McMillon: Wal-Mart Must Reduce Bureaucracy, Push Exciting Products

Clinging to the core operating principles of Sam Walton, but also retooling Wal-Mart Stores for the future is always on the mind of CEO Doug McMillon who has one foot in the past and one in the future.

McMillon was one of the speakers at the University of Arkansas’ Center for Retail Excellence annual conference on Thursday (June 11) at the Northwest Arkansas Convention Center. This marks the 15th year for the conference which drew about 350 of the top retail and supplier professionals from around the country for the day-long event. The event was moved to the NWA Convention Center this year because of capacity given that McMillon was on the agenda.

In an interview format conducted by Richard Smucker, CEO of J.M. Smucker, McMillon discussed Wal-Mart’s past and present challenges. Described as a merchant at heart, McMillon told the audience that he and his executive team being in U.S. stores regularly is the basis for many of the recent changes that include wage increases and adding back department managers.

“That image of Sam Walton on one knee among store associates is authentic. He knew the best ideas came from those associates serving our customers every day,” McMillon said.

McMillon said Walton had been known to take one of his ideas to the store and pitch it to associates. If they liked it, he would write it down on a yellow pad and bring it back to the home office to say he heard a good idea from a store associate.

He said one of the things the new management team is working on includes reducing the Wal-Mart bureaucracy that has developed over the years. He said the layers have created a disconnect that prevents necessary communication. He said people will tell you what you don’t want to hear if you ask, but too often executives don’t ask.

“We have a lot of room to improve,” McMillon said.

WAGE, DEPARTMENT MANAGER CHANGES
McMillon said while visiting a Denver store he was talking with store management and workers about what could be done to help instill a sense of ownership in the company.

“They pointed to an independent burger joint in the parking lot and said their starting wage was $10 per hour and we pay $9, and that can’t happen,” McMillon said.

He said the planned $1 billion investment in wages is a long-term effort and he can’t magically tell Wall Street when the pay-off will happen. McMillon said the board of directors understands it’s a long-term commitment.

McMillon said during his speech Friday (June 5) at the Wal-Mart shareholders meeting that he is constantly amazed at how many principles Sam Walton got right. He said serving customers, saving people money and valuing your workforce while also acting with integrity have stood the test of time.

That said, McMillon said Thursday that “Sam Walton would not want us looking back all the time, it would ruin our business. … But our culture matters.” He said as an organization grows larger it can lose touch with its base, which is why Wal-Mart spends so much time and effort to keep their culture at the front and center of mind.

McMillon said being out in the stores he heard from managers that managing multiple departments was complicated and sometimes logistically challenging. He said part of the supercenter’s success through the years was related to the fact that department managers ran their departments like stores within a store.

“We lost something over years when it was our associates in the stores that continue to help us know what works and what doesn’t,” he said.

PRICES, ‘CREATIVE’ PRODUCTS
McMillon told suppliers in the room that Wal-Mart’s focus on Everyday Low Price and innovation are top areas they are seeking from their vendor partnerships.

“Too many of our stores lack excitement. It’s just about doing a better job executing modulars … about 15% of merchandising is creative, getting those items that customers don’t expect to see,” he said.

Years ago, McMillon said a huge tennis ball was sold in stores that was not functional for many things, but it sold like crazy for pet toys and child’s play.

“When our numbers got bigger over the years, we weeded out some of the risk takers which are important to the equation. You can manage a department to death,” he added.

During a brief question and answer segment, a participant asked McMillon what he would ask IBM’s Watson to fix or help fix at Wal-Mart. With a laugh, McMillon responded, “How do I get comp store sales up?”