Business performance management essay

A successful business must strike a balance between being productive, satisfying consumer requirements, following trends, and remaining competitive (Drucker, 2009; Doyle, 2009; Porter, 2008). The productivity, efficiency, and dependability of the production are key factors in the company's capacity to compete and perform well. Sam Walton established the business in July of 1962 under the name Walmart. Wal-Mart is a worldwide chain of superstores, discount stores and groceries majored in selling electronics, movies, home and office furniture, supplies, fitness equipment among many other products and services (Walton, 2013). This brings us to the fact that the company should conduct maintenance, conclusive evaluation and performance measurement of the production, labour, administrative, finances and the external environment represented by the customers, competition and the changing political and socio-economic factors (Kiridena and Singh, 2008). This paper aims at assessing the performance of Wal-Mart as a company. It is believed that one of the company’s faults and reasons for lower productivity and customer satisfactions lies greatly on the performance measurement systems and company’s management strategies. This paper looks into the systems of performance management and how the management can bump up the company’s productivity; meet the changing needs of the customers and adding value to their market and beat the competition on their turf through close monitoring of company’s performance, value stream

Introduction

There is a great belief that drives the cooperate world which includes the fact that companies are obligated to satisfy the customer and make huge profit while doing so. However there seems to be a great conflict in these two concepts. A company working to increase profitability would among other factors downsize and attempt to change the input suppliers in order to be profitable but for a short time. This ends up compromising the customer satisfaction (Porter, 2008). If at all the company focuses on satisfying the customer, they would then end up compromising the productivity in the long run. A successful company has to find the balance between being productive, meeting the customer’s needs, keeping up with the trend and being competitive (Drucker, 2009; Doyle, 2009; Porter, 2008).

Company’s Objectives

• Productivity
• Competitive
• Customer satisfaction
• Sustainability

In the current global corporate scene, competition is increasingly becoming one of the stakeholder’s demands. Therefore companies have to come out to create superior and better products than their competitors. Competitiveness and high performance of the company is reliant on the productivity or efficiency and reliability of the production (Porter, 2008).

This brings us to the fact that the company should conduct maintenance, conclusive evaluation and performance measurement of the production, labour, administrative, finances and the external environment represented by the customers, competition and the changing political and socio-economic factors (Kiridena and Singh, 2008). This paper aims at assessing the performance of Wal-Mart as a company. It is believed that one of the Wal-Mart’s faults and reasons for lower productivity and customer satisfactions lies greatly on the lack of performance measurement systems, new strategies implementation and company’s management strategies. This paper also looks into the systems of performance management and how the management can bump up the company’s productivity and meet the changing needs of the customers and add value to their market so as beat the competition on their turf through close monitoring of company’s performance, value stream assessment and customer and employee satisfaction.

Wal-Mart Stores Inc., profile

The company was founded in the July of 1962 as Walmart by Sam Walton. Wal-Mart is a worldwide chain of superstores, discount stores and groceries majored in selling electronics, movies, home and office furniture, supplies, fitness equipment among many other products and services (Walton, 2013). The company is one of the world’s largest companies by revenue measured at US$480 billion. Wal-Mart is also one of the world’s biggest private employers with over 2.3 million employees including more than 1.3 million employees who are resident in the US. Most Wal-Mart customers have cited that one of the main reasons for shopping at Wal-Mart is the low price quotes compared to other retail stores. The company’s slogan is “saving people money so that they can live better lives” (Blumenthal, 2011). In the recent months Wal-Mart has experienced low profitability as a result of investing in the online and other operational strategies.

Company Productivity

One of the main benefits of conducting regular value stream assessment is monitor the company’s effectiveness and efficiencies. This explains how the company uses the resources it has at its disposal to satisfy the needs of the customer. This assessment contains how the company’s activities can add value to the customer (Blumenthal, 2011).

Value Chain assessment evaluates the company’s objectives and the delivery of the company in being flexible so as to meet the company’s goals. Value stream assessment has no particular area of influence in business and in particular Wal-Mart, the recommendations offered by the assessment is meant to guide the organization’s managerial, operational, social (human resources and customer satisfaction) and technological (this also includes innovation and research and design) (Gunasekaran, Lai and Cheng, 2008).

Figure Example of the Wal-Mart’s Value Stream Map

Wal-Mart’s stores all over the world and have both international and domestic suppliers (procurement department) who supply products to the national distribution warehouses who then distribute the products and services to the retail stores around the various countries where Wal-Mart is based (Walton, 2013). Other departments that are important in the organisation include the communication and technology, administration, finance, maintenance and human resource management departments (Crain and Abraham, 2008, p.32).

Performance improvement and alignment to Value Stream Mapping

Wal-Mart has cut its profit greatly in the last financial quarter of 2016, according to the Investor’s business daily. This is in spite of the super retail store having had a noted increase in the sales department. The global retail giant has been heavily invested in introducing better technology so as to improve the operations and introducing the company’s online platform in competition with its chief competitor Amazon who have been slowly taking over the online retail business (Graham, 2016). This is as a result of lack of balancing of the future plans with the present.

The table above explains as a result of introduction of technology the company’s production and cost valuation of the operation seems to comparatively rapid business productivity. The activity effect is the measurement of the change in Wal-Mart’s profits in sales volume due to introduction of the retailing technology. Some of the retailing technology that has been introduced includes implementation of drones carrying products across the warehouse, improved bar code scanner among other technology implementations.

Wal-Mart’s retail discount chain group is rated at 190 out of 197 in the Investor’s Business Daily records (Graham, 2016). Even as much as the company has been able to maintain low retail prices due to increased efficiency in operations. This has turned on the heat on the competitors in the retail business. The company is also faced with pressure to provide better working environments. Wal-Mart has an obligation to not only meet the demands and needs of the customers but also to make better the lives of the employers (Crain and Abraham, 2008; Graham, 2016).

Wal-Mart ought to be aligned to the company’s flow of value and make reforms on the company’s support departments so as to ensure that the company’s core activities which include provision of retail services to the market, management of the marketing and sales department and the logistics are run efficiently.

People and Employee Engagement

According to the IBD’s report, Wal-Mart has been experiencing intense competition and exceeding pressure from the employees regarding their wages (Graham, 2016). Kompaso and Sridevi (2010) report that most employees fail in performing their duties as they are subjected to mismanagement. Companies should learn to invest in their employees as they are core in achieving the organization’s goals. The report draws from other related studies and states that employee engagement is linked to the customer satisfaction and the overall company’s performance. The employee engagement includes involving the employees to major company decision making meetings, meeting the needs and demands of the employees through an effective communication system, training the employees and creation of a rewarding system for the top employees (Kompaso and Sridevi, 2010; Andrew and Sofian, 2011).

Management practices of Wal-Mart Stores Inc.

Management is crucial to the organization as it helps to meet the organization’s objectives and maintaining profitability. Good management practices generally involve the driving of a company to achieve the company’s vision and evaluation of the company’s performance. Evaluation of the company’s performance or as commonly referred to as controlling business operations is making sure that all the operations, finances and human resource activities are conducted in an order that will profit the company (Lambert, 2008). Other researches on the management practices have considered the Wal-Mart’s management practices as traditional; the Sam’s model of management. Wal-Mart has remained profitable by maintaining low and affordable prices and merchandising of products that are customer’s preferences (Andrew and Sofian, 2011).

This traditional management practices are described by the company’s asocial interactions with their employees. Another observation that characterises the organization’s traditional management practices is the employment of inexperienced and cheap labourers who do not contribute to the innovative practices and business models. It has been suggested that the Wal-Mart should refigure itself whole management functioning by changing the business model. Companies such as Amazon who are Wal-Mart’s greatest competitors have an online presence that cannot be matched to Wal-Mart. To this effect, Wal-Mart has been engaging in progressive and 21st century management practices which include the recent raising of the employee’s work rate payment (Wheelen and Hunger, 2011; Kiridena and Singh, 2008; Drucker, 2009).

Operations management

Operations refers to all the activities that the company involves itself in. Wal-Mart has vowed in the same light to give the ordinary people commodities that the wealthy have only at an affordable price (Blumenthal, 2011). The company has also been able to maintain a competitive advantage by increasing efficiency in production of retail services. This includes introducing efficient operations from procuring to the payment for goods made by the customer.

In the new era of improving Wal-Mart’s operations by rebranding and maintaining quality provision of goods and services. Wal-Mart is recognized in the field as being very cost-effective which has enabled them to maintain selling products and services at lower prices compared to other retail stores over the years since it was began (Niemeier, Zocchi and Catena, 2013).

The company has reputation of having continuous recruitments due to a ridiculously high turnover due to low hourly rate wages. This is one of the disadvantages of the cost-effective traditional business model. However over the recent past, the company has been involved in trying to cut the rate of turnover by increasing the employees’ wages, giving them better job descriptions and offering staff training seminars to improve the service provision by the employees (Bianco, 2009).

Wal-Mart has of late intensified the use of technology in the supply chain. This has been to increase efficiency and cut down expenses. The flow of information has been modernised and the normal communication from one warehouse to another has been improved increasing efficiency of communication in the company as well. Maintaining inventories and company logistics have been as well modernised to ensure that the firm used cost efficient effort and increase the business performance in operations (Ross, 2013).

Maturity Model

Wal-Mart Stores Inc. has managed to remain relevant from the sixties. The company’s slogan of maintaining the customer satisfaction and being efficient in operations have kept the company alive and going even when other companies in the industry were failing. The CEO, Doug McMillon made a comment that the company values and is greatly motivated by the customer feedback which is as a result of investing in the company’s systems and innovation. This statement was made after the company had invested heavily in innovation and systems improvement. This was followed by a great setback in the company’s profitability (Drucker, 2009).

Nevertheless, Wal-Mart and Kmart have demonstrated great levels of competition during the 1990’s. Capabilities-based competition, details being efficient and consistent in producing product quality, following accurately the customer’s feedback and the changing customer preferences and needs, finding of new markets to venture in, remodelling and innovation of the business models to fit in the changing tides of time (Ruffa, 2008; Drucker, 2009). The improvisation of the capabilities-based competition model has caused Wal-Mart to grow exponentially by 25 per cent annually. Wal-Mart became the highest profit making discount retailing company per square foot (Sehgal, 2010).

Interventions for improvement of company’s performance

Systems Approach

The system approach to performance measurement has the tools to bring transparency to the objectives and means of different participants in the production process of a company. It is the identification of key performance indicators along the input, output and outcome indicators which ensures efficiency and the effectiveness of the company’s activities as well as covering the accountability to the customers and other external stake holders. The system measurement or benchmarking allows the company to evaluate objectively whether changes are to be implemented where necessary or not. The results of the assessment can help as an input for organizing the system’s changes or improvement. It can also be used as a forward mechanism to predict trends, anticipate needed changes and fore-tell future environments as narrated in (Zairi, 2012).

Systems approach appreciates all the systems that make up the success of the company and incorporates them to ensure that they are uniform in bringing the profitability to the company sustainably. The systems approach helps the management to recognise that the company is heavily reliant and connected to the environment and they have an obligation to give back to the environment. The system approach brings the company closer to gaining customer approval (Esty and Winston, 2009).

Figure showing the interaction between the environment and Wal-Mart

Strategic leadership that supports feedback

Strategic leadership models help to create and maintain an atmosphere of open communication, information sharing, trust, and integrity (Schein, 2010). Employee involvement is another system performance measurement that develops a spirit of cooperation within the company and takes into account the collective creative contribution of each employee.

Process improvement is another approach also which consists of the efficiency and the effectiveness of the company’s management and processes that influence the customer’s quality of services and products. Customer focus in the model, deals with gaining a better knowledge of customer’s requirements and using this understanding to providing satisfactory product and services (Cook, 2008).

Wal-Mart needs to engage in performance measurement systems and employee engagement in order to understand the causes and obstacles that the employees are facing in the business (Cook, 2008). Unless the management gets to the cause of problems, the problems will continue to fester. The first step in this process is identifying the most critical obstacle. Once enough information is gathered about the root-cause and where the performance issues are, then the process of analysing the cause of the problems can follow. This process can help in the problem-solving procedure in Wal-Mart.

From the extreme ups and downs of the Wal-Mart’s financial markets over the past decade, senior directors and investors are redesigning the systems that they use to assess the company’s performance. This can be done by constructing a comprehensive performance analysis team that measures the long-term and short-term value outcomes and sets goals and milestones that will help them to improve. This also helps the management to balance the short-term and long-term creation of value for the customers. The board members and investors can help determine whether the policies put in place and the company’s price is on target or may derail the company’s progress.

Conclusion

For sustainable growth in the company, and management of the company’s profitability the company should engage the company employees more. The employees are the social construct of the company and they determine the growth of the company. A well-motivated employee force will ensure efficiency and objective meeting. Wal-Mart has to make plans to be more effective in management and value stream mapping and planning. They should also get involved in the setting of SMART goals and communicate effectively to stakeholders and understand the value and purpose of every business process. Planning, ensuring the on-going process, gathering the information and documentation are some basics in performance measurement of a company. The use of a revised capabilities-based model, and systems approach model might seem complicated but in the end a rewarding process. The measurement of the business performance is important so as to ensure that the company is meeting set short term and long-term goals (Kaplan, and Norton, 2008).

References

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