What would Sam do ?

Today, politicians are discussing of opening up the retail sector and the possibility US retail major Wal-Mart opening stores in India. But I had never heard of Wal-Mart till I made my first visit to US in 2003. Even then, I could have never imagined a retail store could be as big, could have as many items, as many varieties and be almost like a warehouse. The first thing that stuck me after entering this giant store is “Everyday low prices”. I really did not understand the meaning of the statement till I asked a few friends. One gets the best and cheapest items at this place. And as I traveled around America, I saw Wal-Mart stores in every city. It triggered a lot of interest in me and this concept of such large scale retailing. So, when I chanced upon the autobiography of Sam Walton, “Made in America”, the founder of Wal-Mart, I knew I had to read it.

Sam Walton was born in the year 1918 in the United States of America. Early on, he was very hard-working, passionate and would excel at whatever he did. As a young boy he developed his leadership abilities by participating in all kinds of events and going on to become head of Boy Scouts and later President of college student body. He started his career as a management trainee in a J.C. Penney store and liked the retailing profession. Hence, after marriage he bought franchise of Ben Franklin variety stores in Arkansas. While his store became the number one store in six states, an error in rental agreement made him sell off the store! It was the first big set back for him and as he writes (Walton and Huey 1993,39),

“I had to pick myself up and get on with it, do it all over again, only even better this time.”


In the 1960s, self-service and discount retailing were absolutely new concepts which many hated. But, Sam Walton was visionary and he realized the need to improve the efficiency of the merchandising system by lowering costs and selling high volumes (Walton and Huey 1993,33). He often shared hotel rooms and used inexpensive travel arrangements, so as to pass the reduced cost benefits to customers.

He hired managers and offered them a percentage of the store’s profit and stock options to store employees (referred to as associates). That would motivate everyone.

He gathered hundreds of Wal-Mart executives, managers and associates every Saturday on 7:30 am at Arkansas headquarters to talk of business and have fun (Walton and Huey 1993,199). That was an opportunity to appreciate people, learn from each other and create strategies. In Sam’s words (About.com 2006)

“Appreciate everything your associates do for the business. Nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise.”

In this way he built his team and ensured team-spirit and healthy competition.

When he as Chairman, lost a bet to then President of Wal-Mart, David Glass, he danced on Wall Street wearing a skirt (Walton and Huey 1993,202). He infused enthusiasm in his workers through the now famous Wal-Mart cheer. He created that culture of doing crazy things, implementing new ideas to increase sales. Hence he also served as a figurehead and symbol.

In his book (Walton and Huey 1993,314) he elaborates 10 important leadership traits, six directly related to working with others (Share, Motivate, Communicate, Appreciate, Celebrate and Listen). He was like a magnet drawing people towards himself and taking them along.

Sam Walton's high energy, motivation to reduce cost, vision to be the best retailer created a loyal band of supporters who dedicated themselves to the creation of a successful organisation. He opened his first Wal-Mart store in 1962 but by 1990, he had about 1528 stores with profit of 1 billion and employed 400,000 people.

He exhibited charismatic qualities and his unconventional strategies for success endeared him to the associates, customers, shareholders and others.

Michael Bergdahl (2004,62), one of the former employees of Wal-mart writes

“I know that in my own career I never met anyone in top leadership who was as charismatic and visionary a leader as Sam Walton.”

Sam Walton started and grew his business across the small towns in America. There were several small stores there but Sam's established Wal-Mart stores were a variety store where the whole family could come shopping and get all the required things. His vision was to be the Best Merchant in Town and all his store offerings followed from that.

“I always wanted to be the best retailer in the world, not necessarily the biggest”(Walton and Huey 1993,277).

Walmart had the widest assortment of goods, the lowest prices, friendly knowledgeable service and guaranteed satisfaction. In his words

“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”

Hence, Sam set the vision and philosophy of Wal-Mart very clearly. This vision was communicated in every possible manner – in meetings, through stories, anecdotes.

Sam was very hardworking and competed with all the stores in the neighbourhood. He often visited those stores, talked to the store managers, took notes and tried to find out how they did things. As a competitor manager, Herb Fischer noted (Walton and Huey 1993,245)

“Personally, he's such a fine, unassuming, quiet gentleman. But he's always picking your brain, and he always has a notebook or that tape recorder. He'll learn everything you know, but he shares his information freely with you in return.”

In this way he became an expert in the field of retailing.

He was a hard negotiator and bargained at length with his suppliers to supply the best goods at lowest prices. Hence building on his vision, he offered “Low Prices Every Day” to his customers (Walton and Huey 1993,255). At a later stage, he invested millions of dollars on developing one of the most efficient distribution systems using satellite and computers. Wal-mart has since become the leader in Supply Chain Management introducing concepts such as cross-docking and leading the RFID revolution.

Bergdahl (2004,73-74) described, that in one of the store openings in 1960s, Sam had organized donkey rides to attract children with families. He had also merchandised watermelons and in the heat the watermelons popped. Customer’s entered the store with donkey dung and watermelon juice at the bottom of their shoes creating an awful mess. These unconventional strategies to woo the customers have become part of company folklore and are told over and over again to emphasize its humble beginnings.

Be it at Saturday morning meetings or via TV cameras using satellite – Sam would always be at the forefront of communicating and sharing information with his people. In one such communication via satellite, he proposed that whenever customers approach, the associates should look them in the eye, greet them, and ask to help. Sam understood that some associates are shy, but if they do what he suggested,

"It would, I'm sure, help you become a leader, it would help your personality develop, you would become more outgoing, and in time you might become manager of that store, you might become a department manager, you might become a district manager, or whatever you choose to be in the company.. .It will do wonders for you."(Walton and Huey 1993,284).

In one of his visits to Britain, Sam saw Greeters welcoming people into the store and wanted to incorporate the same in Walmart stores. He soon found that they were useful as it cautioned the customers from shoplifting any item. He was very persistent in ensuring that all Wal-mart stores had one. As Tom Couglin (Walton and Huey 1993, 295) writes,

“Sam just kept pushing and pushing and pushing. Every week, every meeting, he'd talk about greeters ... Sam was relentless.”

On Saturday's, he started his work at 2 am working on the sales number before the meeting at 7 am. He had the talent in remembering numbers and could rattle them out. That way he was aware of the happenings at each store and cross-checked with the store managers in case of any issues. He worked hard to achieve the vision for the company and rightfully set an example.

Bergdahl (2004,61) noted that Sam enjoyed competition, but he was never boastful of the company's success. In a Saturday meeting, when there was big jubilation on news of a competitor stores closing down, Sam was embarrassed and reminded the audience that breadwinners had lost their job. He directed the managers to hire as many employees as possible to lessen the impact on families. Sam showed emotional expressiveness and empathy and ensured personal values were not compromised in the achievement of vision.

Again, every Saturday's meeting was very unique and dramatic. As Berghdal (2004,67) writes, 99 percent of the corporate offices in America are closed on Saturday Morning, Wal-Mart being an exception. The meetings have freewheeling agenda and an element of surprise. Sometimes CEOs of other big companies are present in those meetings. As Sam Walton wrote

“For the meeting to work, it has to be something of a show. We don't ever want to let it become predictable”(Walton and Huey 1993,211).

As described earlier, Wal-Mart’s beginnings were in small towns of America. Most of the associates hailed from there and were not college-educated. The people were simple, hard-working and liked to have fun. Accordingly, he created a kind of informal atmosphere in the stores

“As you can see, we thrive on a lot of the traditions of small-town America, especially parades with marching bands, cheerleaders, drill teams and floats”(Walton and Huey 1993,204).

The power distance between Sam and his followers were low and they could approach him any time. As Bergdahl (2004,71) wrote,

“When Sam visited stores, the company associates would walk right up to him and strike up a conversation with no fear”

In Sam Walton’s words (Walton and Huey 1993),

"I'd like to say that we're a diverse collection of mostly average people-almost a melting pot, if you will, of former retailers, housewives, college trainees, and just people from all walks of life. But the factor that has set us apart from the beginning are those qualities hidden inside, for the most part, in our associates, that have seemed to confound the experts. One of those qualities I'm contending our people have is a strong will to win.”

Bergdahl (2004,70) described, Wal-Mart as a group of average people motivated to above-average levels of performance. People at Wal-mart worked long hours as the standards set were very high and there were few people. As Bergdahl reminisced, there was always more to be done in a given day than one could possibly get done.

“I was never a big believer in the concept of burnout until I worked at the Wal-Mart Home Office. I’ve got to tell you that I was physically or mentally exhausted the entire time I worked there.”(Bergdahl 2004,63)

However, the key was how the leaders in the company treated the associates. As Bergdahl(2004,71) writes that at Wal-mart the leaders embraced a philosophy called “servant leadership” which refers to the fact that as leaders one requires to put the needs of the people first. Managers had to maintain high level of integrity and show that they care. Bergdahl (2004,64) noted

“The balance of people versus profit presents a difficult dilemma for the store-management team. As a manager, if you hit your financial goals for your store at the expense of the morale of your team, you may get demoted or fired.”

Recognition was the other way he kept people motivated. Managers are required to take off to meet the associates, give them information and sincere recognition for their accomplishments. As Bergdahl described (2004,70)

“Recognition can be monetary and it can be non-monetary. Using employees’ names, saying thank you, and asking about the kids are few simple examples of recognition.”

“Our people make the difference” is prominently displayed on company trucks, wall stores and distribution centers (Bergdahl 2004,74).

Thirdly, Sam empowered his people by (Walton and Huey 1993, 289-91)
1. Pushing responsibility and authority down
2. Forcing ideas to bubble up
He implemented the Volume Producing contest when an associate can choose any item and find a creative way to sell. Hence, there was great autonomy at the stores and the store manager ensured every associate was recognized for his/her efforts.

Sometimes at 4 am, Sam met up with the truck drivers, questioning them of the stores they visited. That was an excellent empowering tactics where the truck-driver felt that he was doing meaningful work

“He's not just driving a truck. He's dedicated to servicing those stores, and he knows he's an ambassador of Wal-Mart and everything we stand for out on the road.” (Walton and Huey 1993, 267)

In 1974, Sam retired from the post of CEO of Wal-Mart and handed over the reins to younger managers. However, he still wanted to see his ideas implemented and felt the company going in the wrong direction (Walton and Huey 1993, 192).

“Actually, I knew it was a mistake almost right after I resigned the chairmanship....The problem was that I actually just kept doing exactly the same thing I had been doing along.”

So, after 30 months of retirement, Sam came back and took over the reins of the company. We recognize that Sam wanted to be in full control and he could not disassociate himself from the company that he built with his sweat and blood.

Sam was courageous enough to own up his mistakes. Initially Sam paid his Associates very low wages. (Walton and Huey 1993, 162)
“In the beginning, I was so chintzy I really didn't pay my employees very well”.
He narrated that he was more obsessed with profits and hence his single biggest regret that he did not take care of the basic needs of the people (Walton and Huey 1993,163-166). However, later by giving them employee stock options and including them in the profit-sharing plan, he corrected himself.

However, Sam Walton did not like publicity. He spent much of his career largely unnoticed by the public or the press. It was only in 1985, when Forbes magazine named him the richest man in America because of his 39% ownership of Wal-Mart's stock that people took notice. He did not give much attention when media showed his preference for pickup trucks over limos and for the company of bird dogs over that of investment bankers.

Sam Walton valued education the most. Hence he instituted special scholarships for students of Arkansas to go to college and sponsored 70 scholarships of $6000 each every year for children of Wal-mart associates.(Walton and Huey 1993,300-301). On 17^th March, 1991 he received the Presidential Medal of Freedom (highest American Civilian Award) and the citation read:

“An American original, Sam Walton embodies the entrepreneurial spirit and epitomizes the American dream. Concerns for his employees, a commitment to his community, and a desire to make a difference have been the hallmarks of his career. “

In the final days of his life, Sam Walton suffered from bone cancer but he continued to work from his hospital bed. Bergdahl (2004,72) described, “The sight of him lying there in his office in the final days of his life, continuing to work from a hospital bed, is an inspirational image burned forever into my memory.”
His charismatic personality has crossed the chasm of time and when in tight situations people at Wal-Mart would often ask “What would Sam do?” - An ultimate tribute to his legacy (Bergdahl 2004,62).

References:

Walton, S., Huey, H. (1993). Sam Walton:Made in America. New York: Bantam Books.

Bergdahl, M. (2004). What I learned from Sam Walton: How to compete and thrive in a Wal-mart world. New Jersey: John Wiley & Sons