Made in America (My Story) by Sam Walton (Part 2)

Building the Partnership. The managers work extremely well with the employees. He gave the employees autonomy to make certain decisions on their own. W-M seeks satisfied, loyal and repeat customers. Sam regretted not including the employees in the profit scheme back in the 1970s. Helen was the one who proposed higher salaries for employees. Unions were divisive and Sam didn’t feel the need for them. The employees have always believed in the company. Take care of your people and treat them well. The unions won’t bother you. Sam started calling employees ‘associates’. He wanted to give them more fair treatment. In 1971, the profit sharing scheme started for the associates. This plan amount to at least 6% increment on the salary. Employees are also rewarded if there is less inventory theft in the particular store. People are now rewarded for honesty. Sam was also transparent with W-M’s figures to his employees. W-M has a good trend of sharing information with others. Learn to praise others. If people did something wrong, let them know. Sam Walton tries his best to visit the other employees. There is an existence of an open-door policy.

What you’ve created here is better than communism, better than socialism could ever be, better even than capitalism. I like to call what you’ve got here ‘enlightened consumerism,’ where everybody works together as a team and the customer is finally king again. – Paul Harvey

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 profit margin. – Sam Walton

The more you share profits with your employees – whether it’s in salaries or incentives or bonuses or stock options – the more profit will accrue to your company. Why? Because the way management treats the employees is exactly how the employees will then treat the customers/clients. – Sam Walton

The truth is, once we started experimenting with this idea of treating our employees as partners, it didn’t take long to realize the enormous potential it had for improving our business. And it didn’t take the employees long to figure out how much better off they would be as the company did better. -Sam Walton

I think that 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 the people. – Sam Walton

Lip service won’t make a real partnership – not even with profit sharing. 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. – Sam Walton

I learned this early on in the variety store business: you’ve got to give folks responsibility, you’ve got to trust them, and then you’ve got to check on them. – Sam Walton

But I truly believe that people anywhere will eventually respond to the same sorts of motivational techniques we use – if they are treated right and are given the opportunities to be properly trained. If you’re good to people, and fair with them, and demanding of them, they will eventually decide you’re on their side. – Sam Walton

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. – Sam Walton

Partnership involves money – which is crucial to any business relationship – but it also involves basic human considerations, such as respect. – Sam Walton

Stepping Back. At 56, Sam was quite successful and was happy with the way things were going for him. His other hobbies were quail hunting and tennis. He gave up on golf long ago. He was extremely competitive in tennis. However, he played fairly and by the rules. You know you lost to a good player. Sam loved training dogs and the great outdoors. Sam started taking a backseat and let his other colleagues run part of the business. However, there were employees which formed alliances with either of the executive vice-presidents. Sam let Ron be the chairman and CEO of the company. However, Sam realized he could not give up the business and kept giving suggestions to Ron. The company was split into two. As this issue was dividing the company, Sam needed to offer Ron a lower position. Ron declined and decided to leave. Some of Ron’s friends also left the firm. At least one-third of the senior management had left the firm. David was brought in and he proved to be a huge success. Sam believed very strongly in the power of teamwork.

What I really love about hunting is the coordination and the training of the dogs. You have to develop a partnership with them. You have to motivate them, and they have to do their work reasonably well. – Sam Walton

Creating a Culture. He often gathers executives to talk about business on Saturday mornings. He has a W-M cheer. People can voice out their problems every Friday. It is a very friendly community. Sam even dressed up in Hawaiian outfit to dance. Sam is okay with crazy ideas to boost morale. Every shoppers had a chance to play shopping cart bingo etc. The games at the stores try to thrive on American tradition as well. The Saturday meetings is to discuss about problems and company strategy. Even guests were invited to the meetings. Meetings were always spontaneous as well. Very often, there would be no agenda. Sam hates people who flaunt their wealth and lead extravagant lifestyles. Sam encourages his staff to pursue further education.

But if you get too caught up in that good life, it’s probably time to move on, simply because you lose touch with what your mind is supposed to be concentrating on: serving the customer. – Sam Walton

My feeling is that just because we work so hard, we don’t have to go around with long faces all the time, taking ourselves seriously, pretending we’re lost in thought over weighty problems. – Sam Walton

Whether it’s Saturday morning meetings or stockholders’ meetings or store openings or just normal days, we always have tried to make life interesting and as unpredictable as we can, and to make W-M a fun proposition. – Sam Walton

Making the Customer Number 1. There was plenty of demand in the small towns for W-M to grow and they took advantage of it. W-M were so good that their competitors had to shut down. W-M actually provided savings for small towns and created jobs as well. The media accused them of destroying small towns. Unless you have a monopoly, you will do well to serve the customer’s needs. Small merchants, in order to survive, have to target a niche of customers and create that personal touch. Some tried converting variety stores into craft stores. It is possible to compete with W-M if you can find a particular niche. Do not compete on price. W-M tries to get involved in the community as well. They are not all just profit-driven. W-M hated going through middlemen and developed their own distribution system. They did away with distributors. W-M is very demanding of vendors and want the lowest price possible. They even drive trucks to pick up the items. You might fight well with these vendors. Even P&G was afraid of them and took W-M seriously. P&G and W-M worked together on a partnership and starting sharing information to one another. It was great and helped to drive costs even lower. The supplier is a very important partner. With this system, the supplier can estimate demand trends even a year in advance. The customer comes first and are treated like a boss.

For my whole career in retail, I have stuck by one guiding principle. It’s a simple one, and I have repeated it over and over and over in this book until I’m quite sure you’re to death of it. But I’m going to say it again anyway: the secret of successful retailing is to give your customers what they want. – Sam Walton

When you start out as an unknown quantity with just a dream and a commitment, you couldn’t buy a mention of your company in any publications. When you become moderately successful, they still ignore you unless something bad happens to you. Then, the more successful you become, the more suspicious they become of you. – Sam Walton

‘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 a living. – Sam Walton

Meeting the Competition. ‘Sam was notorious for looking at what everybody else does, taking the best of it, and then making it better.’ Instead of avoiding the competition, it was necessary to face it head on. Sam was always trying to learn from competitors. Sam spent a lot of time in K Mart trying to understand how they worked. K Mart realized that W-M was getting too big and tried to expand aggressively. Some of other competitors gave W-M feedback on how they could improve. W-M was never one to shy from competition. Some analysts doubted W-M’s future. K-Mart was also resistant to change and were expanding too fast. W-M started acquiring smaller discount stores. They then ventured into Mississippi. ‘We are going to do this’. Sam sometimes uses his gut to make decisions. He tried the hypermart concept in the US. However, they only turned out to be marginally profitable.

Our competitors have honed and sharpened us to an edge we wouldn’t have without them. We wouldn’t be nearly as good as we are today without Kmart, and I think they would admit we’ve made them a better retailer. One reason Sears fell so far off the pace is that they wouldn’t admit for the longest time that Wal-Mart and Kmart were their real competition. They ignored both of us, and we both blew right by them. – Sam Walton

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. – Sam Walton

To stay ahead of those challengers, we have to keep changing and looking back over our shoulder and planning ahead. – Sam Walton

Distribution and transportation are seen as competitive advantages for W-M. Sam invested a lot in technology. Computers have helped them achieve economies of scale and better efficiency. Mechanized distribution was the way to go. The distribution centres are strategically located. There was extreme time saving and much greater flexibility. W-M does its own distribution, and this helps to reduce lead time. W-M has its own fleet of trucks and trailers. The drivers are also model professionals. They are extremely loyal people. The drivers also feel that they have to take care of the customer. There are even customized delivery plans. Sam heard about the satellite system which would improve communication between stores and the distribution centres. Instead of calling one another, people could pull data from the system.

I guess we’ve always known that information gives you a certain power, but the degree to which we can retrieve it in our computers really does give us the power of competitive advantage. – Sam Walton

But when you see all those satellite dishes outside our building, or hear about all the computers inside it, or look at some videotape of our laser-guided distribution centers, don’t let anybody kid you. Without the right managers, and the dedicated associates and truck drivers all across the system, all that stuff is totally worthless. – Sam Walton

Thinking Small. If you know how to grow and stay profitable, then you should do it. Sam always wanted to be the best retailer. Being big tends to mean being slower to respond. However, suppliers tend to ignore small players in the market. W-M is big, but it things like a small company. It treats the customers well and does not ignore small towns where the markets are smaller. Thinking small is a way of life. There are 6 ways in which W-M tries to think small. Principle 1: ‘Think one store at a time’. Keep the prices down and offer superior customer service store by store. Saturday meetings are used for that. Management has to listen to the merchandizers in the stores. Principle 2: ‘Communicate, communicate, communicate’. The importance of this can’t be over-stated. If you find out something good, you would want to let your stores know about it. Sam wanted staff to pledge that they will greet customers and smile. Principle 3: ‘Keep your ear to the ground’. Sam always wants his managers to visit the stores. W-M has a fleet of private jets for their use. Usually, these managers should be able to come up with ideas for how to improve the stores after their visit. Principle 4: ‘Push responsibility – and authority – down’. Store within a store concept. Information was shared to the department heads. These department heads were then give the opportunity to manage a store by themselves. There a fine line between autonomy and control. Principle 5: ‘Force ideas to bubble up’. Associates are allowed to share ideas with the management. The (Volume Producing Unit) works well. Associates who have money-saving ideas can attend the Saturday meetings. When there are so many staff, there will definitely be many great ideas lying around. There were also people greeters in each store. Principle 6: ‘Stay Lean, Fight Bureaucracy’. Be as lean as possible to cut down on expenses.. Their offices were quite plain and not very showy. Even if you don’t want bureaucracy, it will naturally build its layers. There should not be so many layers of bureaucracy.

A computer is not – and will never be – a substitute for getting out in your stores and learning what’s going on. In other words, a computer can tell you down to the dime what you’ve sold. But it can never tell you how much you could have sold. – Sam Walton

If you don’t zero in on your bureaucracy every so often, you will naturally build in layers. You never set out to add bureaucracy. You just get it. Period. Without even knowing it. – David Glass

A lot of this goes back to what Deming told the Japanese a long time ago: do it right the first time. The natural tendency when you’ve got a problem in a company is to come up with a solution to fix it. Too often, that solution is nothing more than adding another layer. What you should be doing is going to the source of the problem to fix it, and sometimes that requires shooting the culprit. – David Glass

I guess one reason I feel so strongly about not letting egos get out of control around W-M is that a lot of bureaucracy is really the product of some empire builders’ ego. – Sam Walton

It has been our heritage – our obsession – that we would be more productive and more efficient than our competition. – Sam Walton

Giving Something Back. Sam was never interested in creating a huge personal fortune. Sam still holds some of the company stock. He has never liquidated much of the position he has. Sam does believe in worthy causes. His family usually focusses on causes like education. They support schools, hospitals, environmental groups, conservation groups. They also sponsor scholarships to students so that they can study in University. They plan to give at least 50% of their wealth to worthy causes. Sam is very concerned about education. They want the organizations to remain accountable for how they spend their money. Educating and training the workforce is very crucial. W-M likes locally directed charities. They are giving back just by allowing customers to save money. The shareholders also have some say in what kind of community projects they would like to invest in. W-M wanted to groom the local manufacturer in order to produce quality goods which they could purchase. Because of this programme, W-M has managed to purchase more of such goods. Rather than importing. W-M is still thinking of different ways to give back to the community.

I believe that every right implies a responsibility; every opportunity an obligation; every possession a duty. – John D. Rockefeller Jr

We have never been inclined to give any undeserving stranger a free ride, and we will never change our minds about that. Nor do we believe that because we have money, we should be called upon to solve every personal problem that comes to our attention, every problem of the community, the state, or, for that matter, the country. – Sam Walton

We are going to see if we can’t shake up some of the time-honored assumptions about what you can teach people, about what you can do with people whose self-esteem has been beaten down, and about how you can motivate ordinary people to do extraordinary things. – Sam Walton

Running a Successful Business: Ten Rules that Worked for Me. There is no one key to success. It is a culmination of many different ingredients. Most of the values have stayed the same. Sam thought about a list of rules for success. Hard work is crucial. If you are not willing to work hard, you won’t be successful. In the end, Sam came up with 10 Rules. Rule 1: Commit to your business. Rule 2: Share your profits with all your associates, and treat them like partners. Rule 3: Motivate your partners. Think of novel ways to push them and challenge them to move forward. Don’t become too predictable. Rule 4: Communicate everything you possibly can to your partners.  Rule 5: Appreciate everything your associates do for your business. Learn to praise their good work. Rule 6: Celebrate your successes. Loosen up and have fun. Learn from your mistakes. Rule 7: Listen to everyone in your company. Figure ways to make your associates talk and give feedback. Rule 8: Exceed your customers’ expectations. This will lead to repeat customers. Make good on your mistakes and learn to apologize. Rule 9: Control your expenses better than your competition. Rule 10: Swim Upstream. Don’t follow others but go the other way. You might be able to locate a niche.

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. – Sam Walton

‘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. – Sam Walton

We like to hear praise often, and especially when we have done something we’re really proud of. Nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise. They’re absolutely free – and worth a fortune. – Sam Walton

To push responsibility down in your organization, and to force good ideas to bubble up within it, you must listen to what your associates are trying to tell you. – Sam Walton

You can make a lot of different mistakes and still recover if run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient. – Sam Walton

Those are some pretty ordinary rules, some would say even simplistic. The hard part, the real challenge, is to constantly figure out ways to execute 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. – Sam Walton

Wanting to leave a legacy. Sam was having the time of his life at W-M. If he had to start all over, he would probably have made the same decisions. The associates have felt a certain sense of satisfaction when working at W-M. Many people are now better off with W-M’s arrival. Sam wants W-M to continue expanding, but also give back to the community. Sam knew since young that he would do something in retail.

Go check the new store out. See what they’ve got to offer, see how they treat you, and decide for yourself if you ever want to go back. Because this is what it’s really all about. In this free country of ours, that shop owner’s success is entirely up to you: the customer. – Sam Walton

If I wanted to reach the goals I set for myself, I had to get at it and stay at it every day. I had to think about it all the time. – Sam Walton

I’ll tell you this: those companies out there who aren’t thinking about the customer and focusing on the customers’ interests are just going to get lost in the shuffle—if they haven’t already. Those who get greedy are going to be left in the dust. – Sam Walton

Great ideas come from everywhere if you just listen and look for them. You never know who’s going to have a great idea. – Sam Walton

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 team idea begins to strain at the seams. – Sam Walton



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