Walmart and the next strategic battlefield: People

Walmart made huge headlines with the announcement that they will be raising wages for over a half-million associates. Walmart will be taking associate wages to a beginning wage of $9/hour starting in April, and rising to $10/hour in the future.

The reactions were strong, and of course, varied:
• Some feel that this was a political move, an inevitable response to the groundswell of minimum wage hikes that are occurring on a state by state basis as well as prolonged federal discussions that are occurring. This gets Walmart ahead, barely, of these legislative battles
• Some feel they didn’t go nearly far enough. There are drumbeats demanding a $15/hour minimum wage and Walmart is, of course, the epicenter of wage rate battles.
• And, of course, there are others who suggest that this move is not needed at all. Keep the minimum wage where it is and let the free markets determine wages.

This is a significant issue for the supermarket industry. Labor is the second largest line item in any retailer’s P&L and competition like Walmart has worked extraordinarily hard to keep all of their costs down to maintain a lower SG&A (and subsequent lower margins) than most supermarkets. Higher costs to Walmart could potentially narrow the pricing gap with supermarkets. Or, as many fear, simply raise everyone’s cost of doing business.

I want to take a slightly different tack with this discussion. Most retailers have considerably higher average wage rates than the minimum wage, either driven by market conditions, or, more critically, the role that they expect people to play in their organization. There is no secret that providing a great work environment for associates leads to a higher level of customer service. Progressive chains in the industry are using their people as a strategic advantage to deliver a superior shopping experience and drive higher efficiency through a motivated work force.

Better benefits. Better training. Better opportunities for advancement. A better work environment. And yes, higher wages are all part of the formula. A few months back, I blogged about running a business from the inside out and asked the questions:
• How can we possibly expect to have our associates take care of customers if we don’t take care of our associates?
• Are you paying as much attention to your people as you do to your customers?

With this latest announcement, Walmart definitely wins a PR battle. It will remain to be seen if they can also turn their people into a competitive advantage in the future. We’re convinced the next battleground will be People. Are you ready?

What are you doing to maintain an engaged workforce?