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High Performance Organizations

High-Performance Organizations: The Wal-Mart Stores Inc. Case Study


Grace S. Thomson
August 2009

Electronic copy available at: http://ssrn.com/abstract=1624245

High Performance Organizations

High-Performance Organizations: The Wal-Mart Stores Inc. Case Study


Organizational effectiveness is the goal of organizations competing in the changing
landscape of global business (Colquitt, LePine, Wesson, 2009). While profitability sustains a
firm financially, the well-being of the human capital of the organization is equally important to
ensure competitiveness (Carpenter & Sanders, 2008). Collins (2001) posited that effective
strategic leaders are those with the capabilities to drive the transformations of the firm into new
and profitable models. Firms that are able to transition from good to great companies (Collins,
2001) have leaders who demonstrate to be (1) capable individuals, (2) contributing team
members, (3) competent managers, (4) effective leaders, and (5) humble executives. According
to Blanchard (2006) leaders in high performing organizations prioritized the triple-bottom line of
being the provider of choice, the employer of choice, and the investment of choice (in Watson,
2007, p. 46). Leaders in high-performance organizations strive to keep their customers,
employees, and investors satisfied, emphasizing that people are always first (Schermerhorn,
Hunt, & Osborn, 2008, p. 22). This study will address the components of the culture and
organizational behavior of Wal-Mart Stores, Inc. in the U.S. to determine if the characteristics of
the firm qualify it as a high-performance organization.
Background
Organizations in the 21st century face rapid changes in the external business environment
that impact the operation of the internal environment (Blanchard, 2006). The demands made by
informed customers, highly-skilled workers, regulators, social activists, and shareholders
increase the pressures on firms to deliver excellent results while satisfying the diverse needs of
these stakeholders (Watson, 2007; Schermerhorn et al., 2004). An understanding of
organizational behavior is necessary to decipher the needs of the individuals and groups within

Electronic copy available at: http://ssrn.com/abstract=1624245

High Performance Organizations

the organization, and in order to exercise more effective communication, decision-making


processes, and leadership.
Robbins and Judge (2008) stated that organizations with strong cultures influence
employee behavior, reducing turnover and maintaining a high level of job satisfaction in the
workplace. However, strong cultures misled by unethical leaders may result in a bad reputation
for the firm (Carpenter & Sanders, 2008), as confirmed by the Enron and WorldCom scandals of
the early 2000s. Single-minded and overachiever overdrive are common denominators behind
unethical leadership behaviors (Spreier, Fontaine, & Malloy, 2006, p.2).
One of the major topics in the discipline of Organizational Behavior is the study of high
performance organizations (HPO) (Schermerhorn et al., 2004). HPOs strive to get the best in
people as a means to achieve sustainable high performance results. Leaders, who put people first
when setting the organizational goals, inspire their workforce to pursue profitability while
meeting the expectations of all the stakeholders (McClelland & Burnham, 2003). According to
Schermerhorn et al. (2004) high-performance organizations are characterized by five
components (p. 23): (1) employee involvement, (2) self-directing work teams, (3) integrated
production technologies, (4) organizational learning, and (5) total quality management.
Strategic leaders must attend to these pieces with equal intensity. If one of them is left out, the
organization will not be a true high-performance organization (HPO).
Wal-Mart Stores, Inc. is the worlds largest retailer, positioned number one in the Fortune
500 list (Wal-Mart, 2008a) with more than $374.53 billion in sales worldwide, and a net income
of $12.9 billion in fiscal year 2008 (Wal-Mart, 2009a). Founded in 1962, Wal-Mart is currently
the largest U.S. employer with 1.4 million workers (Wal-Mart, 2008) and 600,000 worldwide.
According to Beer (2001) Wal-Mart is an exemplary high-performance organization that has

High Performance Organizations


redefined the way retail business is done in the U.S. The importance of Wal-Mart in the
economic activity of the U.S. is undeniable, and consequently its performance is used to
exemplify how successful firms operate. However, contradicting opinions about the business
practices of Wal-Mart have emerged, weakening the qualities of superior performance. Hart
(2007) discussed evidence presented in the Dukes v Wal-Mart case about alleged gender
discrimination in the company, and union representatives of the United Food and Commercial
Workers (UFCW) constantly attack Wal-Mart for what they claim represents a threat to market
capitalism (United Food and Commercial Workers, 2009).
While strong arguments exist about the Wal-Mart effect (Fishman, 2006, p. 7) that
destroys competitors, lowers wages for the industrys workforce, and changes communities
worldwide, other scholars have given Wal-Mart the benefit of the doubt (Ghemawat, 2006)
expecting that the firm commits to both be right, and seem right (p.43). According to
Ghemawat (2006) a large number of arguments against Wal-Mart are biased and exaggerated,
and objective studies about the firm emerge as necessary. All in all, what seems indisputable is
the influence that Wal-Mart has on the U.S. society, both on the consumers side and the labors
side. Consequently, the objective study of Wal-Marts culture and business practices will shed
light on the conceptualization of this firm as a true high-performance organization (HPO).
Problem Statement
The general problem addressed in this study is that despite the recognition that the
competitive environment of the 21st century requires firms to be aggressive and adaptive to
external changes (Carpenter & Sanders, 2008), firms struggle to balance the demands of all
stakeholders expecting high performance and social responsibility (Watson, 2006). Some firms
categorized as successful and profitable in the past (e.g. Enron, WorldCom) failed the society at

High Performance Organizations

relying on an overdrive towards profits that disregarded ethics and peoples well-being.
Organizational behavior scholars argued for firms to behave as High Performance Organizations
(HPOs), putting people first as a condition to sustain their competitiveness (Schermerhorn et al.,
2004). Research on firms that are deemed successful in becoming High-Performance
Organizations (HPOs) (Beer, 2001) would contribute to the literature about organizational
change and organizational behavior. Hence, Wal-Mart was chosen as object of analysis in this
case study.
The specific problem is that organizations like Wal-Mart, recognized for a low-cost
strategy that benefits millions of customers (Beer, 2001; Ghemawat, 2006; Thomson, 2007), deal
with claims of unfair practices towards employees, competitors, and suppliers (Dube, Lester, &
Eidlin, 2007; Hart, 2007). These arguments, both pro and con, concerning Wal-Marts business
practices raise doubts about a plain categorization of this firm as an HPO. Furthermore, despite
the extensive scholarly and non-scholarly literature about Wal-Mart, little research exists that
examines Wal-Mart using a theoretical framework for HPOs.
This qualitative case study will explore the characteristics of organizational behavior and
business practices, as well as financial performance outcomes of Wal-Mart to interpret these
elements under the framework of the Five components of high performance organizations by
Schermerhorn, Hunt, and Osborn (2004). This analysis will allow for an understanding of how
Wal-Mart has approached its transition to High-Performance Organization (HPO), and if its
business practices and organizational behavior conform to a sustainable high performance. The
findings of this qualitative research will provide corporate leaders and scholars with valuable
input regarding key elements of successful HPOs in the U.S.

High Performance Organizations

Purpose of the Study


The purpose of this qualitative case study is to explore the characteristics of
organizational behavior, business practices, and financial performance of Wal-Mart Stores Inc.,
using content analysis, to identify the common themes that may lead to categorize the firm as a
High Performance Organization (HPO). Schermerhorn, Hunt and Osborn (2004) defined HPOs
using five components: employee involvement, self-directing work teams, total quality
management, organizational learning, and integrated production technology. This study will
examine business practices that could fit in the definition of HPO for Wal-Mart Store Inc.
Data about organizational behavior and business practices will be collected from WalMarts corporate website, scholarly journals, and specialized financial publications. Data about
financial performance will be extracted from Wal-Marts annual reports, financial analysis
databases (e.g. Mergent Online, Yahoo Finances) and SEC filings. Additionally,
communications and statements issued by top executives of Wal-Mart to shareholders and the
public will be analyzed. These data will be triangulated to provide a comprehensive snapshot of
Wal-Marts culture, practices, and performance. Qualitative case studies are appropriate when
the researcher seeks an in-depth understanding of a phenomenon (Creswell, 2008). This case
study will describe and interpret manifest and tacit elements of the business practice,
organizational behavior and financial performance of Wal-Mart within a model of High
Performance Organizations (Schermerhorn et al. 2004).
Significance of the Study
The significance of this qualitative case study about Wal-Mart Stores Inc. resides in the
analysis of the traits that characterize the operation, organizational behavior, and performance of
Wal-Mart Stores, Inc., to explain if it reflects the components of High Performance

High Performance Organizations

Organizations. This study will add to the scholarly literature in organizational behavior,
organizational culture, and strategic leadership, because it provides a theoretical approach to the
description of Wal-Mart as an HPO.
In the field of leadership, this research study makes important contributions in the
identification of characteristics of strategic leadership that have led Wal-Mart to be recognized as
a successful global organization, based upon the five components of HPOs proposed by
Schermerhorn et al (2004). Moreover, the study seeks to demonstrate how Wal-Mart has faced
the challenges that are associated with an organizational change derived from becoming an HPO
(Schein, 1997). The findings of this case study will provide corporate leaders and scholars with
knowledge about business practices that might be applicable in their organizations and fields of
research, respectively.
Nature of the Study
This qualitative case study explored data gathered from public documentation available
on Wal-Mart Stores Inc, statements of the top executives of the firm, and audited financial
statements for the past five years. All the sources used in this study are secondary and are
publicly accessible through Wal-Marts corporate website, annual reports to Wal-Marts
shareholders, statements of the CEO in the media, SEC filings, scholarly journal articles, website
of the United Food and Commercial Workers (UFCW), and financial analysis databases such as
Mergent Online.
The qualitative case study design was selected for this research as it allows the researcher
to explore the characteristics of organizational behavior, business practices, and financial
performance of Wal-Mart Stores Inc., with intensity and thoroughness (Schermerhorn et al.,
2004). The data will be analyzed using content analysis of the materials collected from public

High Performance Organizations

sources to identify the common themes and accomplish the goals of the research, which are to
identify characteristics that may appear to categorize Wal-Mart Stores Inc. as a High
Performance Organization (HPO). Most studies on Wal-Mart relate to its strengths as a major
retailer in the U.S. and others, less favorable, depict this organization as a threat to American
capitalism. Studies that provide an in-depth analysis of Wal-Marts characteristics using a
conceptual framework for HPOs are non-existing.
Research Questions
The significance of the economic impact of Wal-Mart in the U.S. society and the
countries where it operates (Dube et al., 2007) appears to be blurred by contradicting opinions
about Wal-Marts corporate practices, culture, and contributions to the society (Beer, 2001;
Fishman, 2006; Ghemawat, 2006; Kaliprasad, 2007). To shed light in this debate, the following
research question was formulated to guide the research case study: What, if any, business
practices, organizational behavior, and financial performance of Wal-Mart Stores Inc. are
indicative of a High Performance Organization (HPO)? This study will provide a significant
contribution to the literature in organizational behavior, culture, and strategic leadership, through
the identification of Wal-Mart Stores Incs characteristics and their fit into one or more of the
five components of the HPO model (Schermerhorn et al., 2004).
Conceptual or Theoretical Framework
Globalization has opened the borders to competition, and domestic firms face the
challenges and opportunities of new competitors, new suppliers, and foreign workforces.
Multinational corporations such as Wal-Mart are present in 13 countries (Wal-Mart, 2008a)
employing more than 600,000 people. Advances in technologies increase the speed of
information and the capacity of response of businesses but also increase the risks of technology

High Performance Organizations

and cyber attacks (Goodman & Ramer, 2007). E-commerce and e-business have transformed
brick-and-mortar enterprises into more dynamic businesses, and has created a new breed of
entities (i.e. dot.coms) requiring new skills and competencies (Schermerhorn et al., 2004).
Organizations are pressured to deliver high performance results to respond to customer
expectations, a changing workforce, and the changes in the organization itself (e.g. downsizing,
reengineering) (Schermerhorn, et al., 2004). Beer (2001) defined a set of four roles for managers
and leadership teams in the organization to complete the HPO transformation process (p. 244246): (1) create a compelling and balanced organizational development direction, (2) manage
expectations about financial performance, (3) involve unit managers in leading change and
encourage learning from that experience, and (4) promote self-reflection at the top management
level.
Brown, Reich, and Stern (1993) conducted a research on employees of five U.S.
companies to examine the experience of the workforce in the transition to a Security-employee
involvement-training model (SET). The findings showed varied indexes of security, with
employees in two of the firms scoring low given the recent lay-off experiences in those sites. The
indexes of employee involvement also varied with the type of firm. In firms with high technical
orientation, workers scored higher in problem solving; in firms with customer service
orientation, teamwork scored even higher. Firms with influence in managerial decisions scored
higher in the sub-index of involvement, as well. Firms that had formal and informal training
scored higher in the Training Index.
Schermerhorn et al (2004) argued that high performance organizations (HPOs) thrive in
environments where customer expectations and workforce are changing. HPOs emphasize the
development of intellectual capital (p. 22). High performance organizations are characterized by

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involving their employees, empowering them to work in self-directed teams, promoting


organizational learning, supporting total quality management, and integrating production
technologies. Blanchard (2006) posited that HPOs are known for their capacity of response,
flexibility and nimbleness (p. 4). Servant leadership is the engine that makes the transition
possible, defining a vision, and constructing a visionary culture that will outlive the leader
(Blanchard, 2006).
Research on High Performance Organizations is relatively less abundant than research on
organizational culture or leadership topics. A quick search in an electronic database such as
EBSCOhost about these three terms yielded interesting results. When High-Performance
Organization(s) was used as the title keyword, a total of 81 documents were listed between
1984 and 2008; only 59 of them were peer-reviewed. The number of studies on leadership
exceeded 47,400 between 1923 and 2009, with only 22,900 peer-reviewed. The query for
research on organizational culture resulted in 1332 studies between 1973 and 2009, with 1,153 of
them peer-reviewed. This brief analysis provides an initial idea of the valuable contribution of
this case study to the literature on HPOs.
Definitions
High-performance organization (HPO). Organizations with the ability to respond to the
demands of the market by strengthening internal capabilities and putting people first
(Schermerhorn et al., 2004). High performance organizations are characterized for a nurturing,
supportive, and positive work environment (Kaliprasad, 2007).
Strategic leadership. Referred as the role of managers who oversee the entire
organization and make decisions that impact the overall performance, competitiveness,
innovation, strategic changes, and survival (Carpenter & Sanders, 2008).

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Organizational Culture. Schein (1989) defined this term as the shared set of values that
the members of an organization hold as basic assumptions, distinguishing the firm from others.
Organizational effectiveness. This concept comprises the achievement of financial goals
and the level of quality of work life of the members of the organization (Schermerhorn et al.,
2004).
The Wal-Mart Effect. A coined definition by Fishman (2006) to refer to the impact of
Wal-Mart on wages and cost reduction generated directly and indirectly on competitors and
suppliers of new markets where Wal-Mart accesses.
Assumptions
This qualitative case study will be conducted under the assumption that the publicly
available secondary data about Wal-Mart Stores Inc, that will be used to describe, analyze, and
evaluate the characteristics of this organization, are true representations of the business practices,
organizational behavior, and financial performance of the organization. The financial statements
and annual reports used in the analysis of financial performance are assumed to be accurate and
prepared based on the regulations of the SEC and other pertinent official institutions.
Scope, limitations, and delimitations
This research is limited to the analysis of public information about Wal-Mart Stores Inc
in the United States, available through public secondary sources. Wal-Mart was selected as
object of this study because of its recognized economic relevance in the U.S. market as one of
the major retailers and top employers in the nation. Data for this study is limited to the business
practices, organizational behavior, and financial figures disclosed in the annual reports and
communications published by Wal-Mart in its corporate website. Journal articles, SEC filings,

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specialized industry reports and other expert analysis of Wal-Mart will also be collected for this
study, and their validity is limited to the reliability of the authors and sources.
The study is delimited by the information that Wal-Mart has made available in the last
five years about its corporate practices, organizational behavior, and financial performance.
Additional information deemed relevant to illustrate the characteristics of High Performance
Organizations (HPOs) of this firm will be included. Most data will relate to the activities of the
firm in the past five years, but when necessary the analysis will also include references to
previous years, specifically when describing the profile of Wal-Marts founder.
Summary
This qualitative case study will describe and analyze the corporate practices,
organizational behavior, and financial performance of Wal-Mart Stores, Inc. in order to identify
whether they conform to the components of High Performance Organizations (HPOs). The
findings of this study will seek to identify the characteristics of Wal-Mart Stores Inc that best
resemble the five components of HPOs as defined by Schermerhorn et al (2004). According to
Kaliprasad (2007) high performance organizations are known for providing a supportive
environment to their workforce, so that they can develop their capabilities at full potential and
contribute to the performance of the firm. Ghemawat (2006) contended that Wal-Mart made
significant contributions to the economic activity of the U.S., and to the welfare of the general
population.
Although Wal-Mart has been exemplified as a High Performance Organization (Beer,
2001), little research has been done to provide a theoretical framework of analysis of these
claims. Chapter 1 provided a rationale for the selection of Wal-Mart as the case study of this
research. Chapter 2 will provide a literature review that will address organizational behavior

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theories in relationship with High-performance organizations (HPO), alternate models to


conceptualize HPO, components of HPOs, and the aspects of organizational effectiveness and
culture associated with HPOs.
Chapter 2 Literature Review
Chapter 1 addressed the shift that organizations in the 21st century have been forced to
make to respond to the rapidly-changing external environment. Successful organizations are
transforming their internal processes, and paying attention to the needs of their workforce and
transitioning to High Performance Organizations (HPOs). Chapter 2 will present a review of the
literature related to Organizational Behavior, using a chronological approach that depicts the
evolution of this discipline. This section will also include research on various models that
explain the components of High Performance Organizations, and the aspects of organizational
culture and organizational performance associated with HPOs.
Documentation
For the purposes of this qualitative research study, data will be strictly collected from
secondary sources publicly available on the Worldwide Web. Information about the business
practices, organizational behavior, and financial performance of Wal-Mart Stores Inc., for the
past five years will be the basis of this study. The literature review about the conceptualization of
High Performance Organizations was retrieved from the University of Phoenix Library online,
using EBSCOHost, ProQuest and other available databases. Information from textbooks will also
be included as well as Harvard Business Review articles that are formally non-peer reviewed.
Literature Review on Organizational Behavior
Organizational Behavior (OB) is a discipline of management that studies how individuals
and groups behave in the organization (Schermerhorn, Hunt, & Osborn, 2004). Colquitt, LePine,

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and Wesson (2009) defined it as a field of study devoted to understanding, explaining, and
ultimately improving the attitudes and behaviors of individuals and groups in organizations (p.
5). Robbins and Judge (2008) added the structure component into the study of OB and explicitly
indicated that the knowledge about individual and group behavior must be used to improve
organizational effectiveness.
The evolution of organizational behavior as a discipline goes back to the early 1920s,
with the classical views about division of labor and tight mechanisms of control (Bowditch &
Buono, 2003). In the 1930s the neoclassical school of management refocused the interest of
theorists toward human relations and the social person (Bowditch & Buono, 2003). The theories
of Maslow Hierarchy of needs theory, McGregors Theory X and Y of motivation (1960, in
Robbins & Judge, 2009), and the two-factor theory of Herzberg (1959, in Robbins & Judge,
2009) and Barnards (1937, in Scott, 2003) theories of motivation were the most important
contributions of this era. Despite the emphasis on the individual, the consideration of
environmental forces was still missing.
In the 1960s, the modern school of management emerged and focused on systems theory,
contingency theory, and organizational behavior theory missing in previous eras (Bowditch &
Buono, 2003). Shifts in the economic activity from production-based to service-based firms
highlighted the importance of information systems and technology. Lawrence and Lorsch (1967)
were precursors of the contingency theory of organizations that described the relationships
between the internal and external environment of the firm. The study of organizational behavior
as a discipline and organizational design as a concept emerged as important ideas in this school.
Information systems were introduced as part of organizational design, to reduce the internal
uncertainty of tasks or processes, and to assist decision-makers with adequate data for strategic

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leadership (Galbraith, 1974). In addition to the consideration of open systems, and organizational
design, modern theorists emphasized situational or contingent leadership (Bowditch & Buono,
2003).
Paradigm Shift in Organizational Behavior
A paradigm shift of organizational behavior started in the 1980s with economic and
organizational processes that gradually changed the speed of business (Colquitt, LePine, &
Wesson, 2009). Schermerhorn et al (2004) posited that organizations in the 21st century face
challenges of a new era, characterized by rapid change, at times frustrating and disorienting.
High employee mobility, outsourcing, and contingent workers impact the way the workplace
operates (Bowditch & Buono, 2003). The understanding of organizational behavior becomes
more essential than ever before to meet the needs of the workforce (Schermerhorn et al., 2004).
Robbins and Judge (2008) discussed the challenges that organizations must undertake to
respond to globalization from the employee perspective, by increasing the firms ability to
manage a flexible and diverse workforce, improving people skills, and encouraging innovation
and change. From the customer perspective, organizations are urged to improve quality,
productivity and customer service, goals that need the participation of employees as executors
and as planners of those changes (Bowditch & Buono, 2003).
Literature Review about High-Performance Organizations
The changes in the global environment, the emergence of new technologies, and the
shifts in the profile and preferences of the workforce is pressuring organizations to become more
competitive in order to survive. High Performance Organizations (HPOs) are a new type of
organization designed purposefully with the goal of realizing the potential of their people to
create organizational capabilities that result in sustainable high performance outcomes

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(Schermerhorn et al., 2004). Buytendijk (2006) conceptualized HPOs as firms that are attentive
to the market, retain their best people and are highly responsive to the external environment.
Kaliprasad defined HPOs as organizations that remain responsive to the marketplace
expectations, while also sustaining the behavior required to meet these expectations (p. 31).
Kaliprasad (2007) expanded the concept of HPOs to high performance cultures, designed to
achieve business excellence.
The Security-Employee Involvement-Training (SET) Model
Early research on high performance organizations denoted the formulation of the SET
system (Brown, Reich, & Stern, 1993) that stands for Security, Employee Involvement, and
Training. According to Brown et al, (1993) these three elements interact and reinforce each
other: Job security reinforces the involvement of employees, as they feel confident that their
contributions to the organization will maintain them in their jobs. Similarly, employment security
strengthens the willingness of the firm to invest in training, while employee involvement is
enhanced by the interest of the firm in developing the employees competencies. The major
critiques to SET relate to its inadaptability to new technologies, the demise of union power, the
increased stress imposed on employees, and the reduction of salaries in high-paid workers
(Brown et al., 1993, p. 248). Brown et al (1993) found that the economic environment affects the
security element of the model, when firms must resort to laying-off employees, or close plants
given a macroeconomic crisis. In a positive economic environment, the SET system works well
because employees reciprocate job security with loyalty, productivity, and involvement.
Buytenkijks Model of Five HPO Characteristics
Buytendijk (2006) conducted a case study to identify the common traits in HPOs using a
corporate performance management approach (CPM). The findings of the study showed that

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firms shared five characteristics: (1) Clear mission and ambitious targets, (2) Shared values
internally and externally (3) Impeccable execution, (4) agility and (5) Common business model
across the organization. The business model of the HPO must be communicated throughout the
organization. Data about performance indicators must be shared with middle managers and
employees to enable a common understanding of the strategy.
Buytendkijk (2006) suggested four ways to improve the agility of a firm (p. 29): (1)
centralization of processes, data, and systems by the IT division, (2) smart-sourcing or
standardizing product components to respond with new product developments in no time; (3)
channel mastering in operating just-in time inventory (e.g. Wal-mart); and, (4) Project-based
management that creates teams without the rigidity of the organizational structure. The
effectiveness of centralization will depend on the firm. For some, centralization kills creativity,
for others, it facilitates response.
Blanchard HPO SCORES model
Blanchard defined HPOs as enterprises that produce outstanding results with the highest
level of human satisfaction (p. 4). Six elements were identified by Blanchard in the HPO
SCORES model (p. 4): (1) shared information and open communication, (2) compelling vision,
(3) ongoing learning, (4) relentless focus on consumer results, (5) energizing systems and
structures, and (6) shared power and high involvement. This model is about leadership infusing
energy, excitement, and heightened sense of purpose in the organization, as well as promoting
organizational learning, empowerment, value, and respect (Blanchard, 2006).
Kaliprasads Sustainable High Performance Culture Model
According to Kaliprasad (2007), the creation of a HPO is based on five success factors
(p. 31): (1) perception of the marketplace by senior leaders, (2) shared mission, vision, values,

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and strategies, (3) leadership practices, (4) employees attitudes and behaviors, and (5) enabling
infrastructure. This model operates in a sequence from components 1 through 4, while
component 5 (infrastructure) supports the other four; altogether comprising the organizational
culture. The firm receives signals from the marketplace and responds to those signals by using its
internal capabilities. The end-result is customer loyalty, and business performance (Kaliprasad,
2006, p. 31). Kaliprasad (2007) recommended to evaluate the performance gaps between each
pair of components of the model: Gap 1, between the perception of leaders and the reality of the
marketplace; gap 2, between the perception of senior leaders and the vision and mission of the
organization; gap 3, between the mission and vision statements and the leadership practices; gap
4, between leadership practices and employee behavior; and gap 5, incompatibility between
infrastructure and the four behaviors that sustain high performance (p. 32).
Schermerhorn, Hunt, and Osborns Model of High Performance Organizations
Schermerhorn et al (2004) defined High Performance Organizations as firms with a
design of responsiveness to the external environment, founded in the realization of peoples
competencies. According to Robbins and Judge (2008) firms must be ready to deal with the
unpredictability of the environment and be willing to become networked organizations, while
nurturing a work environment that is oriented towards a positive organizational behavior (p. 25).
Positive organizational behavior is a new concept that focuses on developing positive thoughts
and perceptions about the organization on the employee (Roberts, Dutton, Spreitzer, Heaphy &
Quinn, 2005). In this context, HPOs appear better equipped to generate positive behaviors from
their workforce.
The overarching concept in the construction of HPOs is the emphasis in intellectual
capital (Schermerhorn et al., 2004). Ulrich (1998) defined intellectual capital as the

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commitment and competence of workers that is embedded in how each employee thinks about
and does work and in how an organization creates policies and systems go get work done (p.
15). Schermerhorn et al (2004) defined intellectual capital as the sum total of knowledge,
expertise, and dedication of an organizations workforce (p. 22).
Components of High Performance Organizations
Schermerhorn et al (2004) proposed a simplified model to operationalize the HPO
concept into five components: (1) employee involvement, (2) self-directing work teams, (3)
integrated production technologies, (4) organizational learning, and (5) total quality
management. Figure 1 illustrates the components of the model.
Employee
involvement

Total Quality
Management
High
Performing
Organization

Selfdirecting

Organizational
Learning

Integrated
Production
Technology

Intellectual Capital

Figure 1. Schermerhorn, Hunt, and Osborn (2004) Five Component Model of HPOs
Employee involvement. The involvement of employees in decision-making processes was
discussed by Brown et al (1993) in the seminal SET model. Schermerhorn et al (2004) expands
the concept and proposes to view it as a continuum of involvement, reflected in low, moderate
and high involvement. Low involved employees simply do their job as instructed; moderately-

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involved employees participate in quality circles, task forces, and suggestion boxes; highlyinvolved employees are empowered with decision-making responsibilities on a daily basis. Highinvolvement work systems are positively associated with higher employee satisfaction and cost
reduction (Scotti, Behson, Farias, Petzel, Neumam, Keashly, & Harmon, 2003)
Self-directing work teams. These workgroups are responsible of making decisions related
to planning, execution and evaluation (Schermerhorn et al., 2004). HPOs strive to integrate the
work of teams seamlessly, to help them complete their tasks, and respond to the customer
demands. Self-directing work teams affect team competence positively compared to regular
teams (Kauffeld, 2006). Goodman, Devadas, and Hugson (in Schermerhorn, et al., 2004) found
strong effects in employee satisfaction and commitment, and moderate effects on performance.
Integrated Production Technologies. The adequate job design and the use of information
systems to facilitate the integration of the manufacturing and service processes are key elements
in HPOs. The use of technology to monitor just-in-time inventories, and the use of computers for
design, service, control, and integration of the business functions is critical to provide agile
response (Schermerhorn et al., 2004). The operation of JIT systems will require firms to change
the flow of information to be timely, simple, and adaptive to changes (Eker & Pala, 2008).
Organizational learning. Organizations that integrate information into their systems and
processes and use it to respond to future situations promote organizational learning. Like
Buytendkijk (2006), Kaplan and Norton (2008) emphasized the existence of a double loop of
management, where the corporate strategy is reflected in indicators defined by top management
(first-loop of management). Any changes in the organization strategy resulting from changes in
the environment represent the second loop of management and are documented in a Balance
Scorecard (Kaplan & Norton, 2008). Organizational learning takes place when the firm identifies

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21

the changes and responds to them after analyzing and questioning them. Operational and
strategic meetings are conducted to brief managers about the execution of the strategy make
correctives where necessary (Kaplan & Norton, 2008).
Total quality management. Firms committed to respond to customer expectations in this
era of strong competition must be cognizant of the need to offer high-quality products and
services. According to Eker and Pala (2008) TQM produces value for an organization, increasing
the understanding of customers and suppliers needs, improving internal communication, and
employee involvement in problem solving. Firms reduce errors and unnecessary waste (Powell,
in Eker and Pala, 2008, p. 43). Employees involved in TQM participate actively in quality
planning and monitoring (Schermerhorn et al., 2004), impacting learning and performance (Eker
& Pala, 2008).
Challenges faced by HPOs
Schermerhorn et al (2004) posited that HPOs face challenges of internal integration,
redefinition of managerial roles, leadership commitment, and the influence of the external
environment. Brown et al (1993) stated that the external macro-economic environment
influenced heavily the outcomes of high performance firms. Senior managers and leaders of the
organization have the responsibility to lead the transformation of the firm into HPO with
transparency (Beer, 2001). The transformations that take place in the rest of the organization
must also include self-reflection and change in the top management team (TMT). Role modeling
will assist top managers in exerting influence on lower levels of the organization to buy in the
change.

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22

Conclusions
A study of the evolution of management theories and practice, accounts for the shifting
emphasis that societies have given to individuals and groups in the organization. Different
models of HPOs presented in this chapter emphasized job security, employee involvement, and
training (SET) for improved performance (Brown et al., 1993). Blanchard (2006) proposed an
energizing model of HPO SCORES that is based on the ability of the leader to set a vision and
embrace servant leadership. Kaliprasad (2007) argued for a model of high performance, based on
bridging gaps between the perceptions of the market, the leader and the employees.
Schermerhorn et al (2004) offered a simple model of five components of HPOs:
employee involvement, self-directed work teams, integrated production technology,
organizational learning, and total quality management (Schermerhorn et al., 2004). This model
encompasses the discussion of employee involvement by Brown et al (1993), management of
megadata purported by Buytenkijk (2006), the role of teamwork (Beer, 2001; Kaliprasad, 2007),
and the role of TQM in improved performance (Eker & Pala, 2008). The literature review
evidenced that most discussion has remained at the theoretical level. The purpose of this study is
to bridge the theory through an application to the analysis of the fit of Wal-Mart Stores Inc. as a
HPO.
Summary
Organizations that operate in the competitive environment of global business in the 21st
century face a myriad of challenges of socio-economic, technological, ethical, and organizational
nature. The transformations that organizations undergo to become HPOs are supported by a
philosophy of high performance culture (Kaliprasad, 2007) that prioritizes intellectual capital

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23

(Ulrich, 1989). High Performance Organizations (HPOs) are led by top managers who balance
the sophistication of systems and processes, with caring for their people (Buytendkijk, 2006).
HPOs face challenges in internal integration and realignment of managerial roles, while
attending to the influence of the external environment. The readiness of the firm and the
conviction of the need for change is what differentiate HPOs from their competitors. Chapter 2
presented an analysis of the evolution of the organizational behavior concept, the paradigm shift
in organizational behavior, and a discussion of various models that explain the components of
HPOs. Chapter 3 will comprise the research methods, research design, data collection methods,
and characteristics of population and sample for this research.

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24

Chapter 3: Methods
The purpose of this qualitative case study was to explore and identify the characteristics
of organizational behavior, business practices, and financial performance of Wal-Mart Stores
Inc. that may identify the firm as a High Performance Organization (HPO). This analysis started
by identifying information about employee involvement, self-directing work teams, integrated
production technology, organizational learning, and total quality management that were evident
in Wal-Mart stores. These five elements define high performance organizations (HPO) according
to Schermerhorn, Hunt, and Osborne (2004). Next, the financial performance of the organization
was examined for the past five years only to the extent of identifying the evolution of WalMarts profitability to verify if it met the 30 to 50% increase expected in HPOs (Schermerhorn et
al., 2004). The information collected about Wal-Mart was limited to these six elements. This
chapter presents the explanation of the research design, instrumentation, data collection and
analysis, and confidentiality.
Research Method
A qualitative case study is appropriate in business research, when the purpose is to
explore a phenomenon using multiple sources such as financial reports, archives, and budget
and operating statements, including market and competition reports (Ghauri & Gronhaug, 2005,
p. 115). Case studies are recommended when the researcher seeks to study a case from many
points of view and interpret and integrate them into a theoretical framework (Ghauri &
Gronhaug, 2005). Single case studies provide an opportunity to conduct an in-depth exploration
of a critical case by looking at it from different dimensions.

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Research Design and Appropriateness


Given the relevance of Wal-Mart Stores in the business environment of the United States
and the countries where the firm operates (Fishman, 2006; Ghemawat, 2006), an exploration of
its performance and practices became pertinent. The research question guiding this study was:
What, if any, business practices, organizational behavior, and financial performance of Wal-Mart
Stores Inc. are indicative of a High Performance Organization (HPO)? Single-case embedded
designs are appropriate when the research is focused on a particular case that is used to test a
theoretical framework (Ghauri & Gronhaug, 2005).
A single case embedded design allowed the researcher to collect, evaluate, verify and
synthesize evidence about Wal-Mart Stores and its multiple departments. The theoretical basis of
Schermerhorn et als Five Component Model of HPO to identify the characteristics of the firm
that revealed potential HPO components. Wal-Marts internal information, previous studies, and
articles about Wal-Mart were analyzed to find common themes that provided evidence of
characteristics of HPOs.
Population
The population of this study was comprised solely by Wal-Mart Stores Inc., including
headquarters and offices across the United States. The operations of Wal-Mart overseas were not
included in this study, as it would imply additional considerations of cross-cultural differences
that should be part of a separate research. Publicly available data about Wal-Mart Stores
business practices, organizational behavior, and financial performances were collected from the
annual reports of the firm, and complemented with journal articles and specialized reports about
the organization.

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26

Informed Consent
Given that the data about Wal-Mart Stores comprised information reported by Wal-Mart
in their annual reports and corporate website. Statements by the CEO of the organization and
other representatives were extracted from letters to shareholders or communications to the
public. Other information about Wal-Mart was extracted from journal articles and specialized
reports about the firm. The study did not conduct interviews or any personal contact with WalMart staff.
Sampling Frame
This qualitative case study was focused on Wal-Mart Stores Inc. and its operations in the
United States as subject of analysis; therefore, the sample and the population of this study were
the same. Data about the business practices, organizational behavior and financial performance
of the organization were explored, identified, and analyzed to match the description to the
characteristics of High Performance Organizations, according to the Five Component Model of
HPO (Schermerhorn et al., 2004).
Confidentiality
Given that this qualitative case study did not use personal interviews or face to face
contact with executives or staff of Wal-Mart, statements of confidentiality were not required.
Data about business practices, organizational behavior and financial performance were extracted
from the annual reports, corporate website, journal articles, and other studies about Wal-Mart
available online and in hard copies. These sources provided sufficient information to identify
characteristics that could categorize Wal-Mart as a HPO.

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27

Geographic Location
This qualitative case study did not require face-to-face interviews with Wal-Marts
employees or executives or any other human subjects. Consequently, no geographic location was
necessary. All the data for this study was collected from the WorldWide Web, from the
University of Phoenix online library, and from the personal library of the researcher located in
Henderson, Nevada.
Instrumentation
Given that this research was conducted using secondary sources and publicly available
data, no instrument was applied to Wal-Marts staff or executives. The information about
business practices, organizational behavior and financial performance of this firm were identified
from data available through Wal-Marts corporate website, journal articles, and other specialized
publications. These data were collected and categorized into five common themes that define
HPOs (Schermerhorn et al., 2004): employee involvement, self-directed work teams, integrated
production technology, organizational learning, and total quality management. Data about WalMarts net income, sales, and return on investment for the years 2002-2009 were also recorded.
Data were analyzed, compared and contrasted between the different sources to explore the
perspectives about Wal-Mart as a HPO.
Data Collection
Data collected for Wal-Mart Stores Inc originated from secondary sources. These data
included information about business practices, organizational behavior, and financial
performance of the firm. Data were collected from diverse sources: Wal-Marts corporate
website provided information on annual report, communications to shareholders, career
opportunities, organizational culture, market positioning, business practices, business ethics, and

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other corporate information that configure business practices and organizational behavior.
Scholarly journal articles and specialized reports about Wal-Mart presented information about
the participation and influence of the firm in the U.S. market. Opinions from supporters and
contenders of Wal-Mart publicly available on the WorldWide Web were also collected.
Secondary sources are an effective method to collect historical data for a case study
(Ghauri & Gronhaug, 2005). Publicly available sources reduce the time and cost of data
collection, while providing sufficient data to answer the research questions (Ghauri & Gronhaug,
2005). However, secondary data may provide limited information for the current research,
because the objectives of the original research could have been different. This requires caution
by the researcher when attempting comparisons (Creswell, 2008).
Data about financial performance, referred to annual net income, sale revenue, and return
ratios, was found in Wal-Marts annual reports and SEC filings. The financial data for 2002
through 2008 were entered in a table that presented the evolution of the financial performance.
According to Schermerhorn et al (2004) HPOs achieve growth in the bottom line by 30% to 50%
over three to five year-periods (Schermerhorn et al., 2004). Financial data collected for this study
included, annual net income, sales revenue, and return ratios.
Data Analysis
Scholarly journal articles and specialized reports that presented information about WalMarts business practices, organizational behavior, and financial performance were included in
this study. Statements issued by the CEO and the top management of Wal-Mart, available on the
corporate website, in interviews, or in letters to the shareholders and the public were also
collected. Financial information for the years 2002 through 2008 were extracted from the annual
reports and presented in tables.

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29

The data extracted from these diverse sources reflected the participation and influence of
the firm in the labor market, in retail practices, in the socio-economic environment of the states
where it operates. All these statements were entered in tables organizing the information under
the five themes underlying the HPO model (Schermerhorn et al., 2004, p. 23): (1) employee
involvement, (2) self-directing work teams, (3) integrated production technology, (4) total
quality management, and (5) organizational learning.
After collecting the data from different sources: Wal-Mart corporate website, scholarly
journals, specialized publications, periodical, public statements, and textbooks, the following
steps were conducted in data analysis. The first step was the organization of data in tables under
each of the five components of HPOs. The data were analyzed to identify the themes of
employee involvement, self-directing work teams, integrated production technology,
organizational learning, and total quality management. Any article identifying Wal-Marts
business practices, organizational behavior, and financial performance was analyzed to discover
common themes. In a second step, data were analyzed again for triangulation. In this step the
researcher identified similarities, contradictions, or new data emerged from the sources. This
procedure ensured a balanced discussion of the characteristics demonstrated by Wal-Mart, as
perceived by the original authors and the researcher. Data were aggregated within each
component of HPO and presented in a summary table.
The third step in data analysis related to the financial performance indicators of sales
revenue, net income and return on investment ratios for years 2002 through 2008. These data
were entered in a table to compute the annual growth rate in net income. The purpose of this step
was to show the evolution of the bottom line of the firm and identify if the annual growth
corresponded to the expectations for HPO organizations (Schermerhorn et al., 2004). Given that

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30

Wal-Mart experienced a change in CEO in November 2008 (Wal-Mart, 2008e), the analysis
considered the management styles of both Lee Scott and Mike Duke.
Validity and Reliability
Qualitative case study research emphasizes a deductive approach in the research process.
The validity of the findings in this type of research depends solely on the quality of logic
employed in the study and precise measurement (Ghauri & Gronhaug, 2005). According to
Creswell (2008) the validity of a research is given by the degree to which the researcher is able
to make inferences from the findings of a sample or population. In qualitative studies the purpose
is to understand, gain insights and create explanations (theory) (Ghauri & Gronhaug, 2005, p.
155). Consequently, validity relates to how well the description provided in the research reflects
the facts (descriptive validity), if the interpretations of concepts are correct (interpretative
validity), or if the underlying theory is adequate to explain the phenomenon (theoretical validity).
Validity also relates to whether the findings about HPOs characteristics found at Wal-Mart are
generalizable to others (generalizable validity) or not. All these types of validity must be
demonstrated in the research report (Ghauri & Gronhaug, 2005).
Reliability in a research study deals with the stability and consistence of a measure
(Ghauri & Gronhaug, 2005; Creswell, 2008). Reliability is a condition for validity, because if the
scores or measurements are not reliable, the measurements are not valid. The accuracy of the
secondary sources used in this qualitative case study could not be controlled by the researcher;
therefore, the reliability of the data is limited to the reliability of the source or the original
researcher (Ghauri & Gronhaug, 2005). In the case of this research, the annual reports issued by
Wal-Mart include forward-looking statements, or subjective statements about their performance
and practices. According to Cooper and Schindler (2001) once the researcher uses secondary

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31

data, the reliability of those data become the researchers responsibility. Consequently, nonscholarly journal articles, blogs, or magazines articles were not used in this study.
Summary
This qualitative case study with single-case imbedded design had the purpose of
describing, analyzing, and identifying characteristics of business practices, organizational
behavior, and financial performance or Wal-Mart Stores Inc. that may resemble the five
components of High Performance Organizations (HPOs) (Schermerhorn et al., 2004). The data
collected about Wal-Mart Stores were analyzed to identify common themes emerged from the
different data sources that described employee involvement, self-directing work teams,
integrated production technology, organizational learning, and total quality management at the
firm.
Data were collected from publicly available data from the Wal-Mart corporate site,
annual reports, statements and letters to the public, from scholarly journal articles, SEC filings,
and specialized publications about this firm. Data about Wal-Marts financial performance for
the period 2002-2009 was also collected to analyze and determine whether it matched the
characteristics of growth in the bottom line of HPO firms.
The population and sample for this study was comprised solely of Wal-Mart Stores Inc
headquarters and offices in the United States. The data collected about the firm were organized
in matrices that categorized the statements, practices, and reports about Wal-Mart within each of
the five components of HPOs. Chapter 4 presents the report about the results of the data analysis.

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32

Chapter 4: Presentation and Analysis of Data


The findings of this qualitative case study about Wal-Mart Stores Inc are presented in this
chapter, comprising an in-depth review of the business practices, organizational behavior, and
financial performance of the firm. Data were collected from publicly available sources issued
directly by Wal-Mart through its corporate website, or indirectly through scholarly studies and
specialized reports about the firm. Chapter 4 presents the findings and analysis of the data
collected in order to answer the main research question: What, if any, business practices,
organizational behavior, and financial performance of Wal-Mart Stores Inc. are indicative of a
High Performance Organization (HPO)?
McMillan and Schumacher (2006, p. 365) suggested an inductive process for data
analysis of qualitative data divided in four phases: (1) data recording, (2) data coding, and
categorizing, (3) identification and validation of patterns (themes/concepts), and (4) narrative
structures and visual representations. These phases overlap and the researcher moves back and
forth across them until the analysis is considered complete.
The data collected are organized in tables and illustrations containing the five
components of HPOs, based on the Schermerhorn et als (2004) model. The phenomena under
study are the characteristics of employee involvement, self-directing work teams, integrated
production technology, organizational learning, and total quality management at Wal-Mart that
could resemble the components a HPO. The analytical style used by the researcher is one of high
intellectual rigor and combined with the subjective interpretation that characterizes qualitative
research (McMillan & Schumacher, 2006).

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33

Wal-Mart Business Description


Wal-Mart Stores is considered the most important mega-retailer in the world (Marketline,
2009a) with operations in the 50 states and U.S. territories and 15 countries worldwide. WalMart offers a broad set of products and services that include the traditional grocery section,
electronics, apparel and entertainment, photo services, vision center services, pharmacy, health
and wellness, and home furnishing (Marketline, 2009a). In 2007, Wal-Mart expanded into
banking services and remittances (Associated Press, 2007).
Wal-Mart Stores operate three main business segments: Wal-Mart US, Sams Club, and
international segment (Wal-Mart, 2008a). In the U.S. segment Wal-Mart manages 4,284
locations in different retail formats, categorized according to size and type of products and
services offered: discount stores, supercenters and neighborhood markets (Marketline, 2009a).
Discount stores have an average size of 108,000 square feet; Supercenters average 260,000
square feet, and neighborhood markets average 62,000 square feet (See table 1). Wal-Mart
operates 602 Sams Clubs with locations that average 132,000 square feet with products for both
businesses and individuals.
Table 1 Wal-Mart: Number of Stores by Type and # of States
Type of Unit
U.S. Segment
Discount stores
Supercenters
Neighborhood markets
Total U.S. segment
Sams Clubs
Marketside

# states

861
2,664
153
4,284
602
4

47
48
16
48
1

As of July 31, 2009. Source: http://walmartstores.com/Investors/7610.aspx

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34

In the international segment, Wal-Mart operates 3,760 locations in 15 countries (WalMart, 2009c) in different modality of ownership: wholly owned subsidiaries in seven countries,
majority-owned subsidiaries in five, and joint ventures in two (See table 2).
Table 2. Wal-Mart: International Locations by Country and Ownership
Country
Wholly-owned
Argentina
Brazil
Canada
Japan
Puerto Rico
United Kingdom
Chile
Joint-ventures

32
359
312
371
56
364
229

Country
Majority-owned
subsidiaries
Honduras
Costa Rica
Guatemala
El Salvador
Mexico
Nicaragua

53
170
164
75
1,262
54

Other controlled
subsidiaries
China
154 China
104
India
1
As of July 31, 2009. Source: Marketline (2009a); Wal-Mart (2008f)
In addition to the traditional brick-and-mortar operation, Wal-Mart successfully
implemented the online retail division -walmart.com- since 1996 and integrated it with its on-site
locations through the site-to-store program in 2007 (Thomson, 2007). Another new concept
was introduced in 2008 with the opening of marketside stores that offer restaurant-type food at
affordable prices, with emphasis in organic meals, bakery, and deli products (Retail Week,
2008).
Wal-Mart is the largest private employer in the U.S. with more than 1.4 million
associates (Wal-Mart, 2008a). The diversity of the workforce is reflected in a significant
proportion of minority employees (See table 3) and an important participation of women (62%)
and seniors (25.4%). Hispanics comprise 11.8% of all associates, whereas African American

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35

represents 18.4% of the workforce. A total of 1.1 million associates are insured (Wal-Mart,
2008a).
Table 3. Wal-Mart: Composition of the Diverse Workforce
Diverse group
Hispanics
African American
Asian Americans
Pacific Islanders
Native Americans
Age group
Seniors (> 50 years old)
Gender
Female
Male
TOTAL
Source: Wal-Mart (2008a) Corporate Facts.

#
165,000
251,000
39,000
5,000
16,000

%
11.8
18.4
2.8
0.35
1.1

355,000

25.4

856,000
544,000
1,400,000

61
39

Wal-Mart Stores History and Organizational Behavior


History
Wal-Mart Stores Inc. was founded in 1962 in Rogers Arkansas, by Sam Walton, a
visionary entrepreneur who expanded his emporium to 24 stores and $12 million in sales in five
years (Wal-mart, 2008f). A major expansion in the infrastructure of the firm took place in the
1970s when the chain opened stores in Kansas, Louisiana, Missouri and Oklahoma and went
public in the New York Stock Exchange. By the end of the decade Wal-mart had more than
21,000 associates working in its 125 stores, and was recognized as the first firm in the United
States that reached $1 billion in sales in such short tenure.
In the 1980s Wal-Mart consolidated as top retailer according to Forbes magazine for the
fourth consecutive year. The services offered by Wal-Mart expanded to pharmacy, and photo
services, auto service centers and jewelry (Wal-mart, 2008f). At the celebration of its 25th
anniversary in 1987, Wal-mart had already 200,000 associates, 1,198 stores and sales for $15.9

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36

billion and was the pioneer in retail technology, with the implementation of private satellite
communication and bar-code systems in all its stores (Wal-mart, 2008f). The first Supercenter
was opened in 1988.
After almost 3 decades, and as result of its leadership in the retail market, Wal-Mart
made the challenging move of launching its own private label: Sams American Choice,
introduced in 1991. Wal-Mart continued growing in size and influence and in 1991 made its first
international incursion in Mexico City and Puerto Rico (Wal-Mart, 2008f). The international
business division was created in 1993 to oversee the entry into Canada, Hong Kong, Argentina
and Brazil, along with a successful joint-venture agreement to operate in China. At the end of the
decade, Wal-Mart would enter Germany and Korea. By 1995, Wal-Mart had 1,995 stores, 239
Supercenters, 433 Sams Clubs in the 50 states of the union; and 276 international stores. WalMarts world-wide sales reached $93.6 billion, with 675,000 associates. Wal-Mart became the
largest global employer with 1,140,000 associates worldwide, with more than 680,000 in the
United States and 115,000 internationally. By the end of 1990s, Wal-Mart was serving an
average 90 million customers per week (Wal-Mart, 2008f) both on-site and online. The first
online experience for Wal-Mart was launched, and formally implemented in 2000 with the
creation of walmart.com.
The 21st century marked the consolidation of Wal-Mart as a market leader, online
retailer, and social responsible firm. In a joint venture with Accel Partners in Palo Alto,
California, Wal-Mart created walmart.com (Thomson, 2007). Fortune magazine included WalMart as Global Most Admired All-Stars in 2000 and 2006 (Fortune, 2006) and one of the
Most Admired Companies in the U.S. in 2000, 2003, 2004 (Wal-Mart, 2008f). By 2005, WalMart had 6,200 stores worldwide, $312.4 billion in sales, and 1.6 million associates in 16

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countries. The number of customers served by Wal-Mart in 2006 reached 176 million, while
more units opened in Japan and Central America. Sales continued to boost as Wal-Mart opened
the 3,000th store in Brazil in 2008 (Marketline, 2009a) to expand its wholesale chain
management system. As of 2009, Wal-Mart has reached 2.1 million associates worldwide in
8,044 stores (Wal-Mart, 2008f).
Wal-Marts Financial Performance
Since its foundation in 1962, Wal-Mart stores experienced dramatic growth in sales and
size. According to CEO Scott, Wal-Mart has generated shareholders return equivalent to
200,000 since 1969 when the firm went public (Scott, 2008). Wal-Mart achieved net sales of
$401 billion in fiscal year 2009, representing 8.2% increase over 2008. The net operating income
recorded $22.8 billion with net profit $13.4 billion, a 3.6% and 5.5% increase over 2008
(Marketline, 2009b). The drivers of this growth in revenue are both an increase in customers and
increase in the average transaction amount (Marketline, 2009b; Mergent Online, 2009). Table 4
shows the evolution of net sales, operating income, net income, and total assets for the period
2002-2009.
Table 4 Wal-Mart Stores: Indicators of Financial Performance (2002-2009)
In billions (except ROA)
1/31/09
1/31/08
1/31/07
1/31/06
1/31/05
1/31/04
1/31/03 1/31/02
Net Sales
401.2
374.5
345.0
312.4
285.2
256.3
244.5
217.8
Operating
22.8
22.0
20.5
18.5
17.1
15.0
13.6
income
Net
13.4
12.7
11.3
11.2
10.3
9.1
8.0
6.7
income
Total
163.4
163.5
151.2
138.2
120.2
104.9
94.7
83.5
Assets
ROA
8.2%
7.8%
7.5%
8.1%
8.6%
8.7%
8.4%
8.0%

Source: Mergent Online

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All the indicators of financial performance of Wal-Mart have increased in the 2002-2009
period, with exception of total assets that showed a slight decrease between 2008 and 2009. Net
sales have reported an average of $304 billion per year during the period of analysis, for a
maximum of $401.2 in fiscal year 2009 and a minimum in fiscal year 2002. Net operating
income also showed a upward trend for an average of $18.5 billion, a maximum of $22.8 in 2009
and a minimum of $13.6 in 2003. Reports for 2002 operating income were unavailable. Net
income registered an average of $10.34 billion, with a maximum of $13.4 in 2009 and a
minimum of $6.7 in 2002. The return on assets (ROA) computed by dividing net income by total
assets shows fluctuation during the period of analysis, for an average of 8.2%, within the limits a
minimum 7.5% in 2007 and a maximum of 8.7% in 2004. For better analysis of these results,
table 5 presents the same information but expressed in annual growth rates.
Table 5 Wal-Mart Stores: Annual Growth Rates in selected Indicators of Financial
Performance (2002-2009)
20082009

Net sales
Operating
income
Net income
Total assets
ROA

20072008

20062007

20052006

20042005

20032004

20022003

7.1%

8.6%

10.4%

9.5%

11.3%

4.8%

12.3%

3.6%
5.5%
-0.1%
5.6%

7.3%
12.4%
8.1%
3.9%

10.8%
0.9%
9.4%
-7.8%

8.2%
8.7%
15.0%
-5.4%

14.0%
13.2%
14.6%
-1.2%

10.3%
13.8%
10.8%
2.7%

19.4%
13.4%
5.3%

Source: Mergent Online (2009)


The growth rates of net sales shows the fluctuation of this indicator in the past seven
years for an average of 9.1%. The period of greater growth was 2004-2005 with 11.3%, being
2008-2009 the second lowest rate of net sales growth, after 2003-2004. The rates for net income
show an erratic evolution, for an average of 10.6%, a minimum of 0.9% and a maximum of
19.4% in the 2002-2003 period. The growth in net income recorded in 2008-2009 is again the
second lowest of the period after 2006-2007. The total assets of the corporation show a parabolic

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39

behavior of increase during the 2002-2004 period, a maximum of 14.6% in 2004-2005 and a
gradual decline up to 2009. The return on assets has also experienced erratic growth rates, for an
average of 0.4%. The maximum growth in ROA was recorded in the 2008-2009 period,
explained by the decrease in total assets, denominator of the quotient.
The Wal-Mart Culture
The culture of an organization represents the set of shared values held by a majority of
the members of the firm (Robbins & Judge, 2008). Schein (1997) purported that the leader of an
organization is a culture builder. At Wal-Mart, the culture of service espoused by their members
was inherited from Sam Walton, and passed on generations of associates and managers for the
past 4 decades. Wal-Marts leaders are proud of the humble start of the organization and its
dedication to touch and improve the lives of millions of people around this world every single
day (Scott, 2006, para. 18).
The basic assumptions of the Wal-Mart culture are expressed in 3 beliefs: (1) respect for
the individual, (2) service to our customers, and (3) striving for excellence (Wal-Mart, 2009e,
para. 2). Each of these basic assumptions is linked to values that are unique to the organization.
Figure 2 presents the Wal-Mart values for each belief (Wal-Mart, 2009e).
Manifest expressions of the culture of Wal-Mart are evident in a number of rituals
conducted in its stores worldwide. The use of people greeters was implemented in 1983 in all
locations (Wal-Mart, 2008f). The Wal-Mart cheer or chant was introduced in 1975 to all
associates inspired by a visit of Sam Walton to Korea (Wal-Mart, 2008f). These artifacts of
culture are practiced with certain variations in China, where an egalitarian management is
supported (Davies, 2007).

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40

Diversity and employee relations are espoused as a priority by Wal-Mart (Wal-Mart,


2009, para. 1). The firm has been recognized with accolades such as the Top 25 Diversity
Recruitment Program by the Hispanic Business magazine, and the Ron Brown Award for its
work in hiring and promoting positive employee relations among associates of diverse
backgrounds (Wal-Mart, 2008f).

Respect for the


individual
Servant leadership
Open door
Accountability
Open communications
People development
Trust
Humility
Caring
Teamwork
Empowerment
Confidentiality
Listening
Diversity

Service to our
customers
Friendly atmosphere
Pleasant shopping
experience
Everyday low prices
Aggressive hospitality
Sundown rule
Satisfaction guaranteed
Sense of urgency
The 10-foot rule
Community minded
Quality always!

Striving for
Excellence
Continuous
improvement
Dissatisfaction with
the status quo
Results oriented
Integrity always!
Competitive spirit
Sustainability
Failure allowance
Risk-taking
encouraged
Expense control
Change agents
Compliance with the
laws

Figure 2. Wal-Mart: Basic Beliefs and Values (Wal-Mart, 2009e)


Wal-Mart Business Practices
Wal-Mart Stores has accumulated a customer base estimated in 80% of households in the
U.S. (Global Insight, 2007). Experts estimate that the prices strategies used by Wal-Mart have
reduced the consumer price index by 3% between 1985 and 2006 (Global Insight, 2007). The
savings generated by Wal-Mart operations are calculated in $200 billion per year in the U.S.
(Mallaby, 2005). The entry strategy of Wal-Mart to communities in the U.S. is justified by their
leaders belief that working families have to be served, and that rural communities deserve to be

High Performance Organizations

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attended (Scott, 2006). Opposing voices challenge this espoused belief pointing out that WalMart is rather accumulating power on behalf of us, the ordinary people (Fishman, 2004, p. 19)
Business strategies that have supported Wal-Marts success in the U.S. market include
the Every Day Low Price (ELDP) program that guaranteed the lowest prices in everyday
items; the rollback tactic to justify clearance prices; and, the store-within-a-store initiative,
and the store of the community programs aimed at connecting each store to the community by
fitting the demographics and assorting merchandise accordingly (Thomson, 2007). The save
even more strategy offers customers to match or reduce the price of any competitor on selected
items (Marketline, 2009b).
In 2008, Wal-Mart introduced the new motto: Save money, live better (Wal-Mart,
2009f) that promotes one of Sam Waltons espoused values. An interactive website informs the
public about the amount of savings received by American households every second since
January 1, 2009, and receives input from customers about their savings and live experiences. The
influence of Wal-Mart in the U.S. economy is insurmountable and seems to respond to Sam
Waltons quote: Theres only one boss. The customer (Wal-Mart, 2009f, para. 1).
Wal-Marts Leadership
The history of Wal-Mart is not complete without Sam Waltons profile. The iconic
influence of Sam Walton has inspired staff and management at Wal-Mart for decades, like a
specter that influences decisions and actions of Wal-Marts stakeholders (Boje, Rosile, & Grace,
2006). Described as a servant leader with a genuine interest for people (Wal-Mart, 2009d),
Walton was awarded with the Medal of Freedom by President George H.W. Bush in 1992. Sam
Waltons espoused values about providing best living for his customers are reflected in the
following statement: If we work together, well lower the cost of living for everyone. Well

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give the world an opportunity to see whats it like to save and have a better life (Wal-Mart,
2009c, para. 2). Wal-Marts associates and managers follow a servant leadership style, with
managers visible in the sales floor, distribution centers, and headquarters (Wal-Mart, 2009d).
The dynamism and consistent growth of Wal-Mart is coupled with the long tenure of its
top executives. As of 2009, Wal-Mart has had only 4 CEOs: Sam Walton (1962-1988), David
Glass (1988-2000), Lee Scott (2000-2009), and Mike Duke (2009-). In the period of analysis of
this research (2002-2009) the focus is on the business practices directed by CEO Scott. Scott
demonstrated the attributes of servant leadership. Servant leaders have elements of
transformational leadership as well (Greenleaf, 2003) and are able to inspire others with their
own service. The new CEO Mike Duke, installed in February 2009, said about Scott: Lee has
led Wal-Mart with humility and grace, and has been a worthy successor to his predecessors, Sam
Walton and David Glass (Duke, in Wal-Mart, 2008e, para. 7). Rob Walton, son of Sam Walton,
also praised Scotts persona, saying: Lee brought a remarkable focus to our mission of saving
people money so they could live better, and a heightened sensitivity to Wal-Marts role in the
world (Walton, in Wal-Mart, 2008e, para. 8).
Social responsibility
Wal-Mart expresses its commitment to charitable causes through diverse mechanisms. In
1998 and 2000, Wal-Mart won the accolade of No. 1 Corporate Citizen in America for its annual
charitable contributions and community involvement (Marketing Supported Employment
Network, 1999). Wal-mart received the Corporate Patriotism Award to recognize its
dedication to support the families of military members. In 2005, as a result of Hurricane Katrina,
Wal-Mart launched a project of in-store health clinics to provide health care to local uninsured
residents. According to the statistics provided by Wal-Mart (Scott, 2006) up to 40% of the

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patients were uninsured, approximately 20 to 40% were emergency cases, and between 10 to
20% of patients would have remained without attention if the clinic was not available.
In 2007 Wal-Mart became part of a partnership denominated Better Health Care
Together that brings together business leaders, labor leaders and public offices to improve the
health care system in America by 2012 (Better Health Care Together, 2009). Firms like AT&T,
General Mills, Qwest, and Intel are part of this organization (Marketline, 2009a). Manifestations
of organizational learning at Wal-Mart are constantly
Concurrently, Wal-Mart has taken concrete actions to participate in the economic
development of communities in the U.S. The Jobs and Opportunity Zones (JOZ) program
engages Wal-Mart with local businesses, minority and women-owned businesses, chambers of
commerce in the preparation of grants to benefit residents of 10 zones (Wal-Mart, 2009c). Stores
located in Chicago; Cleveland; Decatur, Ga.; East Hills, Pa.; El Mirage, Az.; Indianapolis;
Landover Hills, Md.; Portsmouth, Va.; Richmond, Ca.; and Sanger, Ca. (Wal-Mart, 2009c) are
anchors of the JOZs. More stores are programmed to open in 2009.
Analysis of Components of High Performance Organizations
Employee Involvement
Employee involvement in High Performance Organizations refers to the degree of
delegation and empowerment given to the workforce (Schermerhorn et al., 2004). Low-involved
employees are those focused on doing their job and occasionally providing their opinions
through suggestion boxes. Parallel involvement implies that employees participate in discussions
or quality circles. Moderate involvement comprises participative management (Schermerhorn
et al., 2004, p. 23) or increased daily responsibilities. High-involved employees are empowered
to make decisions about their own jobs and about ways of satisfying their customers.

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Employee involvement has been claimed as a tenet of Wal-Marts corporate culture


(Longo, 1989) with managers involving associates in decision-making. Rituals like people
greeters originated from an associate in Louisiana and were implemented at the local, district,
and national level since. Examples of employee involvement at Wal-Mart include the promotion
of diversity through the Associate Resource Groups (ARG) founded in 2005 to provide
opportunities of business development, professional development, and heritage (Wal-Mart,
2008d, p.1).
Business development: associates participate in roundtable discussions, focus groups, and
partnerships with merchants, feedback about product development, and referrals for recruitment,
mentoring and on-boarding of new recruits.
Professional development: associates organize workshops for their peers, host wellness
fairs, develop leadership programs and career workshops for all associates.
Heritage: associates promote diversity through events that increase awareness about
cross-cultural identity.
Another example of employee involvement was launched in 2007. The Personal
Sustainability Project PSP (Wal-Mart, 2007) is an organizational development initiative created
by Wal-Marts associates to develop individual goals to improve their health and wellness and
the health of the environment (Wal-Mart, 2007, para. 2). The program empowers associates to
educate their peers on sustainability, healthy food choices, volunteerism and environmentallyfriendly practices (Robbins & Judge, 2008). A total of 20,000 associates are part of the PSP and
have achieved personal goals of weight loss, recycling, fitness, and smoking cessation.

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Wal-Mart has created a separate website called Work smart. Live Better to provide
information about recruitment opportunities across the United States. The opening statements in
this site say (Wal-Mart, 2008f, para. 2):
Think of the opportunity for you. At Wal-Mart, were a lot of things to our
customers, but were even more to our Associates. You see, as an Associate with
the worlds largest retailer, youll impact more than just the store you work in.
Youll be empowered to leave your mark on an entire industry. And as a WalMart Associate, youll be at the leading edge of Wal-Marts continuous efforts to
offer the best in retail to the neighborhoods we serve.
The site publicizes the opportunities for promotion, with statistics about 75% of
managerial positions held by former hourly employees. Contrasting Wal-Marts executives
statements about career opportunities, Lichtenstein (2005) found that internal promotions were
limited and that new management recruits came from MBA schools with modest career
expectations (para. 11), willing to work for an annual salary of $25,000.
Parnell and Lester (2008) argued that Wal-Mart takes advantage of blue collar workers
(p. 15) and that in some cases, pressures from unions have forced Wal-Mart to grant concessions
that hinder the majority of their employees. Will (2006) estimated that for each 100 jobs that
Wal-Mart created 50 retail jobs were lost. In a study about the impact of Wal-Mart in the labor
market, Dube, Lester, and Eidlin (2007) calculated a loss of $5 billion in the retail sector
influenced by the entry of Wal-Mart in new markets.
Self-Directing Work Teams
High performance organizations are known for their emphasis on empowering their
workforce to plan, do, and evaluate action plans (Schermerhorn et al., 2004). For a successful

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performance of self-managed teams organizations have to invest in training and technology,


while championing a culture where the staff is trusted to solve daily problems without direct
supervision (Heskett, 2006). Wal-Mart claims that its workforce is led by managers who are
servants in the first place (Wal-Mart, 2009d) and that managers become mentors of the
employees, improving workplace morale and supporting teamwork.
The Wal-Mart chant created by Sam Walton to motivate the workforce is reported to
increase the trust and unity among associates (Robbins & Judge, 2008). The purpose of this ritual
was to maintain a small-family spirit (p. 564). These manifestations of the Wal-Mart culture
seem to put people first (one of the characteristics of HPOs) (Schermerhorn et al., 2004).
Hart (2007) categorized Wal-Marts structured as highly centralized, where each
geographic region has a regional personnel manager who operates from headquarters. These
managers travel constantly within their regions to monitor policies, to recruit and select store
managers. Lichtenstein (2005) argued that Wal-Mart has created a culture of coercion to
encourage performance on first-line managers. Lichtenstein (2005) argued that Wal-Mart uses
ideology management to perpetuate the centralized beliefs emanated from Bentonvilles
headquarters. As part of this centralization, each region and city hosts corporate cadres
(Lichtenstein, 2005, para. 9) where managers and assistant managers are responsible to meet the
defined targets set up by the corporate headquarters.
Heskett (2006) pointed out that firms that promote the functioning of self-managed teams
usually pay higher wages and higher benefits than the rest of the industry. When comparing
Cotsco and Wal-Marts salary levels, Heskett (2006) found that Wal-Mart might have involved
their employees successfully through less compensation but higher social costs. Additionally, as
Lichtenstein (2005) argued, centralized organizations are reluctant to let go their command and

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control. In the case of Wal-Mart, critiques aim at a purposeful recruitment process of low-skilled
individuals for whom the firm has no intentions to invest.
Integrated Production Technology
Wal-Mart is recognized as a leader in supply chains (Ehring, 2006). The integration of
logistics and information systems gives Wal-Mart a competitive edge in supply chain
management (Thomson, 2007). This organization has remained at the top of technology
innovations. Bar-code scanning technology was implemented at the end of the 1980s to expedite
the merchandising process (Wal-Mart, 2008f, p. 1) and by 2005 Wal-Mart was the first in
adopting electronic product codes (EPC) in 1,000 locations nationwide. This innovation saved
the firm 63% in restocking time (Thomson, 2007).
According to Ehring (2006) Wal-Mart is the best supply-chain operator of all time in the
U.S. (p. 115). Wal-Mart is able to maintain a low-price strategy through efficiency in
distribution channels leveraged by its scale. Wal-Mart supports its mega-retail operations with
121 distribution facilities in the U.S., the majority of them operated by the firm (106), while
others are owned and operated by third parties. To support the operations of Sams Club 26
distribution facilities are managed by Wal-Mart, 8 of them owned by the firm. These distribution
channels transport 81% of the total merchandise sold in Wal-Mart stores and 65% of Sams
Clubs purchases; the remaining is distributed directly by suppliers (Marketline, 2009a).
Wal-Mart employs 75,000 associates in the logistics and information division to manage
the largest database of any commercial firm, compared only to the Pentagons system
(Marketline, 2009b). The majority of IS developments are completed in-house, giving Wal-Mart
greater flexibility and low-cost advantage (Thomson, 2007). Wal-Mart was the first firm in
installing the largest private satellite communication system in the U.S. in 1987, to keep stores

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48

communicated using two-way voice, data, and one-way video communication (Wal-Mart,
2008f, p. 1).
Trust and effective execution are the two characteristics of Wal-Mart that make it a high
performer. According to Ehring (2006) successful partnerships with suppliers, such as Procter &
Gamble, are a demonstration of how adversarial relationships can evolve positively towards the
satisfaction of mutual consumers. To do this, Wal-Mart integrated its actual demand information
(POS) with consumer data managed by Procter & Gamble to inform retailing and product
development decision, respectively (Ehring, 2006).
Organizational Learning
Organizational learning relates to the ability of the firm to adapt to the changes in the
environment (Schermerhorn et al., 2004). High performance organizations use information
systems to collect data from the market to predict changes and respond to them (Brown, Reich,
& Stern, 1993). Wal-Marts culture is acknowledged as one open to change and innovation,
highly adaptive and aggressive (Beer, 2001; Fishman, 2006; Bernstein, 2006).
Wal-Marts leadership believes in innovation and experimentation as key elements of the
success of the firm.CEO Scott was a strong advocate for change: Change is woven into the
Wal-Mart culture (Scott, 2006, para. 20). In one of his most inspiring speeches before WalMarts shareholders, CEO Scott laid out a transformative plan for Wal-Mart in 2006 called the
Out in Front comprised of five pillars (Scott, 2006):
(1) Broaden Wal-Marts appeal to their customers.
(2) Make Wal-Mart an even better place to work.
(3) Improve business operations and efficiency.
(4) Drive growth in international business.

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(5) Be a valuable member of every community Wal-Mart serves.


Wal-Marts flexibility to enter new markets, trying to understand their culture and habits
is evident in the number of new store opening each year. Cavusgil et al (2008) found that WalMart used an efficient strategy of localization that allowed the firm to connect to its potential
customers. Important developments in organizational learning were implemented by Wal-Mart,
through the experiential stores, where Wal-Mart managers gather data about patterns of
consumption in Hispanic neighborhoods, other minority groups, rural areas, and baby-boomers
(Scott, 2006). These initiatives were highlighted by CEO Lee Scott in the Out in Front strategy
launched in 2006.
The perpetuation of organizational learning at Wal-Mart is possible through the creation
of programs, such as the International Leadership Development Program that provides store
managers and teams with cross-cultural skills (Carpenter & Sanders, 2008). This program
assisted in the promotion of the three main ingredients of their culture: The Every Day Low Price
strategy, brand names and ethical standards (Thomson, 2007). Failures also comprise
organizational learning for Wal-Mart. Despite its success in replicating strategies such as Every
Day Low Prices (EDLP) in United Kingdom, the organizational culture of Wal-Mart clashed
with the competitive German market (Fernie, Hahn, Gerhard, Pioch, & Arnold, 2006). However,
as stated by CEO Scott Wal-Marts marketplace is the world (Scott, 2006, para. 54) and that
implies that the firm must be in constant learning with each store opening.
Total Quality Management
The literature about Total Quality Management stresses the importance of high-quality
results, continuous improvements, and meeting customer needs (Schermerhorn et al., 2004). At
Wal-Mart quality circles have been implemented to ensure that the customers receive the best

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quality at the lowest prices possible (Ehring, 2006). CEO Scott (2006) emphasized the
importance of increased efficiency in the inventory management, by reducing inventory in
warehouses, decreasing shipping times to customers, and making sales floors more appealing.
These simple measures have the effect of less expenses in storage, more consistent pricing, and
lower labor and transportation costs (Scott, 2006, para. 50).
According to Stanley (2007) Wal-Mart is a leader in the competitive retail industry,
having transformed business processes and operations at the domestic and international level.
Wal-Marts efficiency in operations has the sole purpose of giving customers what they want at
the lowest price possible. Fishman (2006) coined the term Wal-Mart effect to define the impact
of the entry of Wal-Mart on competitors, suppliers and manufacturers in new markets. The
impact propagates throughout the vertical supply chain (Fishman, 2006, p. 358) influencing
employment and business conduct standards.
Although quality and cost are seen as mutually exclusive, Wal-Mart has blended them
efficiently and has committed to make investments in proprietary knowledge and processes in its
relationship with suppliers (Ehring, 2006). By sharing knowledge with its suppliers, Wal-Mart
has been able to offer quality and low costs to its customers. Innovative changes were
implemented by Wal-Mart in 2008, with the creation of the Wal-Mart Smart Network, a closecircuit system that provides customers with information about products and services in-store
(Marketline, 2009a). Another example of total quality management at Wal-Mart is the site-tostore program that gives customers the opportunity to order online and pick up at store. This
program has reportedly generated additional $60 in-store spending per customer at pick-up
(Edelson, 2007). Wal-Mart was the first to implement a retail media network in 2,700 stores,
using Internet Protocol Television (IPTV) to provide in-store information to its customers in the

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U.S. This sophisticated system allows Wal-Mart to control 27,000 screens in selected locations
(Marketline, 2009a). While most integrated technologies usually occurs at the back-end of the
channel (in design or production), the idea of connecting customers with the products and
services Wal-Mart offers, serves the purpose of providing value added and increasing customers
trust (Ghemawat, 2006).
Summary
The data collected about business practices, organizational behavior and financial
performance of Wal-Mart Stores showed contrasting opinions about the organization. While
Wal-Marts corporate website provides positive information about the culture, business practices
and promotion of diversity and interest for people, some analysts question the power and
influence of the firm in the United States and abroad. According to Ghemawat (2006) Wal-Mart
is an exemplary high-performance organization that has transformed the retail business; for
others, like Fishman (2006) Wal-Mart is a mega-retailer with a distorted focus on control and
disregard for the human capital.
The perceptions about Wal-Mart Stores Inc were retrieved from releases located in the
corporate website, communications and reports of top management to shareholders, journal
articles, and financial reports. These sources contained information about the firm from its
foundation but mainly focused on the 2002-2009 period. The findings of the content analysis of
these sources were organized according to the five components of Schermerhorn et als (2004)
HPO model for comparison and contrast to answer the research question: What, if any, business
practices, organizational behavior, and financial performance of Wal-Mart Stores Inc. are
indicative of a High Performance Organization (HPO)?

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The analysis of the data collected suggested that Wal-Mart demonstrates strong
integrated production technologies, and organizational learning, unclear manifestations of
employee involvement and total quality management; and inexistent self-directed teams. The
analysis of the financial performance of Wal-Mart showed that the firm has experienced an
upward trend in net income in dollars in the 2002-2009 period, but erratic behavior in terms of
growth rates, fluctuating between 0.9% and 19.4% annually. The literature suggests that HPOs
reach growth of 50% in a period of 3 to 5 years (Schermerhorn et al., 2004) since
implementation of the five components of the model.
Chapter 5 presents the interpretation of the findings of this study along with conclusions
that integrate the literature review and the data analysis. Recommendations derived from the
results of the case study as well as suggestions for future research are also included in chapter 5.

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53

Chapter 5: Conclusions and Recommendations


This qualitative case study had the purpose of exploring the business practices,
organizational behavior, and financial performance of Wal-Mart Stores Inc. to identify how they
could reflect the components of High Performance Organizations (HPOs). The results of the
research presented in chapter 4 were used to see if the statements reported by Wal-Mart in
corporate website, opinions of scholars and analysts, supporters and detractors of Wal-Mart
evidenced some of the characteristics of High Performance Organizations.
Data from annual reports, communications, and speeches of members of top
management, scholarly journal articles, and specialized reports about the firm were collected,
processed, analyzed, and interpreted to identify the business practices, organizational behavior,
and financial performance of the firm. Statements by the former CEO Lee Scott and current CEO
Mike Duke comprised a significant portion of the data analyzed in this chapter. Financial data
was extracted from the annual reports of the firm, SEC filings, and industry analysts such as
Mergent Online and Marketline. The findings of this study suggest that Wal-Mart Stores Inc.
demonstrate the majority of components of High Performance Organizations in different degrees
of manifestation.
Conclusions
Wal-Mart Stores Inc. is recognized as the largest mega retailer in the world (Ghemawat,
2006). The influence of Wal-Mart in the business environment of the United States is
undeniable. Wal-Mart is recognized as the major employer in 24 of 50 states of U.S. employing
more than 2.1 million associates (Fishman, 2006; Wal-Mart, 2009a). Wal-Mart provides benefits
for the average American household in an estimated up to $2,300 per year (Global Insight,
2007). The entry of Wal-Mart in any geographic location derives in direct price effects in its

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stores and indirect effects through influence on competitors that try to match its low prices
(Hausman & Leibtag, 2007). Prices offered by Wal-Mart are estimated in 15 to 25% lower than
the industry, with effects for competitors and for the economy in general (Hausman & Leibtag,
2007).
High performance organizations are characterized by five components (Schermerhorn et
al., 2004, p. 22): employee involvement, integrated production technologies, total quality
management, self-directed work teams, and organizational learning. Wal-Mart shows some
manifestations of these components through statements such as: invest in people, improve
peoples lives, commitment to our workforce, focus on working families, innovation,
adaptive to change, promotion of diversity, strong culture, team collaboration, become
part of the community, efficiency in supply chain management, largest employer, WalMart effect, everyday low prices, work smart, live better. humility, caring,
empowerment, community minded, integrity always, risk-taking, continuous
improvement, and servant leadership. Negative characteristics associated with Wal-Mart
included: centralized organization, negative effect in the retail sector, loss in retail jobs,
absence of opportunity for advancement, take advantage of blue collar workers, and higher
social costs.
The data analysis showed that Wal-Mart shows characteristics associated with two
components of HPOs: integrated production technologies, total quality management, and
organizational learning. The analysis also confirmed that although top executives of the firm
espouse the interest for individuals, service to customers, and excellence (Wal-Mart, 2008f)
employee involvement is yet to be championed by the firm as a priority. The results also showed
that despite the recognition of top management about the importance of teamwork and

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empowerment, any reference to self-managed teams is not manifest. While the logistics,
information systems, and supply-chain management divisions work in coordination to achieve
efficiency in the distribution channels, these efficiencies are not transmitted to the rest of the
divisions. Critics of Wal-Mart (Fishman, 2006; Hart, 2007) asserted that the high degree of
centralization of the firm limits any initiative of empowerment or self-management.
Review of Components of HPO identified in Wal-Mart Stores Inc.
High performance organizations (HPOs) are characterized for putting people as a priority.
These organizations infuse positive organizational behavior in their members promoting personal
and organizational growth (Roberts et al., 2005). The path towards high performance is based
upon the development of intellectual capital, which is the composite of the expertise, knowledge
and insight of the workforce (Schermerhorn et al., 2004).
Schermerhorn, Hunt, and Osborn (2004) proposed a model of five components to define
High Performance Organizations (HPOs): (1) employee involvement, (2) self-directing work
teams, (3) integrated production technologies, (4) organizational learning, and (5) total quality
management. The five pillars of transformation espoused by CEO Lee Scott in 2006 have
implications for the categorization of Wal-Mart as a High Performance Organization. Each pillar
had specific action items that emphasized the commitment to people above all, an important
element of the Wal-Mart culture (Ghemawat, 2006) as well as business practices to keep the firm
competitive. Scott emphasized the aggressiveness of the strategy, yet the accessibility and caring
(Scott, 2006). All these are characteristics of HPOs (Beer, 2001; Kaliprasad, 2007).
Table 6 presents a detail of the action plans linked to each pillar as stated by CEO Scott
and linked to one of the five components of HPOs (Schermerhorn, et al., 2004). The analysis of
the statements and actions taken at the time of CEO Scotts speech revealed the presence of at

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least four of the five components of HPOs (Schermerhorn et al., 2004): organizational learning,
total quality management and integrated production technologies. In this speech, Scott did not
make reference to employee involvement, and only at very low degree, mentioned selfmanagement teams (See table 6).
Table 6. Alignment of Wal-Marts Out in Front Plan and HPO Components
Pillars
(1) Broaden Wal-Marts appeal to their
customers.
In-depth market research to understand
customers
o
Experimental stores: Evergreen
Park store in Chicago to
understand urban and multicultural customers (Scott, 2006,
para. 43)
o
Experimental stores: Plano, Texas
teaching us a lot about appealing
more to women and affluent
customers (para. 45).
o
New experimental stores to
understand: Hispanic, rural, and
baby boomers
Offer exclusive merchandise to loyal
customers and new customer base:
Expansion of Exsto urban mens
clothing line to 300 stores.

HPO component
Organizational
learning

Results
Chicago: Sales per
square foot 25%
higher than other
areas
Texas: Gross profit
per liner foot 24%
higher than other
stores.
Exsto products sold
out in 10 days

(2) Make Wal-Mart an even better place to


work.
Offer good jobs and opportunities for
advancement
Commitment to diverse workplace
Investment in people
Accessible health care for eligible fulltime and part-time associates and their
children.
o
Low premiums ($23 per month),
co-pays as low as $3.
o
No lifetime maximum in health
plan after one year.
Coverage for catastrophic medical

Overarching
concept in
HPO: People
are crucial
resource.

Associates survey
in 750 stores, Sams
clubs and
distribution centers:
90% participation
rate.
Engagement scores:
6 8 points (out of
10)

High Performance Organizations


expenses.
(3) Improve business operations and
Integrated
Inventory
efficiency.
production
reduction: 2% in
Investment and inventory management
technology
U.S. stores
Partnership between Sams inventory
Self-directing
Profit $2.2 billion
team and information system division
work teams
in 2006
o
Inventory reduction in back-rooms Total Quality
o
Uncluttered aisles in sales floor
Management
o
Elimination of inventory not
affordable by customers
o
Shipping time reduction from
suppliers to customers
Logistic team ensures to have the right
product, in the right place, right when
our customers need it (para. 51).
(4) Drive growth in international business.
Organizational
International sales
Aggressive international expansion:
learning
in 2006: 23%
o
New international markets: India.
increase.
Integrated
Visits of Wal-Mart executives to
production
China, Brazil,
potential customers homes.
technology
Argentina, and
o
Sourcing opportunities, and
Mexico leaders in
increased efficiency in global
increased operating
supply chain.
income.
o
Increase U.S. exports.
With each store we open, our company
has the opportunity to learn and grow
(para. 55).
(5) Be a valuable member of every
Organizational
Savings $26 million
community Wal-Mart serves.
learning
Conservation: 10
Strive to become valuable member of the
million gallons of
communities served.
diesel.
o
Local philanthropy: $200 million
Reduction 100,000
in 2005- 90% locally.
tons of carbon
Lessons from Katrinadioxide.
o
In-store health clinics for
Collection 150
uninsured patients.
truckload of plastic,
o
Additional leases for 50 health
$1.1 million in
clinics.
recycling revenue.
Environmental sustainability
o
No idle policy for trucks
o
High-efficiency generators
o
Sandwich bale program for plastic
recycling
Source: CEO Lee Scott speech in shareholders meeting 2006 (Scott, 2006).

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Regarding the fist pillar of transformation, Mc Williams (in Parnell, 2007) argued that
Wal-Mart was attempting to attract upscale consumers, however, the results were not as
promising as claimed by Wal-Mart, and threatened to have negative effects on small competitors.
As to the second pillar, journal articles by Parnell and Lester (2008) report the significant
influence of Wal-Mart in health care and the authenticity of Wal-Marts efforts to provide
affordable health care for their employees. The reports confirmed that 86% of the employees at
Wal-Mart had some kind of insurance (Parnell & Lester, 2008). Dube, Lester, and Eidlin (2007)
argued that Wal-Marts entry effect has lowered the retail wages and health benefits of all the
retail workers in the areas of incursion.
As to the third pillar of transformation -operation improvement-, Wal-Mart has
demonstrated the efficiency in supply chain leveraging its low-cost strategy. Rigby and Haas
(2004) contended that of the five main dimensions of retailing: quality, service, convenience,
selection, and price Wal-Mart has advantages only in price and selection. Rigby and Haas
(2004) proposed that small businesses should be able to compete with Wal-Mart through a
careful segmentation of their customers by product and pricing preferences.
The fourth pillar of transformation relating to international expansion is perhaps the
second most successful aspect of Wal-Marts business practices. Wal-Mart has learned a great
deal about cross-cultural differences and global incursion. The effect of price decline in
international markets is acknowledged by various authors (Frank, 2006; Fishman, 2006). The
fifth pillar of Wal-Marts transformation regarding sustainability has been confirmed openly by
supporters and detractors. Fishman (2006) recognized that Wal-Mart made efforts to create a
sustainable and constructive environment, by reducing the use of fuel energy, purchasing from
sustainable producers, and by requiring their suppliers or organic products to be double certified.

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Employee Involvement
Brown et al (1993) used a set of 13 Likert-scaled statements to measure the levels of job
security, employee involvement, and training that are common in high performance
organizations. This research confirmed that all the organizations that transitioned towards HPO
paid higher wages than their competitors. Beer (2001) proposed that one of the roles of managers
and leadership teams was to Create a compelling and balanced organizational development
direction (p. 224).
Wal-Mart espouses employee involvement as one of the basic beliefs of its culture (WalMart, 2008f), but this involvement is evident in a low degree through the Associate Resource
Groups. These groups promote the participation of associates in roundtables, discussions, focus
groups, and encourage knowledge-sharing. A high degree of employee involvement would
require that associates were able to make decisions on her own on the daily operations of the
firm. The data analysis does not show evidence of a higher degree of employee involvement at
Wal-Mart.
Self-Directing Work Teams
HPOs are able to link the effective results of change with capability development,
encouraging the participation of the lower levels of the organization, and refraining from
dictating change in a top-down approach (Beer, 2001). A clear mission must be integrated into
the corporate performance management system through measurements that can be monitored.
Shared values in HPOs are agreed upon by both managers and employees (internal values) and
articulated to match the customer values (external values) (Buytendijk, 2006).
Wal-Mart executives constantly mention the importance of logistic and supplymanagement teams, and information system teams (Scott, 2006) but do not provide any explicit

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indication that these are self-managed teams. The high degree of centralization, with regional
managers enforcing policies at their regional stores, suggests that top management does not have
incentives to implement self-managed teams. Consequently, this HPO component is not manifest
at Wal-Mart.
Integrated Production Technology
The ability of HPOs to integrate the back-end operations with the sales floor to deliver
customers value is critical for outstanding performance. The leadership of Wal-Mart in supply
chain management is recognized for both supporters and detractors. The firm has characterized
for using technological innovation to shorten the time that merchandise takes to go from supplier
to customer. The capabilities of Wal-Mart as one of the best supply chain operators ensure
consistent low prices and efficiency in the distribution channels (Ehring, 2006).
While Stanley (2007) sees Wal-Marts influence in the retail industry as positive, because
it leads competitors to adapt to efficient operations, Fishman (2006) views it as a negative
pressure of Wal-Mart to lead competitors to unfair practices towards workers. Stanley credits
Wal-Mart for transforming the retail industry making it more competitive; Fishman (2006)
demerits Wal-Mart for being a threat to capitalism. Buytendkijk (2006) emphasized the
importance of managing metadata, master data management, data integration, and data quality
(p. 29) which Wal-Mart prioritizes by assigning 75,000 associates in information systems and
logistics. Consequently, Wal-Mart demonstrates a high degree of integrated production
technologies as a HPO.
Organizational Learning
High performance organizations are adaptive and responsive to changes. Their ability to
learn from their experiences and take action towards innovation is an essential component of

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HPOs (Brown, Reich, & Stern, 1993). Beer (2001) purported that HPOs involve their unit
managers in leading change and to learn from leading. Wal-Mart is recognized for its
aggressiveness, innovation, and adaption to the competitive environment of the retail industry.
CEO Scott has claimed that change is part of the Wal-Mart culture, restating the openness of the
firm to learn.
Evidence of the organizational learning process was found in the data collected about
international incursion, domestic expansion, and purposeful leadership programs to foster
innovation and learning (Carpenter & Sanders, 2008). The impeccable execution of a strategy
will depend on a good formulation and the establishment of measurement system that cascades
from the executive level throughout the organization (Buytendijk, 2006). Wal-Mart has
implemented mechanisms that monitor performance and ensure the alignment of strategy and
outcomes. Consequently, organizational learning is manifest in high degree as HPO component
at Wal-Mart.
Total Quality Management
Based on the definition of Total Quality Management as a process that generates high
quality results, through continuous improvement, with the goal of meeting customers needs
(Schermerhorn et al., 2004), Wal-Mart qualifies as a HPO. Major criticisms to Wal-Mart are not
in the area of technology or supply-chain management, or strategy, but in the human aspect of
the relationship with employees, customers, and suppliers.
Despite the espoused values of investment on people manifested by top executives of
Wal-Mart, and the influence that Wal-Marts culture has on its associates, some authors
(Fishman, 2006; Hart, 2007) appear doubtful of the ability of the firm to treat employees right.
Arguments against the influence of Wal-Mart in suppliers, competitors, and manufacturers blur

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the advantages of the low-cost strategy that has saved thousands of dollars to U.S. households.
At the end, Wal-Marts socio-economic impact in savings and better life for their employees and
customers appear to offset the opposing voices. Consequently, Wal-Mart seems to demonstrate a
mid-level degree of Total Quality Management practices.
Financial Performance
The expectations of financial performance for HPOs depend of the industry where the
company operates (Schermerhorn et al., 2004). Studies indicated that HPO experience increases
of 30 to 50% in their bottom line in up to five-year period. These outcomes depend on how
competitive is the market environment and how responsive the firm is, the ability of the firm in
integrating the HPO components, the empowerment of middle management, and the leadership
of top managers.
Wal-Mart has demonstrated its financial power, with $13.4 billion in net income, and
$401 billion in net sales in fiscal year 2009. Although a consistent growth of its customer base
supports its leadership in the retail industry, the analysis of the trend in growth rates in the 20022009 period, revealed that the growth rates do not exceed 20%. Averaging the most recent 5
years, the growth rate in net income averages slightly above 9%. These indicators of financial
performance at Wal-Mart are below the benchmark of 30-50%, suggesting that Wal-Mart is not
formally a HPO.
An added element to the controversy about Wal-Mart seems to be the apparent secrecy of
its business practices. Fishman (2006) pointed out that Wal-Mart generated an information gap
of such magnitude that it is not possible to evaluate the actual performance of the firm.
Ghemawat (2006) has challenged Fishmans judgments about Wal-Mart pointing out that the
innovative operations and business practices of the firm tend to cause reactions in the industry,

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63

especially when firms are large and powerful. As recommended by Ghemawat (2006) WalMarts issues have to do with how it appears to its stakeholders and the general public.
Transparency in information by Wal-Mart should help reduce the doubts and cynicism of its
detractors.
The economic impact of Wal-Marts activities has been studied by third-parties such as
Global Insight (2008), Hausman and Leibtag (2007) acknowledging positive effects in the
reduction of household expenditures. Contrasting findings of negative effects of Wal-Mart in the
retail industry, labor market, and retail suppliers (Fishman, 2006; Dube et al., 2007; Hart, 2007)
may diminish Wal-Marts qualifications as high performance organization.
Review of Limitations of the Study
This qualitative case study was limited to data collected about Wal-Mart Stores Inc.
available in the corporate website, communications to shareholders, specialized media reports,
journal articles, and expert analysis. While statements made by the CEOs of the firm in speeches
and interviews with the media were used as basis for the analysis, face to face interviews with
associates and the management team would have added valuable insights to the research. Given
the secrecy of certain business practices at Wal-Mart, the possibility of these interviews was very
low and unfeasible.
The validity of the data collected was limited to the accuracy and reliability of the
sources and documents reviewed in the study. Information about culture, business practices,
employee programs, leadership, organizational behavior, and financial performance were
extracted from Wal-Marts website and triangulated with information from third parties.
Consistency was found in the report of financial figures, however, contrasting opinions were
manifest regarding the positive influence of Wal-Mart in the retail industry.

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Review of Delimitations of the Study


This qualitative research was delimited to the description, analysis, and identification of
business practices and organizational behavior that might reflect one or more of the five
components of High Performance Organizations (HPOs). The model used for the analysis was
Schermerhorn, Hunt, and Osborns (2004) five components model. The information about WalMart was focused on the 2002-2009 period but references to the history of the organization were
included to the extent of the availability of information online. The methodology of the study
was a combination of historical account to reconstruct the evolution of Wal-Mart since its
foundation and content analysis to identify common themes that suggested the presence of HPO
components. The researcher included the most recent scholarly articles about Wal-Mart and
excluded media reports or blog content that was not reliable.
Recommendations
This case study explored the characteristics of business operations, organizational
behavior and financial performance of Wal-Mart in an attempt to identify if they reflected one or
more HPO components of the Schermerhorn et als model. An analysis of the gaps between the
espoused values and beliefs and the actual business practices of Wal-Mat may provide additional
insights about the causes of these differences. The consideration of additional aspects of the
organizational culture of Wal-Mart that are not reported by the firm but that could be extracted
through conversations with its members would assist in measuring with accuracy the degree to
which the HPO components are present.
Future studies of quantitative nature that examine the association between the leadership
style of the top management team at Wal-Mart and each of the characteristics of HPO may
contribute to understand the degree to which leadership attributes influence the approach to

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65

employee involvement, self-managed teams, integrated production technologies, total quality


management and organizational learning. Even more, future studies providing an in-depth
analysis of the dynamic of teams at Wal-Mart, will assist in confirming or not, the findings of
this study that suggest that self-directed teams do not exist in this firm.
The findings of this study confirmed the complexity and diversity of opinions about WalMart. The expectations of the researcher were to confirm that despite the criticism to Wal-Marts
influence in the global retail environment, the five components of High Performance
Organizations were evident in the business practices, organizational behavior, and financial
performance of the firm. The results of this study showed that although the HPO components are
present at Wal-Marts with different intensity, the influence of Wal-Mart for the past four
decades is significant in the industry, in the U.S., and in important regions of the global market.

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66

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