Sam Walton: Made In America

by Sam Walton

If I had to single out one element in my life that has made a difference for me, it would be a passion to compete. That passion has pretty much kept me on the go, looking ahead to the next store visit, or the next store opening, or the next merchandising item I personally wanted to promote out in those stores—like a minnow bucket or a Thermos bottle or a mattress pad or a big bag of candy.

I learned from a very early age that it was important for us kids to help provide for the home, to be contributors rather than just takers.

I’ve always had a strong bias toward action—a trait that has been a big part of the Wal-Mart story. Truthfully,

Later on in life, I think Kmart, or whatever competition we were facing, just became Jeff City High School, the team we played for the state championship in 1935. It never occurred to me that I might lose; to me, it was almost as if I had a right to win. Thinking like that often seems to turn into sort of a self-fulfilling prophecy.

learned early on that one of the secrets to campus leadership was the simplest thing of all: speak to people coming down the sidewalk before they speak to you.

“Two things about Sam Walton distinguish him from almost everyone else I know. First, he gets up every day bound and determined to improve something. Second, he is less afraid of being wrong than anyone I’ve ever known. And once he sees he’s wrong, he just shakes it off and heads in another direction.”

It turned out that the first big lesson we learned was that there was much, much more business out there in small-town America than anybody, including me, had ever dreamed of.

“We have a lot of fun with all this item promotion, but here’s what it’s really all about. The philosophy it teaches, which rubs off on all the associates and the store managers and the department heads, is that your stores are full of items that can explode into big volume and big profits if you are just smart enough to identify them and take the trouble to promote them. It has been a real key to helping this company dramatically increase its sales per square foot. If you are going to show the kind of double-digit comparable store sales increases that we show every year, and grow a company the way we’ve grown ours, you have to be merchandise driven.

In retail, you are either operations driven—where your main thrust is toward reducing expenses and improving efficiency—or you are merchandise

driven. The ones that are truly merchandise driven can always work on improving operations. But the ones that are operations driven tend to level off and begin to deteriorate. So Sam’s item promotion mania is a great game and we all have a lot of fun with it, but it is also at the heart of what creates our extraordinary high sales per square foot, which enable us to dominate our competition.”

Check everyone who is our competition. And don’t look for the bad. Look for the good. If you get one good idea, that’s one more than you went into the store with, and we must try to incorporate it into our company. We’re really not concerned with what they’re doing wrong, we’re concerned with what they’re doing right, and everyone is doing something right.”

wherever we’ve been, we’ve always tried to instill in our folks the idea that we at Wal-Mart have our own way of doing things. It may be different, and it may take some folks a while to adjust to it at first. But it’s straight and honest and basically pretty simple to figure out if you want to. And whether or not other folks want to accommodate us, we pretty much stick to what we believe in because it’s proven to be very, very successful. We started out swimming upstream, and it’s made us strong and lean and alert, and we’ve enjoyed the trip. We sure don’t see any reason now to turn around and join the rest of the pack headed downcurrent.

do admit to worrying sometimes about future generations of the Waltons. I know it’s unrealistic of me to expect them all to get up and throw paper routes, and I know it’s something I can’t control. But I’d hate to see any descendants of mine fall into the category of what I’d call “idle rich”—a group I’ve never had much use for. I really hope that somehow the values both Helen and I, and our kids, have always embraced can be passed on down through the generations. And even if these little future Waltons don’t feel the need to work from dawn on into the night to stay ahead of the bill collector, I hope they’ll feel compelled to do something productive and useful and challenging with their lives. Maybe it’s time for a Walton to start thinking about going into medical research and working on cures for cancer, or figuring out new ways to bring culture and education to the underprivileged, or becoming missionaries for free enterprise in the Third World. Or maybe—and this is strictly my idea—there’s another Walton merchant lurking in the wings somewhere down the line.

It all boils down to not taking care of their customers, not minding their stores, not having folks in their stores with good attitudes, and that was because they never really even tried to take care of their own people. If you want the people in the stores to take care of the customers, you have to make sure you’re taking care of the people in the stores. That’s the most important single ingredient of Wal-Mart’s success.

But whatever it was, they just didn’t stay close enough to their business, they sort of chose to get over on the other side of the road. They expanded quickly without building the organizations and the support—such as distribution centers—needed to expand those companies. They didn’t get out into their stores to see what was going on. Then Kmart got their machine in gear and began to do it better and better. I remember going in their stores—I’ll bet I’ve been in more Kmarts than anybody—and I would really envy their merchandise mix and the way they presented it. So much about their stores was superior to ours back then that sometimes I felt like we couldn’t compete. Of course that didn’t stop us from trying. And Target came along and did a fine job, taking the whole idea a little more upscale. As these big operators became more organized, the competition grew a lot more difficult. That’s when all those guys who were failing to meet their customers’ needs and who didn’t build strong organizations—all those promoters—started to fall apart and, eventually, fall out.

couldn’t expand beyond that horizon unless he had the ability to capture this information on paper so that he could control his operations, no matter where they might be. He became, really, the best utilizer of information to control absentee ownerships that there’s ever been. Which gave him the ability to open as many stores as he opens, and run them as well as he runs them, and to be as profitable as he makes them.

What’s really worried me over the years is not our stock price, but that we might someday fail to take care of our customers, or that our managers might fail to motivate and take care of our associates.

as long as he is convinced that it is the right thing, it just keeps coming up—week after week after week—until finally everybody capitulates and says, well, it’s easier to do it than to keep fighting this fight. I guess it could be called management by wearing you down.”

The point is: I always knew I could not just go in there and lay a sheet of numbers in front of him and expect him to just accept it.

If you take someone who lacks the experience and the know-how but has the real desire and the willingness to work his tail off to get the job done, he’ll make up for what he lacks. And that proved true nine times out of ten. It was one way we were able to grow so fast.”

We didn’t pay much. It wasn’t that I was intentionally heartless. I wanted everybody to do well for themselves. It’s just that in my very early days in the business, I was so doggoned competitive, and so determined to do well, that I was blinded to the most basic truth, really the principle that later became the foundation of Wal-Mart’s success. You see, no matter how you slice it in the retail business, payroll is one of the most important parts of overhead, and overhead is one of the most crucial things you have to fight to maintain your profit margin. That was true then, and it’s still true today. Back then, though, I was so obsessed with turning in a profit margin of 6 percent or higher that I ignored some of the basic needs of our people, and I feel bad about it.

Plenty of companies offer some kind of profit sharing but share absolutely no sense of partnership with their employees because they don’t really believe those employees are important, and they don’t work to lead them. These days, the real challenge for managers in a business like ours is to become what we call servant leaders. And when they do, the team—the manager and the associates—can accomplish anything.

very unusual willingness to share most of the numbers of our business with all the associates. It’s the only way they can possibly do their jobs to the best of their abilities—to know what’s going on in their business. If I was a little slow to pick up on sharing the profits, we were among the first in our industry—and are still way out front of almost everybody—with the idea of empowering our associates by running the business practically as an open book.

one simple thing that puts it all together: appreciation. All of us like praise. So what we try to practice in our company is to look for things to praise. Look for things that are going right. We want to let our folks know when they are doing something outstanding, and let them know they are important to us.

At any company, the time comes when some people need to move along, even if they’ve made strong contributions. I have occasionally been accused of pitting people against one another, but I don’t really see it that way. I have always cross-pollinated folks and let them assume different roles in the company, and that has bruised some egos from time to time. But I think everyone needs as much exposure to as many areas of the company as they can get, and I think the best executives are those who have touched all the bases and have the best overall concept of the corporation. I hate to see rivalry develop within our company when it becomes a personal thing and our folks aren’t working together and supporting one another.

It’s sort of a “whistle while you work” philosophy, and we not only have a heck of a good time with it, we work better because of it. We build spirit and excitement. We capture the attention of our folks and keep them interested, simply because they never know what’s coming next. We break down barriers, which helps us communicate better with one another. And we make our people feel part of a family in which no one is too important or too puffed up to lead a cheer or be the butt of a joke—or the target in a persimmon-seed-spitting contest.

A strong corporate culture with its own unique personality, on top of the profit-sharing partnership we’ve created, gives us a pretty sharp competitive edge. But a culture like ours can create some problems of its own too. The main one that comes to mind is a resistance to change. When folks buy into a way of doing things, and really believe it’s the best way, they develop a tendency to think that’s exactly the way things should always be done. So I’ve made it my own personal mission to ensure that constant change is a vital part of the Wal-Mart culture itself. I’ve forced change—sometimes for change’s sake alone

“Sam Walton understands better than anyone else that no business can exist without customers. He lives by his credo, which is to make the customer the centerpiece of all his efforts. And in the process of serving Wal-Mart’s customers to perfection (not quite perfection, he would say), he also serves Wal-Mart’s associates, its share owners, its communities, and the rest of its stakeholders in an extraordinary fashion—almost without parallel in American business.” —ROBERTO C. GOIZUETA, chairman and CEO, the Coca-Cola Company

What I haven’t been able to figure at all is these people who have decided we’re somehow responsible for the decline of the small town. My guess is that a lot of these critics are folks who grew up in small towns and then deserted them for the big cities decades ago. Now when they come home for a visit, it makes them sad that the old town square isn’t exactly like it was when they left it back in 1954. It’s almost like they want their hometown to be stuck in time, an old-fashioned place filled with old-fashioned people doing business the old-fashioned way.

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.

We decided that instead of avoiding our competitors, or waiting for them to come to us, we would meet them head-on. It was one of the smartest strategic decisions we ever made. In fact, if our story doesn’t prove anything else about the free market system, it erases any doubt that spirited competition is good for business—not just customers, but the companies which have to compete with one another too.

The Sam’s launch reflects another part of my management style that applies not only to the competition, but to our own people as well. I like to keep everybody guessing. I don’t want our competitors getting too comfortable with feeling like they can predict what we’re going to do. And I don’t want our own executives feeling that way either. It’s part of my strong feeling for the necessity of constant change, for keeping people a little off balance.

I’ll just say it: we have the best damned truck drivers in America, and their loyalty and their can-do attitude have made a huge difference to this company.

and I can’t tell you how important it is for us to remember—when we puff up our chests and brag about all those huge sales and profits—that they were all made one day at a time, one store at a time, mostly by the hard work, good attitude, and teamwork of all those hourly associates and their store managers, as well as by all those folks in the distribution centers. If we ever get carried away with how important we are because we’re a great big $50 billion chain—instead of one store in Blytheville, Arkansas, or McComb, Mississippi, or Oak Ridge, Tennessee—then you probably can close the book on us.

That makes it management’s job to listen to those merchandisers out in the stores. We have these buyers here in Bentonville—218 of them—and we have to remind them all the time that their real job is to support the merchants in the stores. Otherwise, you have a headquarters-driven system that’s out of touch with the customers of each particular store,

I want you to promise that whenever you come within ten feet of a customer, you will look him in the eye, greet him, and ask him if you can help him. Now I know some of you are just naturally shy, and maybe don’t want to bother folks. But if you’ll go along with me on this, 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. I guarantee it. Now, I want you to raise your right hand—and remember what we say at Wal-Mart, that a promise we make is a promise we keep—and I want you to repeat after me: From this day forward, I solemnly promise and declare that every time a customer comes within ten feet of me, I will smile, look him in the eye, and greet him.

“We get into some of the doggonedest, knock-down drag-outs you have ever seen. But we have a rule. We never leave an item hanging. We will make a decision in that meeting even if it’s wrong, and sometimes it is. But when the people come out of that room, you would be hard-pressed to tell which ones oppose it and which ones are for it. And once we’ve made that decision on Friday, we expect it to be acted on in all the stores on Saturday. What we guard against around here is people saying, ‘Let’s think about it.’ We make a decision. Then we act on it.”

Some folks have a tendency to build up big staffs around them to emphasize their own importance, and we don’t need any of that at Wal-Mart. If you’re not serving the customer, or supporting the folks who do, we don’t need you. When we’re thinking small, that’s another thing we’re always on the lookout for: big egos. You don’t have to have a small ego to work here, but you’d better know how to make it look small, or you might wind up in trouble.

Mart. In the old days, just being bright and willing to work hard was enough to give you all the opportunity you needed at our company. But we are such a sophisticated company today, and have moved so rapidly in the areas of technology and communications, that skill and knowledge in these fields have become a vital part of our business. None of this is news to anyone who keeps up with world business trends. This is the direction in which we’re all headed. And to succeed, we’re just going to have to do a better job of educating and training our work force.

RULE 1: COMMIT to your business. Believe in it more than anybody else. I think I overcame every single one of my personal shortcomings by the sheer passion I brought to my work. I don’t know if you’re born with this kind of passion, or if you can learn it. But I do know you need it. If you love your work, you’ll be out there every day trying to do it the best you possibly can, and pretty soon everybody around will catch the passion from you—like a fever.

RULE 2: SHARE your profits with all your associates, and treat them as partners. In turn, they will treat you as a partner, and together you will all perform beyond your wildest expectations. Remain a corporation and retain control if you like, but behave as a servant leader in a partnership. Encourage your associates to hold a stake in the company. Offer discounted stock, and grant them stock for their retirement. It’s the single best thing we ever did.

RULE 3: MOTIVATE your partners. Money and ownership alone aren’t enough. Constantly, day by day, think of new and more interesting ways to motivate and challenge your partners. Set high goals, encourage competition, and then keep score. Make bets with outrageous payoffs. If things get stale, cross-pollinate; have managers switch jobs with one another to stay challenged....

RULE 4: COMMUNICATE everything you possibly can to your partners. The more they know, the more they’ll understand. The more they understand, the more they’ll care. Once they care, there’s no stopping them. If you don’t trust your associates to know what’s going on, they’ll know you don’t really consider them partners. Information is power, and the gain you...

RULE 5: APPRECIATE everything your associates do for the business. A paycheck and a stock option will buy one kind of loyalty. But all of us like to be told how much somebody appreciates what we do for them. We like to hear it often, and especially when we have done something we’re really proud of. Nothing else can quite substitute for a few wel...

RULE 6: CELEBRATE your successes. Find some humor in your failures. Don’t take yourself so seriously. Loosen up, and everybody around you will loosen up. Have fun. Show enthusiasm—always. When all else fails, put on a costume and sing a silly song. Then make everybody else sing with you. Don’t do a hula on Wall Street. It’s been done. Think up your own stunt. All of this is more important, and more fun, than ...

RULE 7: LISTEN to everyone in your company. And figure out ways to get them talking. The folks on the front lines—the ones who actually talk to the customer—are the only ones who really know what’s going on out there. You’d better find out what they know. This really is what total quality is all about. To push responsibility down in your organization, and to force go...

RULE 8: EXCEED your customers’ expectations. If you do, they’ll come back over and over. Give them what they want—and a little more. Let them know you appreciate them. Make good on all your mistakes, and don’t make excuses—apologize. Stand behind everything you do. The two most important words I ever wrote were on that first Wal-Mart sign:...

RULE 9: CONTROL your expenses better than your competition. This is where you can always find the competitive advantage. For twenty-five years running—long before Wal-Mart was known as the nation’s largest retailer—we ranked number one in our industry for the lowest ratio of expenses to sales. You can make a lot of different mistakes and still recover if you run an eff...

RULE 10: SWIM upstream. Go the other way. Ignore the conventional wisdom. If everybody else is doing it one way, there’s a good chance you can find your niche by going in exactly the opposite direction. But be prepared for a lot of folks to wave you down and tell you you’re headed the wrong way. I guess in all my years, what I heard more often than anyth...

them. You can’t just keep doing what works one time, because everything around you is always changing. To succeed, you have to stay out in front of that change.