Businessweek's been talking to H. Lee Scott: Part 1 and part 2.
Overall, the language used by Mr. Scott does not jive with that of Wal-Mart's labor union opponents. Where Mr. Scott thinks he's reaching out to environmental and international activists, domestic opponents will think he's just spinning. The most telling part of the interview is where he refuses to answer:
I can learn from those people and learn where it is Wal-Mart can change to be a better company, more likely to be embraced or at least tolerated.Another good portion:That isn't the agenda of the unions?
[Silence. No answer.]
When growth was easier this idea of critics being ignored was O.K., because you were getting all this positive feedback from the numbers. As the share price slows [and] the critics are attacking, you have to get to this point.As the share price stagnates, he means?Maybe not all of our critics wish us harm. Maybe some would like us to be a better company and do things differently. So you start reaching out...trying to understand what is it about us that causes them to have this concern. How much of it is legitimate? How much of it is misinformation? What is it that we need to change? What is it we can't [change] that we will hopefully be able to communicate?
I think Mr. Scott fails to convey what he really means, so let me rewrite his words:
Unions want a big say in how we run our business, mostly by lowering the returns to our shareholders. However, the other groups do not want to control our operations or redirect our profits; they may demonize us at first, but they can be persuaded to pipe down by particular, well-defined changes that support their goals and those of Wal-Mart shareholders. And, frankly, we are willing to work with them because their voices impact the views of the consumers we want in our stores, while there's little use in dealing with somebody who vows never to shop at your stores.
What I think many people should realize is that Wal-Mart is not terribly exceptional in any respect other than its productivity and success. Most other businesses face the same difficulties, at a scale proportional to their operations. Mr. Scott quoted a visiting CEO:
"There isn't anything you are faced with, from a class-action lawsuit to the rest of the stuff, that we are not dealing with in our company. The only difference is that yours is played out on the front page of the paper and you never read about ours."
Posted by Kevin on September, 23 2005 at 10:20 AM
Jim Gilliam wrote:Wal-Mart's critics love the fact that the company is so big. It means that changes it makes have a big impact on a large number of lives.
There is an odd kind of incentive for activists to keep Wal-Mart big... and many of them recognize this.
Which is why I don't buy any of this stuff about Wal-Mart's critics wishing the company harm. What does that even mean? Does "harm" to Lee Scott mean lower earnings? unhappy employees? fewer stores? angry shareholders? sharing a room with two execs instead of just one?
I'm a shareholder (and I'm losing my shirt on this stock).. a turnover rate of 44% a year is a very bad thing for business. Show me the true cost of that turnover rate to the bottom line and then tell me it doesn't make sense to do better by the employees.
-- September 23, 2005 01:33 PM ∞
Kevin Brancato wrote:I'm pretty sure "harm" means lower profits through higher prices and wages.
I agree that the incentive for union leadership and current union members is to keep Wal-Mart big, because their incentive is to have unionized control over the hiring and firing of the largest possible share of the workforce in an industry, or the unionized firms will suffer through competitive pressure, as we see with unionized grocers.
However, I would have to disagree that a turnover rate of 44% is a very bad thing, for a panoply of reasons, mostly based on my not having enough information to make even a judgment call:
1) The principle that higher pay will increase retention in the short run is undeniable, IMHO, but it is questionable whether that increased retention rate is more profitable in the long-run. It's possible. But why is Wal-Mart just banking on profitability being maximized by setting wages competetively based on local market surveys? WM has given more subjective control to store/regional managers, so why have none of these people, who have huge incentives to maximize profit, not tried to bend the pay scales? (Are the rules that strict, or is there an institutional problem -- i.e. Is recruiting counted in overhead, but pay counted against a stores operating profit, making a higher-retention rate disproportionately costly to a store manager?) Has Wal-Mart HQ explored this as a profitability enhancing move, since it seems to have a HUGE potential Return on Investment? I don't know...
2) While there is a theoretical optimal turnover rate, the one that strikes the most profitable balance of productivity and cost, I haven't a clue where that rate is for the segment of the labor force that Wal-Mart employs. Is it 1%, 10%, 25%???
3) I have yet to see any good evidence that converting the "WM model" to a "Costco Model" would actually enable the people who currently work at Wal-Mart "to do better by" their employer".
That is, where is evidence that increasing the wage structure at Wal-Mart will help the people in the labor pool that Wal-Mart currently pulls from.
With higher pay, Wal-Mart can attract a more experienced and productive workforce; how large a share of this hypothetical higher-paid workforce currently work, or would otherwise have worked, at Wal-Mart?
I agree that significantly higher pay -- and other changes -- would lead "impact a large number of lives". But which lives, and which direction would the impacts lead to? The economy is sufficiently complex, that we really don't know how those changes would really work out, though I'm pretty sure they would not work out with 1.x million associates remaining in their new, higher paid jobs.
-- September 26, 2005 12:46 PM ∞
wrote:Accountability Mr. Scott:
Resolve and Fix you bad apples in your store management team. It all begins with you. To ignore or deny there are issues makes you look as if you have your head in the sand. Have you become too large to care. Wal Mart can never compete on an International level if they can not run their local stores. The biggest thing is how much you are taking from and not giving to the associates. Get a grip on reality. You and your cronies are a bunch of fat cats wanting only to get fatter.
Put you money where your heart is.
Stock holders are concerned. To all who own stock in Wal Mart call them phone them ask questions get answers not excuses. Do not let them double speak and maybe they will say what they mean and mean what they say. So far this is not the way a company should run. Call Benntonville
Arkansas Wal Mart. Tell them you want to know what they are going to do to reslove the problems.-- September 30, 2005 04:10 PM ∞
