OM in the News: Wal-Mart Tries to Skill Up
Wal-Mart, famous for keeping costs down (including employee-related costs), is testing a new approach: investing in workers through higher wages and training, on the theory that this will pay off all around—for customers, the company and employees. The firm plans to roll out the new training program to all of its 4,500 U.S. stores by early 2016. And by then, Wal-Mart hires will earn at least $10 an hour.
Wal-Mart isn’t alone in its new focus on training front-line workers, reports The Wall Street Journal (Sept.5-6, 2015). The trend, known as “upskilling,” is rippling across the retail and service industries. McDonald’s, Starbucks, Gap, CVS Health, Kaiser Permanente, and UPS are moving in the same direction. It’s a big change, even for companies with a reputation for taking care of employees. Many firms train college-educated workers and managers, but few focus on front-line workers.
Employee turnover costs money— $5,000 per front-line worker, or 20-30% of an entry-level salary. Standard turnover in retail is 50% in the first 6 months. If Wal-Mart can reduce this churn, persuading people to stay at least 12-18 months, it will save tens of millions of dollars a year. Wal-Mart also hopes that the new training will result in better customer service and happier shoppers.
Front-line employees—cashiers, cart pushers and sales associates—will now spend their first months in a supervised on-the-job training program. In the past, they sat through a few days of orientation and safety drills. The only real job training happened in the store—knowledge passed on by more experienced employees. The new program, called “Pathways,” delivers instruction in gamelike computer modules—each just 2-3-minutes long. New employees spend their first six months practicing what they’ve learned from the games and drills, watched over closely by managers and preparing for a “gateway” assessment that can earn them a dollar-an-hour raise and sometimes more.
Classroom discussion questions:
- What are the advantages of these training programs?
- Why has it taken so long to see such changes?