Wal-Mart Generally Avoids Group Decision

Wal-Mart generally avoids group decision making beyond the executive level, in part to avoid the difficulties inherent in that style of decision making. Wal-Mart's decision making process is data-driven (Guthrie, 2008) and heavily centralized. The fundamental premise of decision-making at Wal-Mart is that decisions are not to be made under uncertain conditions. When negotiating with suppliers, for example, Wal-Mart executives often have better knowledge of the supplier's cost structure than do the representatives of the supplier.

In terms of centralization, it was only in 2004 that the company stationed a high-level executive outside of Bentonville, and even then it was only in Miami, not overseas (Troy, 2004). At head office, executives still rely heavily on quantitative data for decision making. Wal-Mart's strict reliance to data in its decision making process is touted as one of the reasons it has become so successful. In short, the company micromanages its operations based on hard crunching of the numbers.

At the heart of this strategy is the recognition that other forms are decision-making are inherently less effective. By gathering as much data as possible, Wal-Mart is able to eliminate the risks associated with traditional decision making. Uncertainty is removed, and replaced with hard facts. There are times, however, when hard facts are not available. For example, when a new product is introduced, Wal-Mart may not have hard data with respect to how that product will sell, or in which part of the store it should be sold.

In this instance, Wal-Mart allows for guesswork and groupthink on the part of store management. They can do this because they monitor sales closely, and they can solve any problems by trial and error. In its recent history, Wal-Mart has seldom faced the types of situations that would call for risky decision making. The firm does not really have a crisis of resources, since it is the largest company in the world and consistently profitable. The firm has never faced any significant crisis.

Even when Wal-Mart was a small regional chain, it was still successful. Wal-Mart's decision making horizon is typically very short. While it has larger strategic goals, most of Wal-Mart's success is driven by short-term decision making, specifically with respect to merchandising and with respect to purchasing. One of the reasons why Wal-Mart has been able to operate with such a simplified decision-making process is because all decisions have the same base objective - to lower costs. This singularity of purpose almost entirely eliminates goal conflict.

If you examine Wal-Mart's situation vs. The rational decision making process, you can see that the company meets most of the criteria that are the assumptions of rational decision making. This means that almost all decisions made at Wal-Mart are purely rational, thus driven by cost reduction and with strong information. Wal-Mart eschews group decision making. Enculturation is key to this - when you join Wal-Mart it is made clear that you are going to do things their way. With a company that successful,.