October 27, 2005

Walmart: A Modest Proposal

The New York Times (registration required) has published excerpts from an internal Walmart memo, in which M. Susan Chambers, Wal-Mart's executive vice president for benefits, outlines a fascinating dual strategy of polishing the company's public image and at the same time reducing the costs of benefits to employees. Wal-Mart executives said the memo was part of an effort to rein in benefit costs, which to Wall Street's "dismay" have soared by 15 percent a year on average since 2002. The LA Times (registration required) has an interesting analysis of Walmart's dilemma here.

Who Needs Experience?
Perhaps the most startling recommendation targets longer term employees, especially those deemed "unhealthy." The memo asserts that workers with seven years' seniority earn more than workers with one year's seniority, but are no more productive. In other words, in the world of Walmart, experience and loyalty are worth absolutely nothing. It fact, less than nothing, because the experienced worker costs more. So unlike most employers, who value experience and try to retain good people, Walmart is in search of a method for turning over the workforce before more expensive benefits and wages kick in.

"It will be far easier to attract and retain a healthier work force than it will be to
change behavior in an existing one," the memo said. "These moves would also dissuade unhealthy people from coming to work at Wal-Mart."

The memo goes to observe that "the least healthy, least productive associates are more satisfied with their benefits than other segments and are interested in longer careers with Wal-Mart." In other words, Walmart's most loyal employees are the ones they want to get rid of. I would love to overhear the conversations at Walmarts across the country today during coffee breaks. Then again, they probably don't get coffee breaks.

Ms. Chambers's recommended strategy includes a reduction in benefits that older works prefer and an increase in benefits that appeal to younger employees. Thus she recommends reducing 401(k) contributions and life insurance coverage, while at the same time offering education benefits.

Ms. Chambers asserts that she made her recommendations after surveying employees about how they felt about the benefits plan. "This is not about cutting," she said. "This is about redirecting savings to another part of their benefit plans." And it is about showing older, less healthy associates the door.

Ms. Chambers acknowledged that 46 percent of the children of Wal-Mart's 1.33 million United States employees were uninsured or on Medicaid. Perhaps the new hiring policies could discourage the hiring of single parents.

Discrimination in Hiring & Termination
Now that the memo is public, I have a bit of advice for Walmart. If you really want to implement this plan, you better hire a few extra lawyers. If local managers avoid hiring "unhealthy people" and systematically terminate current employees who are in less than perfect health, you are violating federal and state employment laws.

By writing the memo and by defending it in public, the company has created an amazing opportunity for lawyers. The memo is the proverbial "smoking gun." Every termination of an employee who is perceived to be unhealthy will give rise to immediate suspicion of discrimination. Every time Walmart rejects a job applicant with obvious and perhaps not-so-obvious health issues, they are again open to claims of discrimination. The burden of proof will be on Walmart to demonstrate that they did not implement the suggestions of the soon-to-be notorious memo. Did someone say "class action suit"?

A Modest Proposal
I can feel Walmart's pain. I can understand why they would want to get rid of any "associate" with more than a few years on the job. I can understand why healthy people would be cheaper to hire and support. And I have a plan. I can guarantee Walmart a virtually unlimited supply of clean cut, physically fit, young people who know how to follow directions. And I can get rid of all the current, aging, poorly conditioned associates over night. It's simple. Walmart needs to outsource its personnel to the U.S. Army.

Think about it for a moment. You would have a superbly disciplined workforce, spirited, conservatively dressed, short hair, no body piercings, no obesity. You want a Walmart cheer, they'll give you a Walmart cheer. They are all physically fit. And they carry guns, which surely would cut down substantially on shop lifting. (You might end up with a few lawsuits, but Walmart has lawyers to handle that.) The wages and benefits are marginal at best.

In return, Walmart provides logistical support for the military. Goods will be moved on time, every time. No more embarassments like Katrina. It's a "win-win." And best of all, the transition from the current workforce to the army can be accomplished literally overnight. Just send in the troops to remove all current employees and take over the stores. It might be a bit disconcerting at first, to have an armed cashier at check out. But we'll get used to it. After all, you just can't beat those prices!



But Jon, how do you really feel about this?

Wow! You really socked it to this retailer. They will never be sucessful. Just laugh at them. They will go away. We should never emulate them until they become civilized and polite like our companies in the Northeast.

This is one more attempt to make Wal*MArt lok bad. This was probably taken out of context

Clark's use of sarcasm pales when compared to the article.
Tracy - Walmart will tell you that their key to success has been expense control. With this premise in mind, if the documents mentitoned in the article exist, this would not then be out of context but a logical plan to further control the expenses. The problem is that logic is not always right. The question that remains of all of our business citizens of our society is what do they owe , if anything, to promoting what is best for societal ills and should they be subject to being liable if they contribute or promote something not illegal, but unethical?


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This page contains a single entry by Jon Coppelman published on October 27, 2005 10:23 AM.

News roundup: Premium rates, ADA, disability awareness, OHIO privatization, and more was the previous entry in this blog.

"Going and Coming" exception: contractual transportation is the next entry in this blog.

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