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UC2F1101 IBM Individual assignment on ODEC 2011

Wal-Mart‟s Logo (Walmart,2001)

Intoduction

Wal-mart was formed in 1962 in United States of America. The first Wal-Mart discount store
was opened in Rogers, Ark. The company broadened its business to 276 stores in 11 states by the
end of 10 years time. They became an international company in 1991 by opening their Sam‟s
Club near Mexico City.

The CEO of Wal-Mart Stores is Mike Duke (Wal-Mart annual report, 2011).

Mariyam Ulya Asim/TP021480/ University College of Technology and Innovation. Page 1


Wal-Mart‟s global mission statement. (Wal-Mart annual report, 2011).

Wal-Mart’s Objectives.

To work with CEO of Wal-Mart US, Bill Simon and his team to achieve
positive comparable store sales.
To find tremendous opportunity to grow in US through supercenters and new
formats, such as Wal-Mart ExpressTM in urban and rural markets.
To attract new members through improved member experiences.
To recruit, develop, and retain future leaders is important to Wal-Mart success
and give importance for women leaders.
To expand into new markets through web presence where Wal-Mart does not
have physical appearance.

Objectives taken from CEO’s statement (Wal-Mart annual report, 2011)



They provide their services to customers 200 million times per week among 9667 retail units
situated in 28 different countries. The company employee‟s 2.1 million associates around the
world.

(Walmart,2001)

The company introduced their online store Walmart.com in 2000 where customers could reach
products easily in a more convenient manner. More than 1,000,000 products are available in
Warlmart.com and they provide special offers during holidays (Wal-Mart,2001).

(Walmart.com, 2011)



Wal-Mart is a famous company among world that has been using Management by Objectives
system-MBO for the past years until now (Flood& Flood,2000). The company‟s success always
had depended on the way the management handles the new challenging problems that arise in the
business world. The company top level managers and employees have been following to achieve
set goals which are finalized to reach for the success of the organization. Hence, the assignment
would be continued on a description of management by objective system with relating on how
Wal-Mart Company arranges their working system focusing on it. Moreover it would also look
into some advantages and disadvantages of this system.



SWOT Analysis of Wal-Mart.

Wal-mart Strengths Wal-mart Weakness
• Customer oriented • No formal mission statement
• SAM’S Club customers able to buy in • Membership only for SAM’S Club
bulk • Keep poor performing employees on
• Supercenters offer one stop shopping hand
• Satisfaction guaranteed programs • Old fashioned store policies
promoting customer goodwill • Few women and minorities in top
• Buy from local merchants when possible management
• Stock ownership and profit-sharing with
employees
• Leads industry in information
technology
• Ongoing development of its employees
• Strong community involvement

SWOT Analysis

Wal-Mart Opportunities Wal-Mart Threats
• Consumers want ease of shopping
• Internet shopping growing • Regulation of Wal-Mart pharmacies
• Dollar value increasing • Small towns do not want entry of
• Similar shopping patterns worldwide Wal-Mart
• Retail sales expected to increase • Bad media exposure for Kathie Lee
• Environment conscious consumers Brand
• Elderly population growing • Variety of competition
• Asian market virtually untapped by retail nationally, regionally and locally
• European Market untapped by retail • Substitute products more easily
because of intense competition

Source taken from (SooperTutorials,2011).



As stated by DuBrin (2008, p.136), „Management by objectives (MBO) is a systematic
application of goal setting and planning to help individuals and firms to be more productive‟. It
is a system where in which the organizations leading managers set the key objectives that need to
be achieve and those objectives are focused when setting individual goals, so that a noteworthy
result would come which leads to success of the organization (DuBrin, 2008). According to
Koontz & Weihrich (2006, p.90), „Management by objectives is a comprehensive managerial
system that integrates many managerial activities in a systematic manner that is consciously
direct towards the effective and efficient achievement of organizational and individual
objectives‟. It is known that management by objectives is a widely used system in the world.
However, still there is no fixed definition for it. There are various ways in which people define
this system. People see it as a motivational technique, some think it is an appraisal tool and
others refer to it as controlling device. Prior to this it is known that this system is defined and
applied in various ways (Koontz & Weihrich, 2006).

Management by objectives consists of four main processes which are known to be establishing
goals, participation of employees in goal setting, creation of plans to achieve objectives and
performance feedback (McMillan,2011). The first process starts when the top management set
clear goals and objectives which are regarded to the mission and vision of the organization. The
middle managers then work with lower level managers to set different departmental goals. The
lower managers or unit managers share this with employees to set individual goals. These goals
are focused to complete the mission and vision. In order to enhance the goals to be effective
SMART acronym is used to set goals. Where „S‟ indicates specific, „M‟ indicates measurable,
„A‟ indicates agreed/achievable, „R‟ indicates realistic and „T‟ indicates time related (Mind
Tools,2011).
Specific

Measurable

Achievable

Realistic

Time Framed.



Sometimes the goals are not that clearly set that we are not sure when it is achieved. Therefore,
Goals need to be specific which means it has to be clearly defined and understood so that the
employees would be able to make sure when it is achieved. Measurable means that the goals
must contain the amount needed to be achieved. For example for a store they need to specify the
percentage they want to target for sales. The company should target for goals that they are
capable enough to achieve. It is very important that the goals we set should be realistic which
means before we set we must make sure whether we have enough energy or talent that is needed
to achieve the goal. In other words the company must be a bit honest while in setting up the
objectives or goals. The last one is the time frame given to the goal to be achieved. It acts as a
motivating factor so that the people would try to achieve the result within the time given time
limit (Richmond, 2011).In such a way, Wal-Mart has been setting their objectives for the past
years which made them successful around the world. Their objectives do follow these
characteristics that they are being able to achieve those in the time limit given.

(Wal-Mart annual report, 2011)

The second process is employees participation in the decision making process. This is the
process where employees and managers work together so that they clearly set the work to be
done in a much effective and efficient manner. Thus making the employees feel satisfied and
they feel they are being valued to share views within the decisions made to the future progress of
the company. Wal-Mart gives importance to participate their employees in the meetings to share
their views. In fact, the company does have „open-door policy‟ where employees can share their



view and suggestions to the managers (Wal-Mart, 2011).The founder of the Wal-Mart Sam
Walton said, „It‟s more important than ever that we develop leaders who are servants, who listen
to their partners-their associates-in a way that creates wonderful morale to help the whole team
accomplish an overall goal‟ (Wal-Mart,2011).

Suzan Chambers Executive Vice President chatting to associates right before a meeting
(Wal-mart,2001).

The next process is implementing plans which mean the objectives and set goals are changed
into action. The departmental manager‟s assign employees the task to complete which are
aligned to the organizational objectives. This includes the necessary resources being provided to
perform the task. Thus a time limit given to perform the task so that the goal set would not go for
a waste ( Rahman, 2009).In Wal-Mart even they does the same thing and their managers had
proved that their plans are worth enough. Cathy day a pharmacy manager of Wal-Mart proved
that her plan of action worked best to reach their goal. The pharmacy employees wore pins with
the saying, „Why wait an hour someplace else?‟ Through this phrase being focused their team
worked serving for customers which improved customer service to an excellent level. Thus
increasing the sales by nearly 300% and build customer loyalty too (Wal-Mart, 2001).



The last process is where the employees are given feedback for their performance. They
feedback time would be set to an agreed time period which means for example at the year ending
period. If the feedback is good it would be based on the efficient work, time, and energy given
by the employee to achieve the goal or objective. If the feedback is not good and objective and
set goal is not achieved as planned then managers and group member would sit and find out the
reason and what was the thing that cause the result like this. They would analyze the case and set
new clear objectives to be attained within a given time period. Through this process the
employees are being informed about their own progress and what else they need to achieve
(DuBrin, 2008). Company Wal-Mart also follows the process and it has been shown very clearly
that they provide the employees with required training specifically designed to the particular area
which the employee works in and also there goal is to provide way for employees to improve
their ability through giving them the opportunity to gain knowledge from various training
programs. Wal-Mart Company make note of that developing their employees is the key
advantage they gain for the improvement of the service given from the organization (Wal-
Mart,2011).



Advantages of using MBO system.

No matter which system a company uses they gain some advantages and disadvantages from it.
Likewise, Management by objectives also gives some advantages to companies. The system
provides a very fair way of evaluating the performance of employees. As everyone is given their
individual goal set with time limit provided to achieve and that particular employee‟s
performance would be judged for the actual completion of goal. Through this the employees in
that organization would feel satisfied for the way them being judged and find that all of them are
treated in the same manner (Archer North,2010).Therefore for a company like Wal-Mart
handling a diversified group of employees gain this benefit by using the MBO system.

Another benefit is that the system itself forces to bring out clear objectives which make the
participation and ideas from all levels of the organization. Moreover, all the staffs starting from
higher to lower management would have a broader knowledge of what to be focused on and
achieved (Hahn, 2007). In addition, the high employee involvement makes the employees to be
satisfied and committed to the organization. They are happy that they are being involved in
decision making to the organization which they feel their work being valued.

“We are a stronger team when we include different perspectives and ideas at every
level and across all areas of our company.”
– Mike Duke, President and CEO, Wal-Mart- (Wal-Mart diversity and inclusion report, 2011).



Prior to this, the discussions that are held to set goals would enhance better communication and
understanding between the managers and employees. Thus, making the employer and employee
relationship better and which make them much easier to solve problems that arise in the working
environment (Rahman, 2009).Many huge companies such as Wal-Mart could gain many
advantages from the management by objectives system. Wal-mart Company that consists more
than 2 million employees worldwide (Wal-Mart,2011), would find this system beneficial for
them in order to maintain the employee satisfaction and commitment.

Mike Duke, President and Chief Executive Officer chatting with associates (Wal-Mart
annual report,2011).



Mostly it also helps the whole organization to have a clear understanding of what is required
from them. Moreover, this system encourages the organizations output in a way that everything
goes in an organized manner to bring out good revenue for the year. Wal-Mart gains profit by
following the MBO system.

(Wal-Mart Annual report, 2009)



Disadvantages of using MBO system

However, Management by objectives system makes company to face some disadvantages as
well. It makes the whole organization to be more focused in achieving the goals and objectives
which sometime makes them to lack behind other important issues unfocused. For example the
objective to be focused can be to „In FY12 we reduce cost to 2% to 4%‟, and to achieve this
company might lack behind the maintenance work. Managers being human beings they make
mistakes while evaluating the performance in a favored manner. This could be a common issue
that could be seen from the system. There might be a chance where the managers who evaluate
employee performance are not well trained and they just do it without paying much attention as
they are not fully motivated by giving knowledge about the system. This whole problem can lead
to low satisfaction level among the employees and may result failure at the end (Hahn,2007).As
Wal-Mart being a big successful company they need to focus on minimizing such issues in their
system in order to remain competitive and to gain customer loyalty. There might come times
when managers fail to give enough knowledge about the philosophy of Management by
Objectives. In this case it would lead to a failure of the system as it involves high level of
employee involvement. While in the process employee‟s performance is being evaluated, they
must know what is required by them and what are the benefits gained from such a system. The
failure in these steps would not bring the best outcome from the system to the
organization.(Koontz & Weihrich, 2006). Sometimes managers set goal and objectives that are
too high which makes employees demotivated which may affect the whole work of organization
(Hahn,2007). Likewise, there are situations where managers fail to be flexible enough in goal
setting and in performance judgment process which makes employees to progress to the work
slower. Thus, management sometimes hesitates to give rewards or promotion to the achievement
of goals (McMillan,2011).These common issues should be focused by the management of such
companies like Wal-Mart as they follow MBO process.



Conclusion

To conclude, I would like to say that management by objective is an effective system to be used
which could bring out various benefits to the organization. However, those companies who use
the system must focus to those issues which may lead to conflict and try as much to minimize
those issues.



References

Archer North, 2010. Results Method: Management by Objectives (MBO). [online] Available at:
http://www.performance-appraisal.com/results.htm [Accessed 18thAugust 2011]

ArticlesGratuits.com, 2007. Management by Objectives. [online] Available at:
http://en.articlesgratuits.com/article.php?id_article=1443 [Accessed 20th August 2011]

Career-intelligence.com, 2011. Setting SMART Goals: A better way to track your progress.
[online] Available at: http://www.career-intelligence.com/management/SmartGoals.asp [Accessed
15th August 2011]

Daffodil International University Forum, 2009. Management by Objectives. [online] Available
at: http://forum.daffodilvarsity.edu.bd/index.php?topic=305.0#top [Accessed 16th August 2011]

DuBrin, A. J., 2008. Essentials of Management. [e-book] Cengage learning. Available at:
http://books.google.com/books?id=dNThzoekGQcC&printsec=frontcover#v=onepage&q&f=false
[Accessed 17th August 2011]

Flood, P. & Flood, P.C., 2000. Managing strategy implementation: an organizational behavior
perspective. [e-book] Wiley-Blackwell. Available at:
http://books.google.com.my/books?id=4xe2ZmFpSrgC&pg=PA33&lpg=PA33&dq=walmart+uses+mbo&s
ource=bl&ots=24OVq_2MgZ&sig=DoCJwEcW8G3qp3NO4ZOeBzTADPc&hl=en&ei=y61OTvmWCYvxrQfG
0-GZAw&sa=X&oi [Accessed 15th August 2011]

Koontz, H. & Weihrich, H.,2006. Essentials of Management: an international perspective.
Available at:
http://books.google.com/books?id=OSAkMZ3SMQ0C&pg=PA90&dq=management+by+objectives+exam
ples&hl=en&ei=omY6Tvy4HM-
qrAef6JAh&sa=X&oi=book_result&ct=result&resnum=#v=onepage&q=management%20by%20objective
s%20examples&f=false [Accessed 15th August 2011]



Mind Tools, 2011. Management by objectives (MBO): motivating people by aligning their
objectives with the goals of the organization. [online] Available at:
http://www.mindtools.com/pages/article/newTMM_94.htm [Accessed 14th August 2011]

Reference for business, 2011. Management Styles. [online] Available at:
http://www.referenceforbusiness.com/management/Log-Mar/Management-Styles.html [Accessed
14th August 2011]

SooperTutorials, 2011. Wal-Mart Swot Analysis. [online] Available at:
http://www.soopertutorials.com/business/strategic-management/1846-wal-mart-swot-analysis.html

Walmartstores.com, 2001. Walmartstores.com. [online] Available at: http://walmartstores.com/

Wal-Mart-Sustainability Progress to Date 2007-2008, 2011. Wal-Mart-Sustainability Progress to
Date 2007-2008. [Online] Available at:
http://walmartstores.com/sites/sustainabilityreport/2007/index.html [Accessed 17th August 2011]

Walmart, 2001.Annual report 2011. [Online] Available at:
http://walmartstores.com/sites/AnnualReport/2011/financials/Walmart_2011_Annual_Report.pdf

Walmart,2001.Annual report 2009. [Online] Available at:
http://walmartstores.com/Search/?q=employee%20satisfaction&t=a&p=1&s=r&fd=a&fa=p [Accessed
16th August 2011]

Walmart,2001.Diversity and inclusion report 2011.[Online] Available at:

http://walmartstores.com/Search/?q=diversity%20and%20inclusion%20at%20walmart&t=a&p=1&s=r&f
d=a&fa=p [Accessed 17th August 2011]


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