Tough Times at Wal-Mart

Cynthia Haddad worked as a pharmacist at Wal-Mart for ten years before the retail giant fired her. Wal-Mart claimed that she violated company policies. She claimed that male managers were never fired for the same mistakes. She also had the gall to ask for the same pay as males doing the same job.

Last week, a jury in Massachusetts believed Haddad’s side of the story and awarded her two million dollars.

Also in the news last week, state courts in New Mexico, Missouri, and New Jersey agreed that lawsuits against Wal-Mart could proceed as class-action suits. Thousands of current and former Wal-Mart employees are claiming that they were forced to work off the clock without pay. Workers in Pennsylvania, California, and Colorado have already won millions of dollars from Wal-Mart for similar claims.

These cases are small potatoes, however, compared to the sex discrimination case Wal-Mart faces. Filed in June, 2001, the largest ever civil rights class action lawsuit asserts that Wal-Mart discriminated against women in a variety of ways. In this case, the class includes 1.6 million current and former female employees.

I’ve seen some of the data from this case and the evidence is pretty overwhelming. In every job from cashier to regional vice president, women made less than men. Wal-Mart defended itself by claiming that pay was based on performance and experience. Unfortunately, Wal-Mart’s own data showed that female employees had higher performance and more experience, on average, than male employees.

If you had invested $100 in Wal-Mart stock on June 1, 2001, you would have about $95 today. This seems pretty bizarre considering the fact that Wal-Mart has reported record profit levels every year during this time period.

Personally, I believe that Wal-Mart’s stock price is being held back by the uncertainty associated with these lawsuits. What would happen if a jury decided that 1.6 million women deserved the same award as Cynthia Haddad? That’s 3.2 trillion dollars.

Surely the judgment couldn’t reach that figure, but what if each plaintiff is awarded an average of ten thousand dollars? That’s still 16 billion dollars. Even for Wal-Mart, that’s a huge hit.
Wal-Mart does so many things well, how could they possibly allow such basic human resource blunders? I think the root of the problem was revealed in a 2004 Workforce Magazine article (People Problems on Every Aisle). In that article, a former Wal-Mart human resource manager explained that store-level human resource managers were typically hired off the street with little concern for professionalism. They typically had very little knowledge of human resource practices or employment law.

With little expertise they would also have little power over store managers who were pressured to lower labor costs. You mix it all together and you have people working off the clock and incompetent manager favorites being promoted.

One might still wonder why Wal-Mart’s corporate leaders would allow this to happen. The larger problem at Wal-Mart, and lots of other companies, is that they do not believe in the value of a strong human resource function.

Since they don’t believe in its value, they don’t invest in it. Since they don’t invest in it, they don’t receive any value from it. Then they’ve convinced themselves they were right from the beginning.

I’m not sure if these lawsuits will end up costing Wal-Mart billions or trillions of dollars; but I do know that competent and professionally trained human resource professionals make a positive impact on organizations.