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People Problems at Wal-Mart. Sam’s/Wal-Mart vs. Costco. Refresher Quiz: Profit = xxx – yyy Revenue – Costs Lowering costs leads to _____ Higher profit. Labor “Cost” or “Investment”. Sam’s Club/WM Costco Avg. Wage $10.11/hr $17/hr Health Ins. 46% covered 85%
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Sam’s/Wal-Mart vs. Costco • Refresher Quiz: Profit = xxx – yyy • Revenue – Costs • Lowering costs leads to _____ • Higher profit
Labor “Cost” or “Investment” Sam’s Club/WM Costco • Avg. Wage $10.11/hr $17/hr • Health Ins. 46% covered 85% • Health Ins. 67% prem. Paid 92% • HI Cost. $3500 $5735 • Retirement 64% covered 91% • Retirement $747 $1330 • Union 0% 13% • Labor Costs 42% of operating costs 70%
Labor “Cost” or “Investment” • Net Result?? Sam’s Club/WM Costco • Profit/Employee $7,804 $15,890 • Turnover 44% 17% • Shrinkage (Theft) 1.0% sales 0.2% • Productivity $525 sales/ft2 $886 • Wal-Mart’s “Missing” Profit = $16,980,600,000
Labor “Cost” or “Investment” Wal-Mart vs. Costco Stock Price
Wal-Mart’s Message to Managers DANGEROUS SAFE VALUABLE Your job is to cut costs A little lower Lower You should cut labor costs The biggest cost you control is labor Your job is to help us make money We make money by cutting costs
Lowering Labor Costs • Pressure may lead to illegal activities • 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
In the news… • June 3, 2010 New York Times • June 20, 2011
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
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
The Cost of Turnover? • SAS
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
Some companies get it. • Fortune’s Best Companies to Work For
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