Wal-Mart 2002 Reflects Founder?s Vision

On a summer evening in 1984, in the days when Wal-Mart stores still closed at night, the manager of the Stuttgart store was demonstrating closing procedures to a newly arrived assistant manager. After store employees had exited into the steamy, mosquito-soaked night, the two stood alone at the front of the store, ready to set the alarm.

The manager opened the alarm box, covered with a large color portrait of company co-founder Sam M. Walton. After demonstrating the keypad sequence and setting the alarm, the manager closed the box. Walton beamed from the portrait.

“G’night, Sam,” the manager said.

Not long after that, Walton grew tired of seeing his picture at the front of every store and ordered it banished to a back area, out of public view. But the incident illustrated the brisk family feeling that characterized the rapidly growing company.

Walton ran Wal-Mart Stores Inc. in one capacity or another, for 30 years after he and brother James “Bud” Walton founded the chain in 1962. This month marks 10 years since Sam Walton succumbed to bone cancer in 1992. How much has the company that indelibly bears his imprint changed in that time?

The answer is “vastly,” but an examination of the facts indicates that Wal-Mart in 2002 would still make Sam smile.

Business is Good

The business entity that is Wal-Mart Stores, a Delaware corporation based in Bentonville, is doing fine, in some ways better than ever. Not only has it become the world’s largest company in terms of annual revenue, but it has developed a “recession-proof” reputation. In good times sales and profits go up as consumer spending rises, but they don’t drop much, if at all, in bad economic times. That’s because consumers turn to the retailer with “We Sell For Less” boldly displayed on its storefronts.

On the day Walton died, April 5, 1992, there were 1,714 Wal-Mart stores, six of the large grocery-general merchandise combinations called Supercenters and 208 Sam’s Clubs in the United States, company spokesman Jay Allen said. There were also eight international units in Mexico and Puerto Rico.

Today, the company runs 1,647 regular Wal-Marts, 1,066 Supercenters and 500 Sam’s Clubs in the United States. The international count has exploded to include 1,170 stores in nine different countries, and the company has signed agreements to enter Japan.

Wal-Mart reported sales of $43.8 billion and $1.6 billion in profits in 1992, with 371,000 employees (or “associates,” a term Walton adopted from his days as a J.C. Penney sales clerk). With 1.3 million associates worldwide today, the company’s 2001 fiscal year showed $217.7 billion in revenue, with a profit of $6.6 billion.

Walton would have a hard time finding fault with those numbers, though he would likely find some expense and income lines to highlight and discuss on the company profit and loss statement. His opinion of the company as a whole is harder to discern.

A Different Face

Within months of Walton’s death, complaints about Wal-Mart’s labor policies seemed to fill the mainstream media, along with questions about the accuracy of the company’s “Buy America” claims and the chain’s effect on communities. Wal-Mart’s image seemed to change overnight from the kindly face of Mr. Sam to a menacing one of corporate neglect.

Jay Allen, senior vice president of corporate communications, agreed.

“When you have a strong, visible leader, there’s probably always going to be a concern,” he said. “What people didn’t see and they learned [was] that there was a guy like [CEO] David Glass who was ready to step in.”

Glass, the company’s longtime chief financial officer, was hand-picked by Walton as president in 1984. Glass replaced the man who most believed was Walton’s heir-apparent, Jack Shewmaker. Shewmaker, two years younger than Glass, moved to CFO but soon retired, though he remains on the company’s board of directors.

Glass, a serious, low-key man who projected a startling contrast to the vibrant, outgoing Walton, started slow but warmed to the task.

“There’s no question that he was one of the best, if not the best, CEOs … in the 90s,” Allen said.

Indeed, by 1997, a British Broadcasting Corp. report gave Glass credit for the company’s resurgence from a small slump after Walton died.

“After the death of founder Sam Walton in 1992, the company briefly seemed to have lost its way,” the BBC reported. “But under the guidance of new chief executive and chairman David Glass it soon reinvented itself.”

The largest change since Walton’s death is Wal-Mart’s rapid overseas growth, but the die was cast for the international expansion in Walton’s time.

“He did not ever get to see an international store in operation,” Allen said. “Just before he died he visited a Sam’s Club [construction] site in the Mexico City area.”

Clearly Walton signed off on the international concept. Ill as he was, nothing of such magnitude could have gone forward if he was strongly opposed, so great was the respect and deference afforded him within the company.

Selling for Less

The anti-labor union policies and the damage to community infrastructure wrought by Wal-Mart in some cases have been the focus of constant criticism. Wal-Mart vigorously opposed unions, paid the relatively low wages common in the retail industry and fought competitors big and small with cutthroat intensity from the grand opening of Store No. 1 in Rogers — and has not stopped in 40 years.

No labor union ever organized a Wal-Mart unit during Walton’s lifetime, and only one small U.S. unit exists today. “We Sell For Less” means checking competitors’ prices regularly and meeting or beating them, a practice unchanged since the company’s founding.

Walton was probably no more opposed to organized labor than most corporate executives, but he attacked the issue with characteristic vigor and success. Plus, he constantly communicated with people at all levels of the company and insisted that other executives do the same. Leaving the Bentonville office to visit stores was not only encouraged but required, and those who did so were expected to return with ideas, both their own and those of associates.

While the spartan trappings of the Walton culture remain — Walton’s office, now inhabited by CEO H. Lee Scott, was plainly furnished and no larger than an average child’s bedroom — Walton would probably find fault with the state of management-associate communication today.

Disconnect?

Bud Walton, who died in 1995, was long known as a maverick but an integral part of the company’s growth. After Sam’s death, he began to speak up when he believed the company direction was contrary to the co-founders’ intent. At one company meeting, he decried a payroll slashing effort as counterproductive.

Wall Street Journal reporter Bob Ortega addressed the issue in his 1998 book, “In Sam We Trust”.

Ortega noted Bud Walton’s discomfort with a growing disconnect between management and hourly workers.

“After one Wal-Mart annual meeting … I had the chance to chat with Bud Walton … about how the company had changed since Sam’s death in 1992,” Ortega wrote. “Bud worried that the executives were losing sight of how their decisions affected the hundreds of thousands of sales clerks and other frontline workers. But Bud knew exactly how the workers felt, because many of them — even workers who’d never met him — felt comfortable calling him to complain or ask for help. They felt that, like Sam, he would listen, and take care of them.”

The famed Wal-Mart open-door policy was more than a phrase to Sam Walton. He actively looked for opportunities to exercise it. A district manager in Colorado cited an example near the end of Walton’s life.

A department manager at one of the stores in the manager’s district asked to be off on Christmas eve, one of the busiest, most hectic days of the year, after the store manager had told all of the store associates that they would be scheduled that day. According to the district manager, the department manager called Walton. The DM soon received a call from an executive, ordering him to tell the store manager to give the associate the day off. When the store manager protested, the district manager said that Walton “wanted to show the associates that the open-door policy worked.”

The open-door policy now frequently appears in lawsuits and legal judgments against the company. The Ontario Labor Relations Board even cited the policy in its historic 1997 decision certifying the company’s first labor union, at a store in Windsor, Ontario. Wal-Mart management, in meetings with employees before the union vote, had declined to answer questions about whether the store would close as the result of a favorable union vote.

“The problem lies in the fact that Wal-Mart deviated from its normal ‘open door’ policy,” an analysis of the case by the firm of Ogilvy Renault in Ottawa stated. “Despite the employees’ right to information, management refused to answer any questions regarding the possibility of the store closing …”

The Chairman

According to Allen, another Walton is committed to keeping the door open, even now. Sam Walton’s son, S. Robson “Rob” Walton, now serves as the company’s chairman, the last position his father occupied.

At a management meeting in January, “Rob stood up there and he had a very brief, simple message,” Allen said. “He wanted the managers to understand that the open door, as far as he was concerned, was still alive and well.”

But Allen admits that it is logistically difficult to practice the policy as originally outlined, where any associate was free to talk to any level of manager, including the CEO.

“As big as we’ve become, you’re going to have situations,” he said. “It’s a management issue. I’m sure there are places today that people are not comfortable using it,” but not because of a lack of commitment from the company.

And while executive salaries have skyrocketed at Wal-Mart as they have across the U.S., Allen defended the practice as a cost of doing business.

“We are the fastest-growing multinational company in the world,” Allen said. “We owe it to shareholders to attract the best management team we can.”

“We’re not perfect by any stretch,” he said. “I think if Sam Walton walked in the building today he would quickly find things he would want changed, but I think he’d be very proud.”