In this article, we will see Walmart’s Organizational Structure.
Walmart is one of the most successful companies in the world. It owes its success to its organizational structure which endeavors to integrate the values of its founder Sam Walton. The organizational structure of Walmart is a determinant of its business activities, which are significant in the retail industry, including e-commerce. This article will trace the organizational structure of Walmart, its impact on the company, and the reforms which can be brought about.
A US multinational corporation in the retail industry having branches in over ten countries, Walmart possesses a hierarchical functional organizational structure that has two major traits: hierarchy and function-based definition. These will be elucidated upon subsequently. To be successful, a corporation needs to ensure that both its customers and employees feel secure about their future. Walmart has made this certain through its organizational structure.
The organizational structure of Walmart
Walmart has a very wide base not only in the US but also around the world. The company follows the matrix structure which is a hybrid of divisional and functional structures. To manage this vast retail chain, the corporation has divided the areas into districts/regions, each district has a Regional/ District manager who supervises the store in the area. The stores in each district are headed by a Store Manager.
The hierarchical structure
As mentioned previously, Walmart has a hierarchical organizational structure with Chief Executive Officer(CEO) as the top-level management. The CEO is at the top and not answerable to anyone. Every other employee is subordinate to the CEO. The directions are disseminated from the top-level management to the Middle-level management and further passed on to the employees under various departments.
The hierarchy is as follows:
The information is passed from CEO to Regional Manager.
From Regional Manager, it is emanated to the Store Manager.
The Store Manager imparts the information to the managers of the various departments who pass the information to their respective employees.
The hierarchy is a vertical line having the CEO at the top. The information travels from top to bottom and the reporting of the operations in the opposite direction.
The function-based structure: various departments
Walmart operates through various departments that deal with different realms ranging from production to human resources. The following are the departments:
- Production Department
- Custom Relations Department
- Sales Department
- Human Resources Department
- Information Technology Department.
All the departments are headed by separate managers who coordinate with the Store Manager. This division of the department ensures the accomplishment of targets systematically and smoothly. This leads to a better execution irrespective of the size of the operation. Any successful corporation would divide the work amongst various departments to get positive results.
The organizational structure can be explained through an instance. For example, if a new policy is formulated, then it would be imparted to the Regional managers by the CEO and then to the Store Managers who will further emanate it to the managers of the departments and the employees will be expected to operate in compliance with the new policy.
Why this organizational structure?
Owing to the wide base of this gigantic retailer company, the hierarchical and the function-based organizational structure is the best suited. Walmart stores are situated in different geographical and cultural regions. To increase their sales and impact, they need to comply with the demand of the local customers. Globalization has been a driving force behind the expansion of Walmart all around the world. But the way it has strengthened its management by using the functional structure or the matrix structure is commendable. This structure has permitted the division of power amongst the regional managers, store managers, and different department managers which has made it easier for them to focus on the customer base. The following factors have determined the type of organizational structure of Walmart:
- The geographical base of the company.
- The customer base of the company.
- The values of the founder.
By dividing the power, they have established a better employee-employer relationship and even a better customer-company relationship. For instance, the human resource department deals only with human-related issues and solves the problems while the Information Technology department deals with the technological stuff.
The informal organizational structure of Walmart
Walmart believes in maintaining formal relations with its employees. However, to increase employee productivity, they do organize trips and events where the employees are permitted to interact freely. But within the organization, a formal relationship is expected where the subordinates have to obey their superiors.
Pros of the organizational structure of Walmart
Walmart’s organizational structure has the following advantages:
- The division of employees helps in keeping things in order.
- Its organizational structure makes every employee perceive themselves as an essential part of the corporation.
- This organizational structure helps in eradicating bureaucracy as every department can make its own decisions and is answerable to just one head.
- Unnecessary discussions, lengthy and cumbersome procedures, and negotiations are avoided through this.
- Following the hierarchical organizational structure and not giving equal powers to every department aids in avoiding any conflicts that might occur in case of opposing opinions.
- Better implementation and quick decision-making are some of the traits of this organizational structure.
- In case of any queries or differences of opinions, people can reach out to the human resources department which ensures a worker-friendly environment.
Cons of the organizational structure of Walmart
Walmart’s organizational structure has the following disadvantages:
- The company is often criticized for the low wages of its employees.
- The managerial control is maximized through this organizational structure.
- The employees’ opinion has less significance as it is impossible to take the employees’ viewpoint to the top management level. This might reduce the productivity of the workers.
- Due to the hierarchical nature of the organizational structure, blunders could be committed as the orders from the high command would be obeyed even if they aren’t in the favor of the company.
- The company is often criticized for its poor public relations and environmental problems. Maybe they should create separate departments for the issues concerned.
There exist both advantages and disadvantages of the organizational structure followed by Walmart. Though the company has made profits and is a huge success, there remains room for corrections. The company needs to address the concerns of its employees seriously to get better productivity.
Amazon and Walmart: Same organizational structures but different degrees of success
Just like Walmart, Amazon, the e-commerce retailer company, also follows the vertical hierarchical organizational structure. However, the net income of Amazon is $2.133.1 crores while the net income of Walmart is $1370 crores. The difference between the net incomes is due to the contrast between the working policies and nature of store of both the companies. The major differences are as follows:
- Walmart started with physical stores and entered into the world of e-commerce in recent years, while Amazon was an e-commerce retailer from its initiation. Hence the organizational structure is followed differently in both cases.
- Walmart produces more than 4 million products and sells across 27 countries while Amazon produces 250 million products which are sold in around 180 countries.
- Walmart has always aimed at providing consumers with products at cheaper prices while Amazon is considerably expensive. Here, the ideals of the founders make the difference.
- Walmart is not considerate about giving independence to its employees while Amazon does give a significant degree of independence to its managers.
These differences might be the detriment factors of the success of both the retailing giants. Despite having the same organizational structures, one company is making remarkable profits. But one can take into consideration the fact that Walmart’s organizational structure and business strategies are influenced by the values and ethics of its founder, who believed in providing cheaper products to the customer, thus trying to reduce the rich-poor divide. While the founder of Amazon, Jeff Bezos works with the motive of profit maximization.
The organizational structure of the companies plays a crucial role in shaping their success. Walmart’s success in the retail world is credited to its hierarchical function-based organizational structure. However, the fact that there exist certain loopholes in the structure can’t be concealed. This article traced the pros and cons of the organizational structure followed by Walmart i.e. the matrix structure and compared and contrasted it with a company that follows a similar structure but is successful.
Frequently Asked Questions (FAQs)
What are the different organizational structures?
There are majorly four organizational structures:
Divisional is where people are grouped according to the product and service they provide and not based on the work they do. The functional structure involves grouping people according to the task they perform. Matrix is a hybrid of functional and divisional structures. And the flat structure gives the employees the ability to communicate directly with their peers.
Which structure is better to follow?
All the structures execute equally positive results if followed in the right situation. For instance, a small business can use any structure amongst the functional, divisional, and matrix to increase its efficiency.