Wal-Mart execs say investment in people paying off, must do more for stores

Wal-Mart says its $1 billion investment in people is already starting to pay off as cashier turnover in the front-end of its stores began to slow the day the $9 minimum starting pay was announced in mid-February.

Walmart U.S. CEO Greg Foran recently told Wall Street analysts that not only did store turnover begin to slow soon after the pay hike was announced, but job applicants also increased. When asked how long it will take for the hefty investment to materialize in higher sales and better overall financials, Foran said the investment payoff will be gradual, with small improvements each quarter.

Analysts largely applauded Wal-Mart’s effort to invest in its workforce in wage hikes and training knowing that $1 billion, or 20 cents a share in lost earnings this year, won’t be recouped overnight.

Wal-Mart Stores CEO Doug McMillon told analysts that returning department manager positions to the stores is a key part of the investment and ongoing effort to improve traffic and sales at Wal-Mart U.S supercenters. He said department managers are key to customer service improvements because a good department manager runs their area like a store within a store. It also gives them ownership in the store. 

McMillon said Wal-Mart is at its best when store associates begin to identify as “my store, my space and I’m in charge of it,” and take tenure in that department. When that happens he said pride goes up, sales go up and end caps get stocked better than before. He said sales will rise when department managers are reintroduced across the stores and those managers begin to own that department.

“Our relationship with our associates and ultimately how they interact with our customers matters. We are focused on running great stores and clubs right now and doing what’s necessary to have highly engaged associates to help us do that,” McMillon  said. “I think in the U.S. you will see us improve week to week, month to month in the areas of customer service.”

Analysts asked executives how they plan to access and measure results gleaned from the investment in people and training.

“When you’ve got 4,500 stores and a bulk of the 1.2 million associates are on the front line out there serving customers these changes we’re making are a much more gradual process,” Foran said. “This is a journey. It won’t happen overnight. The simple metrics of items in the basket, comp sales will be the metrics that you see us report. But there will also be other metrics we will measure like our ‘Clean, Fresh, Friendly’ scores and associate turnover and worker attendance all which should improve quarter to quarter.”

Foran said the investment in training and additional hours and higher wages is a huge part of the solution but his team is also breaking down the 24-hour cycle of store operations and closely examining everything from foot traffic and restocking efforts to load delivery so that we can run a more efficient operation.

He said it’s important that employees feel they can complete the tasks they asked and that they have the tools, training and time to do so. McMillon also told analysts that store employees need not put up with bureaucratic systems out of Bentonville. 

“I was in a store about a year ago talking with a department manager in electronics and his department did not look very good. He explained to me that he had been on the phone for five hours with the home office trying to get somethings changed to avoid future problems. Not only did he spend five hours on the phone but the problem did not get solved. What I want our store associates to know is they don’t have to put up with that. That is unacceptable … When a phone rings or an email comes in from a store associate  and they need something and it makes sense and there’s not data saying otherwise then the home office needs to help them take care of customers,” McMillon said.

He said the work underway by Foran and his team are in the process of turning that around and returning the home office operations into a role of servant leadership and empowering the store workers. There has to be accountability from the home office to the stores. 

“There are no cash registers in the home office,” McMillon said.