ORGANIZATIONAL CULTURE AND WAL-MART SUCCESS
Introduction
The paper analyzes the corporate culture of Wal-Mart in the context of its establishment by its owners as well as its future changes due to operational needs (e.g. outsourcing marketing to external people). The structure can be somewhat futuristic that will serve as a guide for companies that have adopted or will change their corporate culture. The paper contains overview of Wal-Mart’s culture and related organizational culture theories while the latter part analyzes Enron scandal and Standard/ relating them to cultural issues related to Wal-Mart. There is a conclusion to elaborate on findings and implicate results to current issues confronting Wal-Mart.
Overview of Wal-Mart
Generally, the culture of Wal-Mart is engraved in treating other people as one wants to treat itself. This reflects how they create relationships with customers, associates and suppliers with an initiative to provide excellence to show their competence and upper hand from industry players. The company’s official website has a dedicated icon that explains their culture. Opening remarks before detailing them comes from the CEO who presents financial and operational performance of the firm. Such design is strategic in order for website visitors and people to know that they have an effective corporate culture which results in positive outcome for the company and its customers and business partners.
There are three basic corporate beliefs; namely, respect to individual, service to customers and strive for excellence covering employee motivation, customer satisfaction and competitiveness. On the other hand, top-management including shareholders and owners of the company engaged in ten rules in building the Wal-Mart business. Such rules reveal how the profit-oriented individuals should balance their short-term goals with long-term ones by loving the business, sharing success to others, motivating all partners, managing open communication systems, showing appreciation, celebrating success, exceeding customer expectation, being competitive and adherence to continuous improvement.
With this general framework, Wal-Mart is doing business in ever-changing industry and economy. Recently, it unveiled new ad agency portfolio wherein it aligned its marketing and merchandising businesses to selected advertising agencies. The outsourcing of one of the most significant area of the business to outside parties can have changes or “shocks” in the present cultural structure of the company especially of its known low-pricing strategy. Wal-Mart should be able to guard its business partner selection to maximize the strategy and prevent untoward occurrences. This would not be done without strategic leaders who implement best practice in decision-making.
Overview of Corporate Culture
Organizational culture is the personality of a firm which can be indicated by the feedbacks of the partners and third parties. Culture is based on values and assumptions about organizational resources where some outcomes can be formed (e.g. new technology, innovative processes, and good manager). In every culture, there is an evaluative element which involves social expectations based on certain standards. A firm that is explicitly stating its culture should be able to represent them through symbols and actions in order for expectations to recognize them and include in evaluation process. In this course, social interaction is the best medium to show how the company embodies and execute its culture.
According to Deal and Kennedy (1982), culture is the single most important measure of success of the organization where four dimensions are involved; namely, values, heroes, rites/ rituals and cultural network. Peters and Waterman (1982) elaborated this citing link of organizational culture and business performance where culture can be seen as form of reward or sacrifice. This suggests that culture is both a cause and also an effect which places an organization between a double-edged sword. As such, this makes culture problems less exposed to evaluation and to determine strategic actions.
The tone of Wal-Mart about its culture is that it is innovative, thus, it requires adopting a culture of change. However, tools to be able to run this strategy are demanding and challenging. First, cultural change requires awareness of its consequences, leadership inclination in building strong cultures and ability to balance culture to some form of corporate formalities. Culture is a unifying symbol that reflects the general processes of the organization. In this view, the concept of culture can aid in making corporate changes or simply making a specific culture for an organization to follow.
Culture should be Ethical
In definition, “ethics is a set of principles of right conduct. It is a moral philosophy that conforms to standards of what is right or just in behavior” (Questa Dictionary). The irony is that it has number of definitions but in sense, no theory or philosophy had really elaborate its meaning because it is basically based in norms, customs, values, culture and laws of a certain society. There can never be universality as countries and other ethnic groups have differences. Suffice to hear the word right and just and leave to the various societies, perhaps the majority, judgment of the succeeding individual actions, corporate strategies, government policies or international events.
In private corporations, decision-making plays a very important role in strategies especially its implementation. Company’s overall vision and mission is applied in most of its huge and crucial undertakings usually executed by the Chief Executive Officer (CEO) but lower-levels of management and their decision-making is the instrument used to spread and implement the goals of company. There actions tend to affect the decision of CEO and as a whole, the fate of the company.
The case of the historic fall of Enron is a relevant example which is written by in 2002. CEO K. Lay was impressed to Schilling that he gave the latter the position to run one of its divisions. No doubt Schilling is tough and innovative because of his major contribution to transform the company into one of America’s best performing corporations in history. But then, ethical standards seemed to slip in his consideration as he focused too much of growth and prosperity.
He instituted a harsh review committee for employees that made them taught that “performance measure was the amount of profits they could produce.” Since then, employee turnover rose as he (Schilling) hired the best employee in the business and replace the incapable to adopt and pass his policy. This is started the “darker tone in the internal culture of the company.” Further, Fasted, the man who handled the finances and financial records of the company, also displayed injurious decisions to the company by not disclosing its real financial standing. In addition, it is also discovered that Anderson, both external and internal auditor, was closely linked with the firm’s “internal accountants and controllers as they were his former executives.”
These aspects of unethical practices of the top managers of Enron caused the eventual fall of the company. There is no question of there actions and decisions as being unethical because they constitute unfair treatment to employees who are not “money-based” but cannot be judged as underperforming, to the company who is voluntarily accept their decisions in the hope of achieving its goal and finally, the society because they created fraud and hid transparency.
Ethical practices of a person definitely influence his decision-making for the company. Since the shareholders and even the CEO cannot monitor certain actions of its operational managers (especially in big and multi-national corporations), the latter is given freedom of choice and decision. With this, decision-making must take into account common good and not individual interests. Decision making is ethical if it is rational and able to weigh the benefits and costs of a certain action not only in the context of a company but also its “well-being, justice and sustainability” ( 2005) that will effect individuals, groups, government or even other nations It is an ethical decision if it quoted responsibility in it.
Factors to Consider in Business Partnerships
Culture of Standard
There are a number of positive corporate cultures this company has worthy of emulation of others. A United Kingdom market leader in its industry, it adheres to open communication where employees tend to show trust with each other under friendly relationship, especially with managers. Meetings are held informally to maintain freely flowing discussions regarding the operational issues. Although there are disagreements, it is focused on issues not in employee personalities. Further, its years in the business gave it pride and style. Because of this, it did not allow the parent company’s manufacturing division interfere and impede its potential. Such resistance resulted to the merger with the Homburg System.
On the contrary, on the darker side, the intention to merge was bind with the self-vested interests of its managers for managerial security and retain of power. Also, the informal setting in the subsidiary made performance policies futile because of complacency of employees with penalties. Poor performance was overlooked. The managerial opportunism and incentive bias in favor of seniority led other employees transfer to faster and clearer career path.
Culture of Homburg
A German-owed subsidiary had reflected some characteristics of its famous dictator. The business unit exercised closed- and one-way communication where employees wherein employees show formal and hierarchal approach to other its officers. Meetings are held formally and discourage point-of-views of other employees. Mechanical in nature, its advantage was prominent in its scientific approach to business with numerical and coordination prowess. There also existed the presence of handbooks and “requirements” to foster professionalism and accountability. Its unfamiliarity with the English market made it merge to the company. It had the tools and knowledge but not the market.
In addition, the merger concentrated in power-creation as observed on how its executives managed the newly formed company. Such manifestation is possible because it had experienced overseas operations but not in the United Kingdom. Because of its conservative view of standards, it did not need inefficient employees and terminated them to maintain efficiency. It tends to control employees and widen psychological distance between employees and officers. But unlike standard, performance is silent to bias by age or position.
Sources of Differences
Inappropriate Pre-Merger Planning Team
It is important to note that characteristics and the culture of the parent and the subsidiary are different. At the merger process and implementation, some subsidiary cultures run counter to the parent company. In the list, the parent company allowed its managers to be treated as inferior when Homburg discriminate their offices and the manner Homburg secretary’s converse to Standard’s managers. Originally, Standard System was proud, aggressive and active. This was likely the reason their company became the market leader. On the other hand, the involvement of German managers in the merged company brought mechanical and stricter procedures than with local managers.
The key people who will manage the merged company were not undergone settlement of differences because the pre-merger process was executed by inappropriate people at an abrupt moment. Because of this, Standard and Homburg's differences were not polished. Corporate staff representatives were not a reliable framework as basis for corporate culture either of the two units. Standard had an innovative and aggressive workforce while Homburg was adept with foreign experience and exposure. Distortion of the two corporate atmospheres resulted when Standard was represented by its executives and Homburg's by German managers.
Being a competitor in the same industry, there was existed different strengths and weaknesses, opportunities and threats for the two units. The problem was they were not able to tackle these because the pre-merger process was done by corporate staffs and executives not the units themselves. Even though pre-merger meetings and acquaintances developed harmonious relationship within the parent companies, unit managers of both companies did not. The result was to discover management differences upon implementation that created reasons for disbandment at management levels. Appropriate and involved people should have been encouraged to participate in the process. It should have been the time to create some bargaining agreement to settle disputes and differences as they were once fierce competitors.
Demanding but Weak Leadership
Standard was undoubtedly the more crucial unit between the two. It held the highest position in the merged company because of its market presence locally. It also carried a larger number of employees. But allowing two Homburg's managers to occupy the key positions, it gave them the power to manipulate the larger and more crucial Standard. This scenario resulted to rage of the hidden protests to express dismay in the dictatorial-type of management Homburg was doing. As the new company chairman from Standard remained deaf and busy with other tasks, differences continued to penetrate the new company causing the turn-over of Standard managers.
On the other hand, as Standard’s official slept at his office, the Managing Directors and Commercial Director started to propagate their management style that most Standard employees, especially managers saw to be unfit with their culture. No mitigation was done by ht chairman. His company that used to be the more superior because of bigger size and local leadership and knowledge of market, became a doll. As Standard unit was not used with the management style, they wanted to retain their dynamism and flexibility.
The management demanded compliance without hearing their side. Standard’s pride was neglected and likely not to accept it. The cultural conflict doubles as new procedure was implemented. Since they were not used to closed communication, exit was the easiest way to breathe out. The intention of the merger was not achieved, that is, to break the shackles of the mechanical approach to business of manufacturing division just like Homburg.
Communication Gap
The manner of how each unit exemplifies the features of communication was extremely different. Standard was used to open communication while the strict compliance of rules was adopted by Homburg. This resulted for Standard to resist the change Homburg was introducing. It was aggravated by the persistence of the latter in what the former believed to be the source of their competitive advantage for many years. Open communication stimulated employees creativity to launch effective marketing plan. Standard did not want to be included under its manufacturing division because of the independence it looses in maximizing market potential. As a result, they saw the merger as a mistake as it encompassed its biggest dictatorial nightmare.
Unmet Managerial Assumptions
Both subsidiaries had underlying expectation in the merger at the interest of individual rather corporate level. Managers of Standard were aiming to secure their posts even increase their managerial powers while Homburg was obviously had its own thirst for supremacy. The result was disappointment when failed to achieve. As Standard managers hated how the Managing Director and his Commercial Director operated the merged company, Homburg returned the despised to the former. The problem was unanswered because in the surface laid hindrance to achieve effectiveness and efficiency for the new company.
Employee Treatment Approach
Workforce between the two units has differences in treating their employees. Standard trusted their employees and treated them as a friend. By doing so, resistance was hardly to emerge. They were also not limited by strict and compulsory policies, unlike Homburg, that developed their flexibility as marketing agents. Consequently, they struggled under the different treatment Homburg managers implemented. They were not heard and the source of their competitive advantage, being independent and active, were gradually taken away from them. To retaliate, they resisted or just withdrew.
Conclusion
Wal-Mart is undoubtedly one of the most successful global companies not only in its industry but taken all industries at ones. However, its success is exposed to fast-phased environmental changes which can affect its corporate culture. The case of Enron showed that unethical standards that can affect culture should be avoided by the owners and managers. In this regard, the ten rules adhered by Wal-Mart owners should be kept in-tact. The case of Standard/ Homburg showed that its partnership with external entities should be planned and framed within Wal-Mart’s evaluation of its culture. Otherwise, integration difficulties will emerge and beneficiaries of marketing strategies will not full-appreciate marketing endeavors due to this incompatibilities. Corporate culture is the heart of success because it reflects how people think about their jobs and cooperate towards corporate goals. This is why Wal-Mart should guard its ethical consideration about its culture as well as partnership implications on it.
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