Wal-Mart Stores Inc., in the midst of spending $1 billion to raise employees’ wages and give them extra training, has been cutting the number of hours some of them work in a bid to keep costs in check.
Regional executives told store managers at the retailer’s annual holiday planning meeting this month to rein in expenses by cutting worker hours they’ve added beyond those allocated to them based on sales projections.
The request has resulted in some stores trimming hours from their schedules, asking employees to leave shifts early or telling them to take longer lunches, according to more than three dozen employees from around the United States. The reductions started in the past several weeks, even as many stores enter the busy back-to-school shopping period.
Chief Executive Officer Doug McMillon is trying to balance a desire to improve service – partly through increased spending on his workforce – against investors’ pressure to keep profit growing. Labor costs, which rose after Wal-Mart increased its minimum wage to $9 an hour in April, have weighed on earnings, which missed analysts’ expectations last quarter. At the same time, Wal-Mart is trying to maintain low prices to fend off rivals.
The reduction in hours is taking place only in locations where managers have overscheduled workers, staffing the store for more time than they’ve been alloted, said Kory Lundberg, a spokesman for Bentonville, Arkansas-based Wal-Mart. The reductions won’t affect efforts to better staff stores, shorten checkout lines, and improve cleanliness and stocking, he said.
Greg Foran, the head of Wal-Mart’s U.S. operations, has said the retailer has dual goals of containing expenses and spending more to improve its stores.
“Amid the investment, we’re focused on growing sales and controlling costs, as you would expect from Wal-Mart,” Foran said earlier this month after the company announced disappointing earnings. “We are staying true to our roots. However, we are committed to improving the customer experience and we will protect the investments necessary to achieve this goal.”
Striking that right balance is proving challenging for the world’s biggest retailer, according to accounts from some employees.
A Wal-Mart employee at a location near Houston, who asked not to be identified because she didn’t have permission to talk to the media, said her store had to cut more than 200 hours a week. To make the adjustment, the employee’s store manager started asking people to go home early two weeks ago, she said. On Aug. 19, at least eight people had been sent home by late afternoon, including sales-floor associates and department managers.
The employee said she’s covering an area once staffed by multiple people at one of the busiest times of the year – the back-to-school season. On a recent weekday, she had a customer who had to wait 30 minutes for an employee to unlock a product the shopper wanted to purchase, she said. In emails, interviews and social-media posts, employees in a range of positions across the country shared similar stories of hours being cut.
The staff at a location in Fort Worth, Texas, were told that the store needed to cut 1,500 hours, according to a worker who asked not to be named for fear of being reprimanded. After being asked to stay late to help with extra work earlier in the week, some were told to take two-hour lunch breaks to make up for the additional hours they’d clocked, the employee said.
McMillon’s move to raise Wal-Mart’s minimum wage to $9 an hour in April has stirred other frustrations. Some of the chain’s more senior employees have criticized the increase, saying it mostly benefited newer workers and that more experienced staff shouldn’t be making at or near what new hires are paid.
Wal-Mart has said it anticipated some employees being disappointed about not getting raises and is trying to create more opportunities for workers to advance within the company. It also has a new scheduling system.
By cutting hours, Wal-Mart now risks losing some of its best employees to competitors that can provide more stable schedules, said Burt Flickinger, managing director at Strategic Resource Group. The company also may alienate customers if the staffing levels result in poorer customer service and products not getting on store shelves, he said.
Wal-Mart has made strides during the past year in addressing customers’ complaints of barren shelves, dirty stores and long check-out lines, Flickinger said. But some locations still aren’t staffed well enough during peak times, he said.
“Wal-Mart risks a talent drain at a time when McMillon has made meaningful improvements in the company,” Flickinger said. “All these competitors will take Wal-Mart workers to make themselves strong and help make a major competitor weaker.”