Walgreens' pay-for-performance compensation system and customer experience strategy

Walgreens -- Compensation Analysis

Pay System and Benefits Package Overview

Walgreens has seen many changes in its industry and specific niche over the last decade. The rise of prescriptions by mail, ecommerce giants such as Amazon and EBay, the passage of the Affordable Care Act (ACA), and one of the worst economies since the Great Depression to name a few (Wagner & Orvis, 2013). With this backdrop the company had an ambitious goal of reaching seven thousand stores in 2010 from just over four thousand stores in 2003; Walgreens was opening a store every seventeen hours at one point (Wagner & Orvis, 2013). The company's strategy was primarily based on location however the changes in the industry forced them to reinvent themselves and create a new strategy to remain competitive.

At the center of this strategy was using human resources to create a better customer experience. Walgreens looked at other businesses that were leaders in driving customer experience and realized that people developed an emotional connection to a cup of coffee. Yet, Walgreens customers did not perceive the business any differently than other drug retail chains. Thus they had to create a better experience and creating a compensation package to support the types of behaviors they desired from their employees was a cornerstone of this strategy.

The company developed a true pay-for-performance system that is based off of three different performance metrics: financial results, team member engagement, and customer service (Wagner & Orvis, 2013). Managers were also positioned to be closer to the customer and make local decisions. Many of the previous duties of the local manager, such as deciding merchandising, was transitioned to a corporate responsibility to free up their time so they could focus more on creating a better customer experience.

Mission and Vision

Mission Statement

"To be the most trusted, convenient multichannel provider and advisor of innovative pharmacy, health and wellness solutions, and consumer goods and services in communities across America. A destination where health and happiness come together to help people get well, stay well and live well." (Farfan, N.d.)

Vision

To be America's most loved pharmacy-led health, well-being and beauty enterprise (Walgreens, N.d.)

Discussion

Walgreens has redesigned their compensation packages to better align with their mission and vision. The company has moved to a performance pay system for local managers and has supported their roles as much as possible. Walgreens corporate offices now handle merchandising and other functions which were previously a duty of local managers and accounted for a large portion of their time. The local managers now have more time available to focus on employee development and community outreach.

The company has even started an online university, Walgreens University, that offers more than 200 courses through classrooms, e-learning and self-paced activities to employees at all levels and career stages (Tucker, 2014). Walgreens has even partnered with five universities to offer tuition discounts to employees that enroll in their schools. This represents Walgreens dedication to their employees career development and there is an online job board that is dedicated to internal job positions that are available after an employee has worked for the company for six months.

The company has also embraced the importance of human resources in the company's overall strategy and has positioned a member of the HR team with all of the company's functional leaders. Their work focuses on developing strategic, tailored talent plans for each business and implementing key strategic initiatives, including succession planning, change management, organization design, culture and leadership development (Tucker, 2014). By having a member of the HR team represented at many levels of the organization, the company can make better decisions about how to incorporate a human resource perspective into decision making.

Walgreens has tried to change the internal culture in order to improve the customers' experience. Part of this effort has included a focus on the cultural beliefs within the organization. Walgreens has developed a cultural beliefs statement in which all employees receive training for (Tucker, 2014):

Be One. I know what Walgreens must deliver, and I align my daily action with others to make it happen.

Be Real. I am open, honest and respectful in my words and actions every day.

Be Bold. I demonstrate courage in everything I do to create the future of Walgreens.

Build Trust. I listen, seek to understand and always assume positive intent.

Love Customers. I engage with customers and passionately innovate to exceed their needs.

Own It. I constantly ask, "What else can I do to achieve our results?" And refuse to blame others.

Live It. I help people get, stay and live well.

It is clear that Walgreens has an industry leading HR focus that has been developed out of making the customer experience a priority. The changes in the industry have moved the focus from simply having the best locations to improving the customers' experience. The company is trying to position itself as more than just a drug store and is playing a bigger role in health management. The move beyond a traditional pharmacy into a more comprehensive service provider is heavily dependent upon their human resources; especially as the company begins to hire more health care professionals and clinicians.