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Samuel Walton: Retail Giant

Sam Walton founded Wal-Mart, growing it to over a thousand stores. He is a serial early-adopter whose commitment to innovations made them ubiquitous and his investors extremely rich.

Sam Walton

Short Biography

Samuel Walton was born in Oklahoma, in 1918, and grew up on the move in Missouri, during the great Depression, as his father worked at a series of sales jobs. Walton worked too, during his education, pausing to take a degree in Business at the University of Missouri at Columbia.

On leaving, he started working as a management trainee at JC Penney, where he also started learning the management skills that would help him grow his own business in the future. As for many young men of his age, the Second World War put the brakes on his career, when he served in the US Military Police. Returning to civilian life in 1945, he decided not to return to JC Penney, but to open a franchise Ben Franklin store in Arkansas, funded by a loan from his father-in-law.

This thrived, but he was unable to renew his lease, so opened a new one in a nearby town in 1950. Gradually, he bought more and grew his empire, using a light aircraft to get from one store to another and to scout possible new locations.

In 1962, he opened his first Wal-Mart store, on a new model he’d seen in Chicago – a Kmart, owned by competitor Sebastian Kresge. He had started his experiment with bulk retailing. Over the coming years, he experimented further in stock lines and layouts, and opened a second Wal-Mart in 1964. Then, in 1970, he raised $5 million in equity through a stock issue (at $16.50 per share), and opened six new stores and a distribution warehouse. By the time of his death, one of the original Wal-Mart shares had grown in value to $26,000 and the Wal-Mart empire was the biggest retailer in the US, with over a thousand stores.

Sam Walton stood down as CEO of Wal-Mart in 1988, to fight both leukaemia and bone marrow cancer; and finally died of it in 1992.

Five Retail Lessons from Sam Walton

1. The Personal Touch

Walton would get to know his employees (or Associates, as they are known) personally in the early days. He maintained this as long as he could, having gained a pilot’s licence so he could fly from store to store. The use of the term ‘Associate’ was a deliberate choice to create a sense of inclusion and what we would now call engagement. Indeed, he encouraged managers of new stores to take shares in the business to create a sense of their ownership. Walton practised, from his earliest days at JC Penney, a management style that can be called MBWA: Management by Walking About.

2. Rigorous Standards

In visiting stores, Walton set and expected strict quality standards. If he did not find them, he was sanguine about just shutting the store and not re-opening it until the management and staff could get it right.

3. Control your Supply Chain

There is a story about Walton that reminds me of one I recounted about Ingvar Kamprad (founder of Ikea). In the early days (his second Ben Franklin store), when a local competitor sold out of a product – women’s rayon underwear – instead of ordering himself a stock, he bought the distributor. In one move, he deprived his competitor of stock and assured his own supply chain. The money he raised in 1970 from a stock issue was used in part, not to expand his retail base as much as possible, but to fund a distribution centre. Like a good military general, Walton understood the criticality of his supply chain. He invested heavily in warehousing, logistics and, early on, in networking his stores and warehouses to one another.

4. Embrace the New

Less of an innovator and more of an early adopter, Walton frequently saw and rapidly embraced new ideas that would help him grow his business (Jim Collins’ Flywheel principle). I mentioned satellite networking of his stores, above, but other examples abound:  self-service retailing, discounting, and hypermarkets. Each step made him more successful.

5. Experimentation

Walton believed in achieving the best results he could, so he was constantly experimenting to test the effects of different layouts, promotions, and stock lines. Once again, the flywheel principle at work, but the salient lesson for me is test-evaluate-improve – then test something new.

If all this sounds a little familiar, take a look back at the blog on Ingvar Kamprad, which I posted just over a year ago. I cannot help feeling that these two retailers, born only eight years apart, are kindred spirits.

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Styles of Management

The Management Pocketbooks Pocket Correspondence Course

This is part of an extended management course. You can dip into it, or follow the course from the start. If you do that, you may want a course notebook, for the exercises and any notes you want to make.


In the ‘good old days’ – good old days for managers, that is – there was one style of management:

Tell them what to do – expect them to do it – punish them if they don’t

Life must have been easy then for managers: no need to motivate people (more on that in coming weeks), no back chat and alternative ideas from staff, no worry about giving offence, and high levels of compliance.

Scientific Management

On the other hand, how efficient were workers then? Frederick Winslow Taylor wanted to apply the principles of science to management and was the first person to try to analyse an organisation, test his ideas with experiments, and document the results.

‘Taylorism’ treated people as cogs in a machine. Optimise all aspects of the process, including people, to get the best results. So Taylor introduced time and motion studies to optimise how workers did things, and piece rates as incentives for workers. He said ‘do it this way and you will get your reward’. This was scientific management.

Humanistic Management

Scientific Management largely failed. Yes, it led to the hugely successful production line and arguably to just-in-time concepts too. Six Sigma, TQM and Lean can all draw their origins from scientific management too.

But it failed as regards people. Elton Mayo was a follower of Taylor and tried to apply Taylorist principle in the Hawthorne Lighting Plant. He discovered that changing light levels changed work rates. But it didn’t matter how you changed the light levels, as long as you engaged the workers in the process. What mattered was engaging people. It still does – that’s why staff engagement is such a big deal.

Theory X or Theory Y

The tension between task focus and people focus was crystallised by Douglas McGregor in his models of management style called Theory X (task, transaction, process, incentive focused) and Theory Y (people, consensus, motivation, satisfaction focused).

These are reflected in two contrasting styles of day-to-day management: Management by Objectives (MBO) and Management by Walking About (MWA).

MBO is all about setting clear objectives to staff and supporting them in achieving them – it is formal, transactional and has been seen as highly successful. For example, Bill Packard attributed the success of Hewlett Packard in its heyday to MBO.

But strangely, Bill Packard was well known for wandering around all areas of his business, chatting with people, building relationships, sharing ideas and offering inspiration.

Balance

There is no ‘right’ style of management. We each need to find the right balance, that works for us. We also need to adapt that balance to each individual and to changing circumstances.

Balance of Management Styles

Further Reading 

You may also like the Pockeblog articleIt’s time to get enabling

Three Six Sigma Articles

  1. Belt up and Reduce Errors
  2. The DMAIC Solution Process
  3. Six Tools from Six Sigma
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