Question

Irrelevant cost represent a business cost that does not impact a management decision. Since an irrelevant cost does not impact a managerial decision, in all likelihood the cost will not change that decision. In one decision a specified cost may be irrelevant to that decision, but with another managerial decision that cost may indeed be relevant, thus the term relevant cost, which is decision specific, (wiseGEEK, 2003-2019). Currently, Walmart has 1.4 million American workers, Walmart increased employee wages because it had to. The company was facing immense pressure from the media, their employees and outside organizations for wage increases. With churn costs 1.5 – 2.5 times the cost of the employee’s salary, Walmart needs to continually focus on employee retention. With the media running weekly stories about the poor working conditions at Walmart or the social services received by Walmart employees, the company needed a plan to stop the negative PR. Plus, as other retailers increase their wages and benefits, Walmart’s management is forced to do so as well, otherwise it would be left with a lack of applicants for its positions, (Gustafson, 2018). Walmart’s biggest expense is its labor costs. Instead of paying each employee a higher wage and then reducing their hours, Walmart ought to revamp its entire strategy to cut the number of workers it employs. Self-serve has been implemented in every industry because of its incredible savings power. Walmart needs to drastically reduce its workforce to save on its greatest expense. Employees will be happier because of the increased opportunities for full-time hours and Walmart shareholders will be satisfied with higher profit from lower total employee wages, (Gustafson, 2018).

What can be done differently?

Answer 1

In the given situation some of the measures that can be adopted are as follows:

• Rather than increasing the wages directly, Walmart can give employment benefits like insurance, travel expenses or medical expenses till certain limit in the employment scheme of its company. This will invoke a sense of profit in the employees as they would be attracted towards these benefits which they can use in the future.
• Walmart can also start special target policy wherein, the employee who achieves the specified target as directed will be given bonus along with the salary. This will invoke a sense of more work in employees and they would work more efficiently for the company.
• More back-end work can be given to labor force rather than on desk jobs which will reduce the labor demand of Walmart. More Back-end job attracts less labor as it is less productive and less valuable to the workforce. Thus, this will leave less applicants to Walmart.
• Walmart can also adopt new AI technology in its business that will involve one time investment and will not require much human labor and thus reducing the wage burden on the company.

All these measures and many more can be adopted by Walmart to solve its problem. This will also improve its PR conditions as all this is in favor of labor and will also be supported by the management as it leads to less total employee wages and hence more profit.