Current business performance reflects current ways of working. WMT also gave Store Associates a $2.7B pay increase, fielded NHM formats, increased mix of ecommerce sales, refreshed stores, and invested heavily in technology which placed pressure on margins. This does not include normal investments in price. Right now, WMT has a $5B shortfall relative to its peak operating profit performance.
If performance based management works, WMT should see increased sales, profitability, cash flow, and market share. The complication in my mind is if cronyism will mitigate the potential positive impacts of performance based management and the wrong people are rewarded and retained.
WMT is an EDLC business model. As such, payroll is an addressable expense and will be evaluated on a continuous basis. Additionally, WMT is instituting a zero based budgeting process which will probably result in the elimation of headcount and other expenses. If you can’t increase prices, then operating expenses are your lever.