A Toast To Walhonkey’s Man Upstairs
Tuesday, August 25th, 2009I’ve just finished reading Sam Walton: Made In America, which I purchased at Goodwill for $1. Let me tell you – BEST BUCK I’VE EVER SPENT. I literally couldn’t put it down. Perhaps that makes me pathetic, or perhaps that makes me my father’s daughter.
Say what you will about the fall of Wal-Mart, it’s trade practices or ethics, while Walton was at the helm, great things were accomplished, and he was one of the greatest entrepreneurs of the 20th century. The book gave me incredible insight into his personality and management style, much of which I believe is due great respect.
A compilation of a few quotes from the book that struck me. It may be lengthy, but well worth your time.
On incentivizing employees and creating repeat customers:
The more you share profits with your associates – whether it’s in salaries or incentives or bonuses or stock discounts – the more profit will accrue to the company. Why? Because the way management treats the associates is exactly how the associates will then treat the customers. And if the associates treat the customers well, the customers will return again and again, and that is where the real profit in this business lies, not in trying to drag strangers into your stores for one time purchases based on splashy sales or expensive advertising.
On the adverse effects of unions, and the benefits of strong communication and adept management:
But historically, as unions have developed in this country, they have mostly just been divisive. They have put management on one side of the fence, employees on the other, and themselves in the middle as almost a separate business, one that depends on division between the other two camps. And divisiveness, by breaking down direct communication, makes it harder to take care of customers, to be competitive, and to gain market share.
On the other hand, let me say this: anytime we have ever had real trouble or the serious possibility of a union coming into the company, it has been because management has failed, because we have not listened to our associates, or because we have mistreated them. I think anytime the employees at a company say they need a union, it’s because management has done a lousy job of managing and working with their people. Usually, it’s directly traceable to what’s going on at the line supervisor level – something stupid that some supervisor does, or something good he or she doesn’t do.
On businesses resting on their laurels:
If American business is going to prevail, and be competitive, we’re going to have to get accustomed to the idea that business conditions change, and that survivors have to adapt to those changing conditions. Business is a competitive endeavor, and job security lasts only as long as the customer is satisfied. Nobody owes anybody else a living.
Many people in this business are still trying to charge whatever the traffic will bear, and they’re simply on the wrong track. I’ll tell you this: those companies out there who aren’t thinking about the customer and focusing on the customer’s interest are just going to get lost in the shuffle- if they haven’t already. Those who get greedy are going to get left in the dust.
On ethical free markets:
You start with a given: free enterprise is the engine of our society; communism is pretty much down the drain and proven so; and there doesn’t appear to be anything else that can compare to a free society based on a market economy. Nothing can touch that system – not unless leadership and management get selfish or lazy. In the future, free enterprise is going to have to be done well – which means it benefits the workers, the stockholders, the communities, and, of course, management, which must adopt a philosophy of servant leadership.
Recently, I don’t think there’s any doubt that a lot of American management has bent over too far toward taking care of itself first, and worrying about everybody else later. The Japanese are right on this point: you can’t create a team spirit when the situation is so one sided, when management gets so much and workers get so little of the pie. Some of these salaries I see out there are completely out of line, and everybody knows it. It’s obvious that most companies would be much better served by basing managers’ pay on the performance of the company or return on investment to the shareholders or some yardstick which clearly takes into account how well they’re doing their job. And the formula has to make sure that profits are divided fairly among workers, management, and stockholders, according to their contributions and risks. At Wal-Mart we’ve always paid our executives less than industry standards, sometimes maybe too much less. But we’ve always rewarded them with stock bonuses and other incentives related directly to the performance of the company. It’s no coincidence that the company has done really well, and so have they.
Now this is just incredible. Note that Walton wrote the book in 1992 – YEARS before the collapse of the American auto industry. His foresight was truly tremendous:
Our auto industry doesn’t play on level ground. But I don’t think we should counter with protectionism because it doesn’t address the real problem: the quality of our product doesn’t compete with that of the Japanese, whether we want to admit it or not. The challenge is a great one for management. What they have to do is build a partnership with their people.
I understand that this industry has all kinds of problems we haven’t seen in ours. I know that US auto workers make $22 an hour versus $16 in Japan, and that Mexican auto workers earn much less. I’m not saying I could solve all these problems, but I’d love to have the fun of trying to take a unionized company today and sell its people on the idea of having to be competitive globally – whether it was in autos, or steel, or electronics. I’d love a chance at that, the pleasure of seeing if they could be motivated into a team that would share in all the company’s success – and still have a union. It would take a powerful lot of persuading to pull this off, but I guarantee that it could be accomplished by somebody obsessed and persistent enough. But if American management is going to say to their workers that we’re all in this together, they’re going to have to stop this foolishness of paying themselves $3 million and $4 million bonuses every year and riding around everywhere in limos and corporate jets like they’re so much better than everybody else.
I’m not saying every company should necessarily be as chintzy as Wal-Mart. Everybody’s not in the discount business, consumed by trying to save every possible dollar for their customers. But I wonder if a lot of these companies wouldn’t do just as well if their executives lived a little more like real folks. A lot of people think it’s crazy of me to fly coach whenever I go on a commercial flight, and maybe I do overdo it a little bit. But I feel like it’s up to me as a leader to set an example. It’s not fair for me to ride one way and ask everybody else to ride another way. The minute you do that, you start building resentment and your whole team idea starts to strain at the seams.
All in all I found Sam Walton to be an inspirational business figure who worked harder than most people, and tried to run an ethical business. I’m glad Sam’s not around to see what his companies are up to these days…
