February 17, 2006


On Private Web Site, Wal-Mart Chief Talks Tough (STEVEN GREENHOUSE and MICHAEL BARBARO, 2/17/06, NY Times)

In a confidential, internal Web site for Wal-Mart's managers, the company's chief executive, H. Lee Scott Jr., seemed to have a rare, unscripted moment when one manager asked him why "the largest company on the planet cannot offer some type of medical retirement benefits?" [...]

The Web site has a folksy name — Lee's Garage, because Mr. Scott pumped gas at his father's Kansas service station while growing up.

But its tone is at times biting. In his response to the store manager who asked about retiree health benefits, Mr. Scott wrote: "Quite honestly, this environment isn't for everyone. There are people who would say, 'I'm sorry, but you should take the risk and take billions of dollars out of earnings and put this in retiree health benefits and let's see what happens to the company.' If you feel that way, then you as a manager should look for a company where you can do those kinds of things."

Mona Williams, a Wal-Mart spokeswoman, said Mr. Scott responded so sharply because of the manager's sarcastic tone. The question, she said, indicated the manager failed to understand how competitive retailing is and would not be able to convey that to his subordinates.

"At Wal-Mart, we communicate very candidly with one another," she said. She added that Mr. Scott's tone did not deter employees from asking questions, noting that 2,147 questions have been asked since last April.

Commenting on a labor union that is fighting Wal-Mart's expansion plans in New York City and elsewhere, Mr. Scott wrote in the Web site, "that way its members' employers" — meaning many Wal-Mart competitors — "can continue to charge extremely high prices for food and tolerate poor service."

Stung by the many news media reports about allegations of sex discrimination, off-the-clock work and child labor violations at Wal-Mart, Mr. Scott wrote, "The press lives on things that are negative."

The Web site shows many sides of one of the nation's most powerful executives. He denounces managers who complain about the company or their subordinates. He frets about the success of his discount rival Target. He exhorts employees to act with integrity. He mocks General Motors for problems caused by its generous benefits. He rejects a manager's suggestion that Wal-Mart has created "a culture of fear," and he hails Wal-Mart's performance in responding to Hurricane Katrina.

Mr. Scott has made some of these points before in public speeches, but in these confidential e-mail messages to managers, he delivers far blunter insights in much greater detail.

In one posting, he urges managers to set an example by doing more to comply with the company's 10-foot rule, requiring employees to smile and ask "Can I help you" when a shopper is less than 10 feet away. [...]

Throughout the dozens of postings, Mr. Scott shows deep concern about the many attacks and allegations that Wal-Mart skirts environmental and labor laws. He acknowledges that Wal-Mart used to have a greater tolerance for managers who cut corners, but his postings insist that Wal-Mart's new focus is on total compliance with the law. In a posting last June, he quoted the Rev. Dr. Martin Luther King Jr., saying, "The time is always right to do what is right."

Responding to a manager's question about attacks on Wal-Mart's image, Mr. Scott wrote in an April 2004 posting: "Your value to Wal-Mart is outweighed by the damage you could do to our company when you do the wrong thing."

"If you choose to do the wrong thing: if you choose to dispose of oil the wrong way, if you choose to take a shortcut on payroll, if you choose to take a shortcut on a raise for someone — you hurt this company," he added. "And it's not unlikely in today's environment that your shortcut is going to end up on the front page of the newspaper. It's not fair to the rest of us when you do that." [...]

At several points, Mr. Scott addressed criticisms that Wal-Mart health plan was too stingy toward its employees. He said that Wal-Mart's health plan "stacks up very, very competitively" with other retailers. In a knock at companies that provide more generous benefits, Mr. Scott wrote: "One of the things said about General Motors now is that General Motors is no longer an automotive company. General Motors is a benefit company that sells cars to fund those benefits."

In one posting, Mr. Scott talked about how proud he was about Wal-Mart's response to Hurricane Katrina, when it rushed urgent supplies to the Gulf Coast. "The media coverage has been extremely positive and speaks to who we really are as individuals, and as a company."

When one manager asked how an associate — Wal-Mart's term for an employee — could become chief executive of the world's largest retailer, Mr. Scott wrote, "The first thing you can do is make sure you treat your people well, and understand that your associates are what will make you a success."

Note that in the unscripted moments he sounds exactly the same as in the scripted, only more so? Isn't this the same trick the media fell for with George Bush's "accidentally" open mike last week?

Posted by Orrin Judd at February 17, 2006 2:23 PM

Not only that, his prose is refreshingly straightforward and free of the leaden business-jargon I've heard from others. Nice comeback about the health plan benefits, as well.

Posted by: Bruce Cleaver at February 17, 2006 3:33 PM

Notice how whenever the NYT ever talks about greedy companies and their stingy benefits, that nothing is ever said about what the NYT pays in benefits? Or its competitors? It's been said that Dow Jones (parent of WSJ) is notorious in the newspaper business for being stingy with health benefits.

Posted by: Brad S at February 17, 2006 4:20 PM

How much attention should I pay to an article that starts out talking about postings at an internal web site and, a few paragraphs later, is referring to "emails."

Posted by: David Cohen at February 17, 2006 4:37 PM

Gee, this sassy guy sounds great, except that as a CEO he's a total failure. His profit margins are below industry standards, everyone "knows" he pays his people peanuts (that doesn't happen to be true, but his communications strategery is so bad that this is still the word on the street), his benefits are chintzy, AND his stock price is down 25% over the last few years, in part because the darned company has been following the same moribund strategy since, well, forever.

Yet somehow he makes $22.5 million per year for piloting the world's largest retailer into the ground. At least at the airlines, you have to make occasional course corrections and keep your plane in the air in order to continue earning a salary.

Walmart's retailing, PR, personnel, communications, and investor relations strategies are all blasts from the past. Given how much of the company the Walton family still owns, I'm surprised we're not dragging the swamps of Arkansas for Mr. Scott's corpus delicti. I guess he has pictures of Sam Walton in a safety deposit box somewhere.

Myself, I did a little better than break even on my investment in Walmart after a three year ordeal of annoyance and frustration. But I fired Mr. Scott, i.e. sold my shares, about a year ago. And have been sleeping better ever since.

Posted by: HT at February 17, 2006 11:58 PM

HT - Walmarts will never get good or even fair press unless and until it lets the unions in.

Sorry your investment didn't work out at Walmarts. Try one of the auto manufacturers. They have terrific employee/retiree packages. Now all they need is enough customers to pay for it all.

Scott said it all with, "General Motors is a benefit company that sells cars to fund those benefits." Problem is they aren't selling enough cars or they're not selling them at high enough prices. You sound like the kind of guy who wouldn't mind paying an extra thou or so for a new car so the auto companies could keep up the good work on benefits. Am I right?

Posted by: erp at February 18, 2006 1:48 PM

Erp: clearly you wanted to read something into my comment that wasn't there. My objection to Mr. Scott's "sassiness" is based purely on capitalist considerations. No one who is doing as bad a job as he is should be entitled to take shots at ANYONE else, let alone get paid $22.5MM per year for doing so.

As the CEO of a large corporation, his responsibility is to the shareholders. He has failed them miserably. Why, then, does he still have a super-cushy and over-compensated job?

His retailing strategy has failed, as the company makes substandard profits, is growing too slowly, and has repeatedly failed to adapt to changing seasonal and market conditions.

His PR strategy has failed, given the amount of bad press his company regularly receives.

His lobbying strategy has failed, as is evidenced by the upsurge in anti-Walmart legislation around the country, probably fueled in part by the bad PR strategy.

As it happens, even though I pulled my investment dollars out, I still shop at Walmart regularly. However, I am noticing some strange inventory-control problems that indicate all is not well on the operational level either.

Again, my feeling is that in order to make $22.5MM per year and take cheap shots at others, you had better be darned sure you are doing a fabulous job yourself. People who live in glass houses shouldn't throw stones.

Just another piece of common wisdom of which Mr. Scott seems arrogantly unaware.

Posted by: HT at February 18, 2006 10:49 PM

HT, my apologies.

Posted by: erp at February 19, 2006 1:44 PM