Wal-Mart Stores Inc. is hoping its decision to boost workers' paychecks will help it boost its bottom line.
The nation's largest private employer announced on Thursday that it's giving a raise to about half-million U.S. workers as part of a $1 billion investment that includes changes that Wal-Mart says are aimed at giving workers more opportunities for advancement and more consistent schedules.
The changes come as the company has faced increased pressure to pay its hourly employees more. But Wal-Mart, which has been criticized for its messy stores and poor customer service, says it's also focusing on recruiting and retaining better workers so that it can improve its business.
The company has struggled with disappointing sales for most of the past two years, even though it posted better-than-expected results during the most recent holiday season. Wal-Mart hopes that taking better care of its workers will lead to better-run stores, more satisfied customers and an increase in sales and profits.
“What's driving us is we want to create a great store experience for customers and do that by investing in our own people,” Doug McMillon, Wal-Mart's CEO, told The Associated Press during an interview two days ahead of the wage announcement at the company's headquarters in Bentonville, Arkansas. “A better store experience results in happier customers, resulting in stronger sales.”
Wal-Mart's changes indicate that it is moving beyond relying on its hallmark everyday low prices to make it stand out in an increasingly crowded and competitive retail landscape and moving toward investing in its workers. The company had previously cut back on staffing in stores two years ago in an effort to be more efficient.
But the moves have backfired. Morale among workers was hurt at stores, employees weren't able to quickly restock items on shelves and shoppers came to expect unkempt stores. Wal-Mart's U.S. business, which accounts for 60 percent of its annual net sales of $482 billion, had declines or little growth for eight straight quarters before the latest holiday period. And an annual survey by the American Customer Satisfaction Index, which polled 70,000 customers, found that Wal-Mart's customer satisfaction fell to the lowest level since 2007.
“The stores are understaffed,” said Anthony Rodriguez, who has been pulled to do different jobs from being a bike assembler to sales floor associate at the Wal-Mart Rosemead, California, because of low staffing. “Often, there is nobody in a department. A lot of customers get upset.”
McMillon, whose first job at Wal-Mart was an hourly position loading trucks during college, acknowledged that some measures the company took to cut staff and other moves to increase productivity may have gone “too far.” But he says Wal-Mart has learned from its mistakes.
“We want to make it really clear that working at Wal-Mart is a great opportunity,” he said. “Time will tell what the significance of the decisions will be.”
In focusing on investing in workers, Wal-Mart follows other big retailers that have announced plans to increase pay recently as the national debate over raising the federal minimum wage has reached a crescendo. Swedish home furnishings retailer Ikea this year gave thousands of workers at its U.S. division a 17 percent average raise to $10.76 an hour. And clothing chain Gap Inc. raised its minimum hourly wage to $9 last year and to $10 this year.
But Wal-Mart's changes are likely to have a bigger impact because it employs 1.3 million U.S. workers. Among the changes, Wal-Mart is raising entry level wages to at least $9 an hour in April and to at least $10 an hour by February of next year. That includes the less than 6,000 workers who make the federal minimum wage.
With the changes, the average full-time wage at Wal-Mart stores will be $13 an hour, up from $12.85. For part-time workers, the hourly wage will be $10, up from $9.48.
That's below the $14.65 average that hourly retail workers in a non-supervisory role earn, according to government data that includes people who work at auto dealers and other outlets that would likely pay more than discounters like Wal-Mart. But it's above the $9.93 average hourly pay for cashiers and low level retail sales staff, according to Hay Group's survey of 140 retailers with annual sales of $500 million.
In addition to raises, Wal-Mart is also doing things like offering hands-on training for new workers in areas including teamwork, merchandising, retail fundamentals and communications. It's also rolling out a program that offers some workers fixed schedules so they can be able to choose the same hours each week. The program is being tested in Wichita, Kansas.
Some industry watchers say that Wal-Mart's move to treat workers better will lead to sales growth. “There's a nice connection to highly satisfied customers and happy employees,” said David VanAmburg, managing director of the American Customer Satisfaction Index. “Employees who are better paid and treated better by management tend to go the extra mile for the customer.”
But some employees are less optimistic about what the moves will do for morale.
Rodriguez, the California Wal-Mart employee who has participated in protests at Wal-Mart, says he's happy to get a bump up from $9.40 to $10 an hour next year. He's also encouraged about the new training. But the 26-year old says the money isn't enough to support his fiancée and 2-year old son.
Emily Wells, a leader of OUR Walmart, a union-backed group of Wal-Mart workers that has been pressing the discounter to start its hourly wages at $15 and increase hours, agrees.
She said she's pleased that the company is addressing issues about pay and erratic scheduling, but Wells, who makes $9.50 an hour and is scheduled to work only 26 hours per week, said the plan comes up short.
“Wal-Mart can afford to provide the good jobs that Americans need – and that means $15 an hour, full-time, consistent hours and respect for our hard work,” she said.