Tuesday, April 30, 2013

Wal-mart Employee Shortages

I don't shop at Wal-mart much, maybe twice a year, so have not noticed any problems with either stock outages or lack of help on the sales floor.  According to this article from Bloomberg, Wal-mart nationally has added 455 stores between 2008 and Jan 31 of this year.  During the same period, the company cut about 120,000 employees from company payroll.  The article doesn't say if this was due to employee attrition or termination.  However, this means that the company increased in size about 10% while cutting staff for the stores approximately 10%,  trying to cover more stores with fewer people.  there is only so much efficiency you can wring out of people before gaps in your operation start to appear.

The reason why Wal-mart, or any company, cuts payroll first is simple.  Payroll is the largest variable cost any employer has and the largest cost a business has direct control over.  If a company wants to reduce costs, the first place it typically looks is employees, as terminating one employee, leaving the others to pick up the slack, adds a whole year of wages to the company's bottom line.  Other costs, such as rent or mortgage, utilities, insurance, taxes, etc. are fixed and/or have to be paid for the business to keep operating.  Employee payrolls present a very large and tempting target for cost cutters, since the effect of removing an employee on profit is immediate while management can spread the increased workload over the remaining staff.  The problem occurs when you spread out so much additional workload that the remaining staff cannot handle it, which appears Wal-marts' problem

1 comment:

  1. I'm fairly sure that working at Walmart is a better job in Southern Illinois, then it is in Chicagoland. Not sure we can use local conditions about bad jobs, and understand Walmart's problems elsewhere.