-Mart was attempting to attract upscale consumers, however, the results were not as

promising as claimed by Wal-Mart, and threatened to have negative effects on small competitors.

As to the second pillar, journal articles by Parnell and Lester (2008) report the significant

influence of Wal-Mart in health care and the authenticity of Wal-Mart’s efforts to provide

affordable health care for their employees. The reports confirmed that 86% of the employees at

Wal-Mart had some kind of insurance (Parnell & Lester, 2008). Dube, Lester, and Eidlin (2007)

argued that Wal-Mart’s entry effect has lowered the retail wages and health benefits of all the

retail workers in the areas of incursion.

As to the third pillar of transformation -operation improvement-, Wal-Mart has

demonstrated the efficiency in supply chain leveraging its low-cost strategy. Rigby and Haas

(2004) contended that of the five main dimensions of retailing: “quality, service, convenience,

selection, and price” Wal-Mart has advantages only in price and selection. Rigby and Haas

(2004) proposed that small businesses should be able to compete with Wal-Mart through a

careful segmentation of their customers by product and pricing preferences.

The fourth pillar of transformation relating to international expansion is perhaps the

second most successful aspect of Wal-Mart’s business practices. Wal-Mart has learned a great

deal about cross-cultural differences and global incursion. The effect of price decline in

international markets is acknowledged by various authors (Frank, 2006; Fishman, 2006). The

fifth pillar of Wal-Mart’s transformation regarding sustainability has been confirmed openly by

supporters and detractors. Fishman (2006) recognized that Wal-Mart made efforts to create a

sustainable and constructive environment, by reducing the use of fuel energy, purchasing from

sustainable producers, and by requiring their suppliers or organic products to be double certified.


Employee Involvement

Brown et al (1993) used a set of 13 Likert-scaled statements to measure the levels of job

security, employee involvement, and training that are common in high performance

organizations. This research confirmed that all the organizations that transitioned towards HPO

paid higher wages than their competitors. Beer (2001) proposed that one of the roles of managers

and leadership teams was to “Create a compelling and balanced organizational development

direction” (p. 224).

Wal-Mart espouses employee involvement as one of the basic beliefs of its culture (Wal-

Mart, 2008f), but this involvement is evident in a low degree through the Associate Resource

Groups. These groups promote the participation of associates in roundtables, discussions, focus

groups, and encourage knowledge-sharing. A high degree of employee involvement would

require that associates were able to make decisions on her own on the daily operations of the

firm. The data analysis does not show evidence of a higher degree of employee involvement at

Wal-Mart.

Self-Directing Work Teams

HPOs are able to link the effective results of change with capability development,

encouraging the participation of the lower levels of the organization, and refraining from

dictating change in a top-down approach (Beer, 2001). A clear mission must be integrated into

the corporate performance management system through measurements that can be monitored.

Shared values in HPOs are agreed upon by both managers and employees (internal values) and

articulated to match the customer values (external values) (Buytendijk, 2006).

Wal-Mart executives constantly mention the importance of logistic and supply-

management teams, and information system teams (Scott, 2006) but do not provide any explicit


indication that these are self-managed teams. The high degree of centralization, with regional

managers enforcing policies at their regional stores, suggests that top management does not have

incentives to implement self-managed teams. Consequently, this HPO component is not manifest

at Wal-Mart.


The ability of HPOs to integrate the back-end operations with the sales floor to deliver

customer’s value is critical for outstanding performance. The leadership of Wal-Mart in supply

chain management is recognized for both supporters and detractors. The firm has characterized

for using technological innovation to shorten the time that merchandise takes to go from supplier

to customer. The capabilities of Wal-Mart as one of the best supply chain operators ensure

consistent low prices and efficiency in the distribution channels (Ehring, 2006).

While Stanley (2007) sees Wal-Mart’s influence in the retail industry as positive, because

it leads competitors to adapt to efficient operations, Fishman (2006) views it as a negative

pressure of Wal-Mart to lead competitors to unfair practices towards workers. Stanley credits

Wal-Mart for transforming the retail industry making it more competitive; Fishman (2006)

demerits Wal-Mart for being a threat to capitalism. Buytendkijk (2006) emphasized the

importance of managing “metadata, master data management, data integration, and data quality”

(p. 29) which Wal-Mart prioritizes by assigning 75,000 associates in information systems and

logistics. Consequently, Wal-Mart demonstrates a high degree of integrated production

technologies as a HPO.


High performance organizations are adaptive and responsive to changes. Their ability to

learn from their experiences and take action towards innovation is an essential component of


HPOs (Brown, Reich, & Stern, 1993). Beer (2001) purported that HPOs involve their unit

managers in leading change and to learn from leading. Wal-Mart is recognized for its

aggressiveness, innovation, and adaption to the competitive environment of the retail industry.

CEO Scott has claimed that change is part of the Wal-Mart culture, restating the openness of the

firm to learn.

Evidence of the organizational learning process was found in the data collected about

international incursion, domestic expansion, and purposeful leadership programs to foster

innovation and learning (Carpenter & Sanders, 2008). The impeccable execution of a strategy

will depend on a good formulation and the establishment of measurement system that cascades

from the executive level throughout the organization (Buytendijk, 2006). Wal-Mart has

implemented mechanisms that monitor performance and ensure the alignment of strategy and

outcomes. Consequently, organizational learning is manifest in high degree as HPO component

at Wal-Mart.


Based on the definition of Total Quality Management as a process that generates high

quality results, through continuous improvement, with the goal of meeting customers’ needs

(Schermerhorn et al., 2004), Wal-Mart qualifies as a HPO. Major criticisms to Wal-Mart are not

in the area of technology or supply-chain management, or strategy, but in the human aspect of

the relationship with employees, customers, and suppliers.

Despite the espoused values of investment on people manifested by top executives of

Wal-Mart, and the influence that Wal-Mart’s culture has on its associates, some authors

(Fishman, 2006; Hart, 2007) appear doubtful of the ability of the firm to treat employees right.

Arguments against the influence of Wal-Mart in suppliers, competitors, and manufacturers blur


the advantages of the low-cost strategy that has saved thousands of dollars to U.S. households.

At the end, Wal-Mart’s socio-economic impact in savings and better life for their employees and

customers appear to offset the opposing voices. Consequently, Wal-Mart seems to demonstrate a

mid-level degree of Total Quality Management practices.

Financial Performance

The expectations of financial performance for HPOs depend of the industry where the

company operates (Schermerhorn et al., 2004). Studies indicated that HPO experience increases

of 30 to 50% in their bottom line in up to five-year period. These outcomes depend on how

competitive is the market environment and how responsive the firm is, the ability of the firm in

integrating the HPO components, the empowerment of middle management, and the leadership

of top managers.

Wal-Mart has demonstrated its financial power, with $13.4 billion in net income, and

$401 billion in net sales in fiscal year 2009. Although a consistent growth of its customer base

supports its leadership in the retail industry, the analysis of the trend in growth rates in the 2002-

2009 period, revealed that the growth rates do not exceed 20%. Averaging the most recent 5

years, the growth rate in net income averages slightly above 9%. These indicators of financial

performance at Wal-Mart are below the benchmark of 30-50%, suggesting that Wal-Mart is not

formally a HPO.

An added element to the controversy about Wal-Mart seems to be the apparent secrecy of

its business practices. Fishman (2006) pointed out that Wal-Mart generated an information gap

of such magnitude that it is not possible to evaluate the actual performance of the firm.

Ghemawat (2006) has challenged Fishman’s judgments about Wal-Mart pointing out that the

innovative operations and business practices of the firm tend to cause reactions in the industry,


especially when firms are large and powerful. As recommended by Ghemawat (2006) Wal-

Mart’s issues have to do with how it appears to its stakeholders and the general public.

Transparency in information by Wal-Mart should help reduce the doubts and cynicism of its

detractors.

The economic impact of Wal-Mart’s activities has been studied by third-parties such as

Global Insight (2008), Hausman and Leibtag (2007) acknowledging positive effects in the

reduction of household expenditures. Contrasting findings of negative effects of Wal-Mart in the

retail industry, labor market, and retail suppliers (Fishman, 2006; Dube et al., 2007; Hart, 2007)

may diminish Wal-Mart’s qualifications as high performance organization.

Review of Limitations of the Study

This qualitative case study was limited to data collected about Wal-Mart Stores Inc.

available in the corporate website, communications to shareholders, specialized media reports,

journal articles, and expert analysis. While statements made by the CEOs of the firm in speeches

and interviews with the media were used as basis for the analysis, face to face interviews with

associates and the management team would have added valuable insights to the research. Given

the secrecy of certain business practices at Wal-Mart, the possibility of these interviews was very

low and unfeasible.

The validity of the data collected was limited to the accuracy and reliability of the

sources and documents reviewed in the study. Information about culture, business practices,

employee programs, leadership, organizational behavior, and financial performance were

extracted from Wal-Mart’s website and triangulated with information from third parties.

Consistency was found in the report of financial figures, however, contrasting opinions were

manifest regarding the positive influence of Wal-Mart in the retail industry.


Review of Delimitations of the Study

This qualitative research was delimited to the description, analysis, and identification of

business practices and organizational behavior that might reflect one or more of the five

components of High Performance Organizations (HPOs). The model used for the analysis was

Schermerhorn, Hunt, and Osborn’s (2004) five components model. The information about Wal-

Mart was focused on the 2002-2009 period but references to the history of the organization were

included to the extent of the availability of information online. The methodology of the study

was a combination of historical account to reconstruct the evolution of Wal-Mart since its

foundation and content analysis to identify common themes that suggested the presence of HPO

components. The researcher included the most recent scholarly articles about Wal-Mart and

excluded media reports or blog content that was not reliable.

Recommendations

This case study explored the characteristics of business operations, organizational

behavior and financial performance of Wal-Mart in an attempt to identify if they reflected one or

more HPO components of the Schermerhorn et al’s model. An analysis of the gaps between the

espoused values and beliefs and the actual business practices of Wal-Mat may provide additional

insights about the causes of these differences. The consideration of additional aspects of the

organizational culture of Wal-Mart that are not reported by the firm but that could be extracted

through conversations with its members would assist in measuring with accuracy the degree to

which the HPO components are present.

Future studies of quantitative nature that examine the association between the leadership

style of the top management team at Wal-Mart and each of the characteristics of HPO may

contribute to understand the degree to which leadership attributes influence the approach to


employee involvement, self-managed teams, integrated production technologies, total quality

management and organizational learning. Even more, future studies providing an in-depth

analysis of the dynamic of teams at Wal-Mart, will assist in confirming or not, the findings of

this study that suggest that self-directed teams do not exist in this firm.

The findings of this study confirmed the complexity and diversity of opinions about Wal-

Mart. The expectations of the researcher were to confirm that despite the criticism to Wal-Mart’s

influence in the global retail environment, the five components of High Performance

Organizations were evident in the business practices, organizational behavior, and financial

performance of the firm. The results of this study showed that although the HPO components are

present at Wal-Mart’s with different intensity, the influence of Wal-Mart for the past four

decades is significant in the industry, in the U.S., and in important regions of the global market.


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