Soderquist: Wal-Mart?s Minister of Culture

For a decade, Sam Walton tried to hire Don Soderquist to work for Wal-Mart Stores Inc.

Every time Walton traveled through Chicago, he would leave O’Hare Airport and go to Soderquist’s nearby office to talk to the man who was head of the Ben Franklin Stores chain.

With 15 stores, Walton was Ben Franklin’s largest franchisee. At the same time, Walton was hard at work starting his own company.

But Soderquist was skeptical. Nobody knew that Walton’s small-town discount store chain would grow to be the largest retailer in the world.

Soderquist resisted until 1980, the year Wal-Mart passed Ben Franklin with $1 billion in sales.

He’s been a staple of the company ever since, receiving — but not accepting — much of the credit for a distinctive corporate culture.

In 1999, Soderquist was the most highly compensated executive of a publicly traded company in Arkansas, bringing home $10.5 million in salary, exercised stock options, profit sharing, bonuses and other compensation. Last month, Soderquist announced that he would retire at the end of this week from the Bentonville retailer. He will remain on the company’s board of directors, where he has served for 20 years.

“I was foolish enough to tell them when I joined the company … that the great growth years were over but we could still grow the company,” Soderquist, now 66, said. “That shows you how much I know.”

Wal-Mart’s growth rate was about 40 percent per year at the time. Over the past decade, the annual growth rate has averaged 20 percent, which is phenomenal for a company that has sales 165 times than it did 20 years ago.

“Even though we’re here and we’re a part of it,” Soderquist said, “you kind of look back and shake your head and say, ‘Wow, that’s fantastic!”‘

Background

Donald G. Soderquist was born Jan. 29, 1934, in Chicago. He received a bachelor’s degree in business administration from Wheaton College in Illinois in 1955. He has received three honorary degrees — from John Brown University in Siloam Springs, Southwest Baptist University in Bolivar, Mo., and Judson College in Chicago.

From 1964 to 1980, Soderquist was with Ben Franklin Stores, rising through the ranks to serve and president and CEO for the last six years of his tenure.

At Wal-Mart, he was executive vice president of administration and logistics from 1980 to 1985, executive vice president of operations and administration from 1985 to 1988, vice chairman and chief operating officer from 1988 to 1999, and senior vice chairman from 1999 to 2000.

Soderquist was responsible for overseeing many of Wal-Mart’s key support divisions, including real estate, human resources, information systems, logistics, legal, corporate affairs and loss prevention, as well as the company’s McLane Co. division.

“Without question, Don Soderquist has played a vital role in the growth and development of Wal-Mart over the last 20 years,” Chairman Rob Walton said in a press release. “He is an inspiring leader and talented executive who sets the bar in terms of business ethics and personal integrity.

“My father respected him greatly, as do all of us at Wal-Mart, and we are pleased he has agreed to remain on our board and to serve in an advisory capacity.”

Ben Franklin influence

Soderquist said Walton took many of his early ideas for Wal-Mart from the Ben Franklin chain.

“Sam learned from Ben Franklin and others how to do Wal-Mart,” Soderquist said.

Among the ideas Walton borrowed from Ben Franklin were everyday low pricing, the controlled flow of new items into the stores, and monthly advertising circulars — rather than weekly or biweekly — delivered through the mail or by hand in some markets.

But franchisees had the freedom set their own prices at Ben Franklin stores. Wal-Mart didn’t franchise and prices were uniform from store to store.

“When [Walton] went into Rogers with the first Wal-Mart store, he followed the practices of Ben Franklin,” Soderquist said. “Over the years, those changed.

“What he did slowly over time in the markets where he had those 15 Ben Franklin stores was to convert them into Wal-Mart stores.”

Walton opened the first Wal-Mart on July 2, 1962, in Rogers. By 1969, Walton had 14 Ben Franklin stores and 18 Wal-Mart stores. A year later, Wal-Mart had 32 stores, $31 million in sales and was trading publicly at $15 per share. By 1980, Wal-Mart had 276 stores and $1.2 billion in sales.

Soderquist said Wal-Mart survived and thrived because of its ability to change and to change frequently.

“We’re not bashful,” he said. “We have a low RC factor — resistance to change. And we continue to try to improve.”

In 1980, when Soderquist joined Wal-Mart, the company grossed about 5 percent of what Kmart Corp. of Troy, Mich., brought in. In 1991, Wal-Mart passed Kmart in sales.

Kmart, currently the nation’s No. 3 retailer behind Wal-Mart and Sears, Roebuck and Co., couldn’t keep up because the company resisted change, Soderquist said.

“They had a successful product that worked,” he said. “Kmart’s formula worked. They were very profitable. They continued to use a cookie-cutter to cut it out. During that period of time, we continued to change.

“[Kmart] followed ‘if it ain’t broke, don’t fix it,’ but they didn’t change with society, the market and the economy. We would relocate stores if they weren’t serving the community successfully.”

At that time, Kmart wouldn’t locate stores in cities with a population of less than 50,000. Those small towns became a target for Wal-Mart’s nationwide expansion. Wal-Mart even built stores in towns with as few as 5,000 residents.

Now, Wal-Mart has 1,773 Wal-Mart stores, 780 Supercenters and 466 Sam’s Clubs in the United States and more than 1,000 stores abroad.

Wal-Mart employs more than 885,000 people in the United States and 255,000 internationally. The company had $165 billion in sales last year, second only to General Motors Corp. in the United States.

Soderquist said Wal-Mart still has room for growth, particularly in the areas of food, international and Internet sales.

Influence on culture

Although Wal-Mart credits Soderquist with initiating many of the folksy aspects of the retailer’s corporate cultural — such as Saturday morning cheerleading meetings for employees at corporate headquarters — Soderquist gives the credit back to Walton.

“I wasn’t trying to be Mr. Culture,” he said. “No one could replace Sam Walton.”

Soderquist said he and former CEO David Glass “could do the job of keeping it together” after Walton’s death in 1992.

Soderquist said the culture centered around the individual customer and the individual employee.

“The actions of one clerk in one store is important to how the whole company looks,” Soderquist said. “When one person acts contrary to the culture, that screws up the whole pattern. It’s what Sam believed in. It’s what I believe in. It’s how you think, how you act. It’s basically everybody’s responsibility.”

Johnnie Roebuck, dean of the graduate school at Henderson State University in Arkadelphia, thinks Soderquist is too modest about his influence on Wal-Mart’s culture.

“He was definitely the hero, second only to Sam Walton,” she said.

Roebuck studied the corporate management of Wal-Mart for her doctoral dissertation. She compared the company’s management to the leadership style of school districts in Arkansas. She concluded that “a good leader is what matters” and that schools could benefit from business-style management.

During her research in 1989 and 1990, Roebuck found that Soderquist was second only to Walton as a motivational force.

“He was so in-touch with the people,” Roebuck said of Soderquist. “He was a very definite driving force to keep the original Wal-Mart culture alive. I think he carried it to a new height. He was a quick study.”

Roebuck said Wal-Mart employees described Soderquist as “natural,” “down to earth” and “a good listener.”

Discount Store News agrees with Roebuck. In 1996, when Soderquist was inducted into the Discounting Hall of Fame, the industry magazine wrote: “Probably no other Wal-Mart executive since the legendary Sam Walton has come to embody the principles of the company’s culture — or to represent them within the industry — as has Don Soderquist.”

Soderquist said he was “fortunate” to be at Wal-Mart during the years of explosive growth.

“I suppose I’m a little outgoing,” said the gregarious Soderquist. “When I believe in something, I don’t hide it. I try to preach it. I live it. The success of this company has a lot to do with the way we treat each other.

“It’s worked. Wal-Mart is an example of the free-enterprise system. [Walton] started a little business and was able to convert it into this gigantic company.”

And Walton listened to his customers along the way.

A Wal-Mart employee in Crowley, La., suggested the company put customer-greeters at store doors.

Walton listened and made the woman a greeter in the Louisiana store. Now, the greeters are in every Wal-Mart store and are an integral part of Wal-Mart culture.

“The people in [Crowley] just thought it was fantastic,” Soderquist said. “We’re human beings. We don’t do everything right in any location. … Some ideas work; some don’t work. But we learn from every one of them.”

Soderquist said the secret is respect — respect for the customer and the employee.

“People like to be treated nice, with respect and dignity, all over the world,” he said. “When you treat people right, they respond.”

The Future

Soderquist said he doesn’t know yet what his schedule will be after he retires. He’ll maintain an office at Wal-Mart headquarters in Bentonville. Soderquist said he won’t become a consultant, but he will serve Wal-Mart “in an informal advisory capacity.”

Soderquist said he’ll stay busy as chairman of the board at John Brown University.

“I do have a passion for teaching leadership,” he said. “It used to be real clear what was right and wrong. Today, it’s not real clear. … A big percentage of people believe we have lost our way.”

Soderquist said the notion of “situational ethics ” — ethics that vary from one situation to another — is “a bunch of baloney.”

“I believe in true ethics,” he said.

Soderquist said JBU has undergraduate and graduate programs on business leadership and ethics. A graduate MBA program that will begin this fall has a special emphasis in ethics, he said.

Soderquist said he recently taught business seminars in Belize and Panama City sponsored by the Wal-Mart scholars. He hopes to be able to teach similar seminars around the world.

“I would love to be involved in things where I can help people,” he said. “I have to make my life meaningful. I can’t vegetate. My mind won’t let me.”

But Soderquist wants to have some time to relax, also. He said he plans to travel, play golf and spend time with his grandchildren.