1. People Problems at Wal-Mart Perception that HR does not add value Lack of investment in HR HR doesn’t produce value

2. Sam’s/Wal-Mart vs. Costco Refresher Quiz: Profit = xxx – yyy – Revenue – Costs Lowering costs leads to _____ – Higher profit

3. Labor “Cost” or “Investment” Sam’s Club/WMCostco Avg. Wage$10.11/hr$17/hr Health Ins.46% covered85% Health Ins.67% prem. Paid92% – HI Cost.$3500$5735 Retirement64% covered91% Retirement$747$1330 Union0%13% Labor Costs 42% of operating costs 70%

4. Wal-Mart Profit

5. Labor “Cost” or “Investment” Net Result?? Sam’s Club/WMCostco Profit/Employee$7,804 $15,890 Turnover44%17% Shrinkage (Theft)1.0% sales0.2% Productivity$525 sales/ft 2 $886 Wal-Mart’s “Missing” Profit = $16,980,600,000

6. Wal-Mart vs. Costco Stock Price Labor “Cost” or “Investment”

7. DANGEROUS SAFE VALUABLE Wal-Mart’s Message to Managers We make money by cutting costs Your job is to help us make money Your job is to cut costs The biggest cost you control is labor You should cut labor costs A little lower Lower

8. Lowering Labor Costs Pressure may lead to illegal activities – Wage & Hour lawsuits Wage & Hour lawsuits – 12/05 Ordered to pay $172 million for failing to provide meal breaks to 116,000 CA workers – Fined repeatedly for violating child labor laws – Largest class action case in history for sex discrimination

9. Gender-Based Pay Disparities Job% of Women in jobs Male Salaries Female Salaries Difference in Salaries Reg. Vice Pres.10%$419,400$279,800$139,600 District Mgr10 239,500 177,10062,400 Store Mgr14 105,700 89,30016,400 Assistant Mgr36 39,800 37,3002,500 Mgmt. Trainee41 23,200 22,400800 Dept. Head78 23,500 21,7001,800 Sales Associate68 16,500 15,1001,400 Cashier93 14,500 13,800700

10. Were Women as a Group Less Qualified for Management ?

11. “Women don’t want to be managers”

12. In the news… June 3, 2010 New York Times June 20, 2011

13. DANGEROUS SAFE VALUABLE

14. Competitive Advantage Something that allows one company to successfully compete against its competitors. – Valuable: Does it increase revenue or decrease costs? – Rare: Is it unique to this company? – Not easily imitated or substituted: Is it difficult to copy? Example: Wal-Mart’s size

15. The Cost of Turnover Turnover Costs (1.5 – 2.5 x salary) Separation Costs –Exit interviews, administrative functions, separation pay, unemployment tax Replacement Costs –Advertising, selection function, staff meetings, travel/moving expenses Training Costs –Formal/informal training, performance differences

16. The Cost of Turnover? SAS SAS 2% T/OSAS 20% T/O # of employees 6,000 Avg. Salary $60,000 Avg. Replacement Cost $90,000 Turnover1201,200 T/O Cost$10.8M$108M Savings$97.2M

17. Savings from low absenteeism SAS (6,000 employees) National Average Absenteeism = 5 days/yr X 6,000 = 30,000 days/year X $240/day = $7.2 Million SAS Absenteeism = <2 days/yr X 6,000 = 12,000 days/year X $240/day = $2.88 Million Savings of $4.32 Million

18. Some companies get it. Fortune’s Best Companies to Work For

19. Competitive Advantage Something that allows one company to successfully compete against its competitors. – Valuable: Does it increase revenue or decrease costs? – Rare: Is it unique to this company? – Not easily imitated or substituted: Is it difficult to copy? Example: HR Function at SAS