CASE: Should Wal Mart Standardize Selection?

The process for securing a management position at WalMart has seemed arbitrary to some. One observer called it "a tap$-$on$-$the shoulder process, where Wal$-$Mart would reach down and anoint somebody and invite them into upper management." One reason it looked this way was Wal$-$Mart's practice of decentralized decision making, meaning the company left many decisions up to the managers of individual stores or departments. This decentralization has allowed the company to be creative and quick thinking in terms of purchasing and merchandising. But in terms of human resource management, more centralized control might have prevented some problems.

Wal$-$Mart has recently been in legal hot water because women statistically have been selected for promotion less often than men. Many female workers who served WalMart for years and received glowing yearly performance evaluations watched in frustration as they were passed over for management jobs that went to men who seemed to be less qualified. Because the company lacked standard, centralized practices for promoting employees into management, it is hard for outsiders $($and even corporate management$)$ to say exactly what motives were behind these selection decisions. However, it is easier to track the outcomes of those decisions. According to numbers in the discrimination filing, women made up more than twothirds of Wal$-$Mart's hourly employees but less than onethird of the management positions. $($Wal$-$Mart says the numbers are closer to $60$ percent and $40$ percent.$)$ Recently, $1\mathrm{.}5$ million current and former female employees of Wal$-$Mart filed a class$-$action lawsuit charging that Wal$-$Mart discriminated against women in its promotion practices$-$the largest such lawsuit in history.

Two practices contributed to the problem. First, WalMart did not have a policy of posting job openings so that all employees could see what positions were available. Often, the local store manager simply filled an opening without notifying employees that there was an open position. Second, each store manager made selection decisions

according to his or her own methods. The company didn't require managers to detail or justify their criteria for accepting or rejecting candidates. So$,$ when it became apparent that the decision$-$making process was adversely affecting women$-$in terms of pay as well as advance$-$ment$-$Wal$-$Mart had difficulty pointing to any legitimate criteria that could justify the hiring decisions.

Wal$-$Mart may also have contributed to the problem through its broad approach to human resource management. The company generally recruited human resource staffers from the ranks of line workers, rather than from professional HR programs or colleges whose graduates specialize in human resource management. Wal$-$Mart emphasized cost cutting, and since human resource management does not directly generate sales, the function was treated as an unfortunate cost of doing business.

Wal$-$Mart's deemphasis of human resource management may have made the company vulnerable to Costco, a direct competitor that seems more dedicated to human resource management. Costco, like Wal$-$Mart, emphasizes low costs, but it pays workers higher wages and has moreformal systems to offer opportunities to be promoted. At Costco stores, turnover among employees is only half that of W$/$al$-$Mart stores. In addition, promotion policies that emphasize competence and experience help Costco build a more effective managerial staff. These differences may help explain why, on average, a Costco store generates nearly double the revenue of a Wal$-$Mart store the same size.

As Wal$-$Mart defends the lawsuit, it also has to weigh decisions about whether to change its selection process so that discrimination lawsuits are less likely in the future. Huge changes could be interpreted as an admission of having done something wrong, and decentralized decision making has helped the company grow into a huge, widely admired corporation. However, the company has made some adjustments. One change is to begin rewarding managers for diversity in selection decisions. Now $15$ per$-$