Walmart Compensation Philosophy

Evaluate the current compensation philosophy for your organization or an organization of your choosing (from a third-person perspective).

  • Evaluate the organization’s current compensation philosophy and propose ways to enhance or revamp the current compensation philosophy to meet the changing needs of the organization and its employees.
  • Examine key factors within the internal and external environment including the mission and strategic focus of the organization, as well as the financial and cultural aspects of your organization (i.e., they cannot have a compensation philosophy where they “lead” the market if the organization does not have the financial resources) that should influence this philosophy. The proposed philosophy itself should be no more than a short paragraph.
  • Identify the key factors that should contribute to the organization’s development based on your proposed organizational philosophy.
  • Remember to write from a third-person perspective. Do not include wording like “my company’s philosophy is …” Instead include wording like “XYZ Company Name’s philosophy is …” Remember to write about the company and the company’s philosophy; do not refer to you or your connection to the company.

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Walmart Compensation Philosophy

Compensation philosophy refers to a formal statement that documents a company’s position on employee compensation. It explains the reasoning behind how much employees are paid as well as creates a framework for consistency. Compensation philosophies are usually developed by the human resources department with the help of the executive team (Zacharuk & Doney, 2016). Some of the factors that determine compensation philosophy include the financial position of the company, the size of the firm, the industry that the company is in, business objectives, level of difficulty in finding competent employees, and market salary information (Ferguson & Reio, 2010). A company’s compensation philosophy should be reviewed and updated according to the changes in the factors affecting business (Ferguson & Reio, 2010). A well designed compensation philosophy will support the strategic plans of an organization, its competitive outlook, operating objectives as well as total reward strategies (Ferguson & Reio, 2010). Most compensation philosophies seek to identify the pay programs and reward strategies, acknowledge how the pay programs support the business strategy, attract employees to join the organization and motivate employees to perform at the best of their skill competencies.

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Current Compensation Philosophy of Walmart

The compensation philosophy of Walmart is based on the internal equity compensation approach. Internal equity based compensation consists of rewards and compensations being given to employees fairly according to the value of the job they do within the organization (Thompson, 2017). Walmart gives fair compensation to employees based on their performance and contribution in order to attract and retain skillful employees. As is advised for any compensation philosophy, Walmart conducts an annual review of the company’s management and employee performance so that relevant changes to the compensation philosophy are made. Some of the factors that Walmart puts into consideration when conducting reviews include level of skills, efforts of employees, responsibilities of employees as well as the working conditions of the employees (Thompson, 2017). Internal equity based compensation encourages the employees at Walmart to perform well and increase their contribution to the organization. Walmart also uses a competency based pay compensation philosophy approach whereby employee wages and salaries are dependent on skills, knowledge and behavior as opposed to the position that they hold. This approach based on competency is effective in addressing the needs of the organization and motivates employees at the same time.

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Factors that Influence Walmart’s Compensation Philosophy

While Walmart is dedicated to motivating employees and attracting highly skilled employees, there are other factors that influence the compensation philosophy at Walmart. The human resource management approach in employee compensation and career development is founded on the minimization of costs (Thompson, 2017). Walmart is committed to minimizing the compensation packages without compromising the performance of employees. The company has put in place career development strategies whose aim is to minimize turnover among employees by ensuring that there is maximization of the level of fit between the worker and their job positions (Thompson, 2017). The considerations by the human resource department at Walmart are important in making sure that employees are in a sufficient position to support the growth of the company.

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Improvements to the Compensation Philosophy

Walmart’s compensation strategy is most identifiable by the ‘low price, low wage’ policy. The low wages that are given to employees are often points of criticism on the management of the company. The current minimum hourly wage for employees at Walmart is significantly lower than that of the national average (Thompson, 2017). While the basic pay for minimum wage employees is relatively lower than that of other workers, the company provides other benefits for its employees. Some of the benefits include company-matched 401(k) contributions, some of which consist of up to 6% of salaries (Thompson, 2017). In addition to that, employees enjoy associate discounts, associate stock purchase plans with company match and health insurance plans that are comprehensive (Thompson, 2017). The listed benefits maintain motivation among employees, and they address some of the human resource goals of employee retention. Other ways through which Walmart motivates its employees is the use of incentives. For instance, the company gives special recognition to employees that perform exceptionally well. While benefits and incentives are recommended, Walmart should review its compensation philosophy in order to raise the wages given to employees. Doing so would make the company competitive in terms of human resources and dedicated staff.

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Conclusion

A compensation philosophy is an important part of a company’s strategy. The compensation philosophy should be aligned with the goals and objectives of the concerned firm. At the same time, a compensation philosophy should seek to motivate employees, retain employees and attract potentially skilled employees. In the case of Walmart, the main factor determining the company’s compensation philosophy seems to be the minimization of cost. The company is reputable for offering lower wages than the national average. Such a reputation is bound to jeopardize the firm because it does not motivate employees nor does it attract new staff. A recommendation on improving the compensation strategy at Walmart would be to base the philosophy on attracting and retaining employees.

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