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7.1 Do you think that Wal-Mart's low employee retention is a function of poor employment practices that the company would like to see improved, or is it a deliberate policy? 7.2 If it is deliberate policy what might be the reason? 7.3 Could it be determined by calculating the offset Wal-Mart savings in reducing eligibility for promotion, benefits and salary increases?

7.1 Do you think that Wal-Mart's low employee retention is a function of poor employment practices that the company would like to see improved, or is it a deliberate policy? 7.2 If it is deliberate policy what might be the reason? 7.3 Could it be determined by calculating the offset Wal-Mart savings in reducing eligibility for promotion, benefits and salary increases?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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3. CONTEXT In 2019 Wal-Mart employed over 1.7 million employees in the U.S. and, in its annual report, recorded an employee turnover rate of about sixty percent. Although Wal-Mart has since made some efforts to improve employee retention, the situation remains substantially unchanged and, more importantly, the underlying principle is still very pertinent. In fact, Amazon actually pays employees who have, (often legitimate) grievances to quit. 4. THE CASE Given the vast number of employees, enormous expense in terms of rehiring and training is to be expected. For purposes of this exercise we presume that employee training pay is above the federal minimum and, more or less the average of state minimums, or about $6.50. We estimate that training time is three and half work weeks of thirty-six and half hours. Since Wal-Mart has about 1.7 million employees, a 60% turnover means hiring and training about a million new people every year. In addition to the cost of the trainee we must add the cost of those doing the training. This would make annual training costs alone at Wal-Mart over a billion and a half dollars a year 5. CALCULATION THE HIGH COST OF LOW EMPLOYEE RETENTION: Wal-Mart in the United States* Category Imputation basis value 1,700,000 Total employees Turnover rate Total turnover 60% 1,020,000 time per hour 36.5 hours 3.5 weeks time per hour 40 hours 1.75 weeks Imputed hourly rate Average hrs/week Weeks to train Weekly per new employee Imputed starting base pay Just below minimum for benefit eligibility Based on experience of minimal need Weekly per experienced trainer Average wage as per annual report Maximum number before time & a half Based on half of new employee Total cost to Wal-Mart Imputed hourly rate Average hrs/week Weeks to train Total for trainees Total for trainers Page 1 of 2 Wal-Mart 2006annual report (rounded) Wal-Mart 2006annual report (rounded) Equals new employees each year Total turnover x total cost per trainee Total turnover x total cost per trainer Total $ values $6.50 $237 $830 $ values $10.25 $410 $718 $846,600,000 $732,360,000 $1,578,960,000 6. CONCLUSION If Wal-Mart was able to cut this turnover rate by about 10%, a very reasonable goal, this would result in a savings in excess of one hundred million dollars! 7. USE THESE QUESTIONS TO FRAME YOUR DISCUSSION BOARD COMMENTS 7.1 Do you think that Wal-Mart's low employee retention is a function of poor employment practices that the company would like to see improved, or is it a deliberate policy? 7.2 If it is deliberate policy what might be the reason? 7.3 Could it be determined by calculating the offset Wal-Mart savings in reducing eligibility for promotion, benefits and salary increases? 7.4 Is it possible that Wal-Mart has already made this calculation, but does not want the information to become public?
Transcribed Image Text:3. CONTEXT In 2019 Wal-Mart employed over 1.7 million employees in the U.S. and, in its annual report, recorded an employee turnover rate of about sixty percent. Although Wal-Mart has since made some efforts to improve employee retention, the situation remains substantially unchanged and, more importantly, the underlying principle is still very pertinent. In fact, Amazon actually pays employees who have, (often legitimate) grievances to quit. 4. THE CASE Given the vast number of employees, enormous expense in terms of rehiring and training is to be expected. For purposes of this exercise we presume that employee training pay is above the federal minimum and, more or less the average of state minimums, or about $6.50. We estimate that training time is three and half work weeks of thirty-six and half hours. Since Wal-Mart has about 1.7 million employees, a 60% turnover means hiring and training about a million new people every year. In addition to the cost of the trainee we must add the cost of those doing the training. This would make annual training costs alone at Wal-Mart over a billion and a half dollars a year 5. CALCULATION THE HIGH COST OF LOW EMPLOYEE RETENTION: Wal-Mart in the United States* Category Imputation basis value 1,700,000 Total employees Turnover rate Total turnover 60% 1,020,000 time per hour 36.5 hours 3.5 weeks time per hour 40 hours 1.75 weeks Imputed hourly rate Average hrs/week Weeks to train Weekly per new employee Imputed starting base pay Just below minimum for benefit eligibility Based on experience of minimal need Weekly per experienced trainer Average wage as per annual report Maximum number before time & a half Based on half of new employee Total cost to Wal-Mart Imputed hourly rate Average hrs/week Weeks to train Total for trainees Total for trainers Page 1 of 2 Wal-Mart 2006annual report (rounded) Wal-Mart 2006annual report (rounded) Equals new employees each year Total turnover x total cost per trainee Total turnover x total cost per trainer Total $ values $6.50 $237 $830 $ values $10.25 $410 $718 $846,600,000 $732,360,000 $1,578,960,000 6. CONCLUSION If Wal-Mart was able to cut this turnover rate by about 10%, a very reasonable goal, this would result in a savings in excess of one hundred million dollars! 7. USE THESE QUESTIONS TO FRAME YOUR DISCUSSION BOARD COMMENTS 7.1 Do you think that Wal-Mart's low employee retention is a function of poor employment practices that the company would like to see improved, or is it a deliberate policy? 7.2 If it is deliberate policy what might be the reason? 7.3 Could it be determined by calculating the offset Wal-Mart savings in reducing eligibility for promotion, benefits and salary increases? 7.4 Is it possible that Wal-Mart has already made this calculation, but does not want the information to become public?
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