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This is also true for inventory turnover. As significant as the impacts of all of these outputs can be on the organization, when improvements are made to multiple outputs, the impact is magnified.
Furthermore, these outputs all contribute to another crucial output for Wal-Mart, the profits. Profit is the ultimate output for Wal-Mart, and all of their other key measures relate directly to this objective. Many other outputs at Wal-Mart, for example staff turnover, intergroup collaboration, or even customer satisfaction are less directly correlated with improvements to profits. Thus, they are not considered to be outputs of equivalent importance to those described above. Those inputs have a high level of congruence with one another. They support one another and combine with each other easily to improve the bottom line.
In areas where the key outputs do not come together, they complement one another. While improvements to same store sales will inevitably improve the sales volume, the two measures are considered distinct because they are essentially measuring two very different, complementary outputs. The growth that is based on improvements in same store sales is complemented by the growth attributable to new store growth. Likewise, gross margin makes some contribution to the net margin, but the measures reflect to distinct, complementary components of cost - the cost of goods sold and the overhead. This complementary relationship is reflected on the balance sheet as such, but Wal-Mart could choose to measure COGS and overhead separately should they so desire. In either case, the outputs are complementary because they combine to yield one definitive output. Yet, because of the strong emphasis on the cost leadership strategy, both are equally relevant to Wal-Mart's strategic objectives.
Wal-Mart has done an exemplary job of building output congruence. Many of their other outputs are considered of lesser importance to the ones described above. For example, it is not that Wal-Mart is entirely unconcerned with employee job satisfaction, it is simply that the company is less concerned with that than they are with improving inventory turnover or margins. Indeed, where possible Wal-Mart does seek to improve job satisfaction. At times, there are conflicts that arise. Sam Walton once remarked that there were "too many millionaires" at Wal-Mart, a reference to a managerial culture that he felt was not congruent with the company's low-cost strategy. Walton himself had stayed at budget motels and walked to meetings in order to reduce costs, but the need for Wal-Mart to deliver job satisfaction at the executive level in order to attract and retain talent had led to this perception of output conflict. To combat this, Wal-Mart has built a strong corporate culture. This culture essentially serves to subordinate outputs and objectives that are not congruous with the organization's cost leadership strategy. The effect of this is to inhibit the rise of conflict between different outputs in the organization.
The Nadler-Tushman congruence model emphasizes the need for organizational structure to support strategy. Wal-Mart's structures consistently emphasize the need to follow the low cost strategy. The strategies are carefully coordinated with respect to the most important outputs. Inventory turnover is driven by just-in-time ordering, cross-docking and maximizing turnover per square foot of store space. Wal-Mart's aggressive leveraging of its buying power supports its desired output of gross margin maintenance.
Policies with regards to wages, corporate travel and the use of information technology to reduce overhead all support improvements to the net margin. Sales volume is driven by the purchasing, the product mix and growth. That attention to product mix and inventory turn drives the output of same store sales growth.
There is very little conflict between any of Wal-Mart's internal structures or policies and their most desired outputs. Further, each of those desired outputs supports the overall objective of growing profits and increasing shareholder value. On the basis of the Nadler-Tushman congruence model, there is a high degree of congruence between Wal-Mart's outputs, and between the outputs and the strategic objectives.
Burke, W. Warner & Litwin, George H. (1992). "A Causal Model of Organizational Performance and Change." Journal of Management. Retrieved November 27, 2008 at http://findarticles.com/p/articles/mi_m4256/is_n3_v18/ai_13526990/pg_2
Falleta, Salvatore V. (2005) "Organizational Diagnostic Models: A Review and Synthesis" Leadership Sphere. Retrieved November 27, 2008 at http://www.leadersphere.com/img/Orgmodels.pdf[continue]
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