The “big is bad” fallacy is everpresent. It’s shockingly common even among entrepreneurs and startup employees. I’ve heard founders say they expect their values to degrade once they get to a large size. However, when looked at closely, “big is bad” is only generally true when government props up the big. For those in the private sector, it’s a choice.
In the 00’s, the media relentlessly attacked Walmart as the quintessential big, evil corporation, putting small local companies out of business. Media and shows would satire how big, evil corporations like Walmart acted behind the scenes.
The only way things work at scale is by having the right culture. In The Geek Way, Andrew McAfee proposes the framework of ownership, science, openness, and speed. It’s clear Walmart, at least under Sam Walton, had these traits in spades.
Ownership
In Sam Walton’s memoir, Made in America, he emphasized being a servant leader and encouraged his team to have a stake in the company. Managers owned pieces of their stores, so they were as concerned as Sam when the books didn’t match.
Due to aligning incentives of their employees with policies like profit sharing, Walmart’s shrinkage (i.e., lost or stolen inventory) was half the industry average. Walmart directly rewarded employees for reducing shrinkage.
Sam challenged the team. In 1984, Sam told company associates he would “do a hula on Wall Street” if Walmart achieved a record 8 percent pretax profit that year. Sam wore a hula skirt and did a hula dance on Wall Street when they achieved it.
Business conditions change. Nobody owes anybody else. When negotiating with vendors, you’re negotiating for the customer, not Walmart. Sam framed it internally as competition serving the customer. Customers want the best price and the best service.
Sam’s advice was to motivate and communicate with partners. Make your partners care, share information to empower them, and utilize sincere words of praise when warranted.
Each manager had the freedom to experiment and try new things. This decentralization naturally led to thousands of experiments.
Science
One manager had a problem with stealing and realized that having an employee greet every shopper significantly reduced theft and sent warm, friendly messages to customers. It was successful, so they rolled it out throughout the company. Walmart’s competitors eventually copied Walmart and hired greeters of their own. Nowadays, it’s rare to walk into any store without someone greeting you. You can thank Sam for that.
Having hundreds of stores iterate led to the best ideas spreading to the rest of Walmart. Walmart’s team constantly ran experiments and pushed Sam to try new things.
One such endeavor made Walmart the most prominent early adopter of satellite and dispatch systems, investing over 700M into technology by 1990. Walmart owns and manages its distribution channel and a private truck fleet. By 1990, they had 11K trailers and 2K tractors and could know where any truck or trailer was in real time.
Before Walmart, Sam started in variety stores. He built the best variety store in the region, but his landlord didn’t allow him to renew his lease at any price. The landlord forced Sam to sell his business. He then changed to discount stores and scaled up.
Walmart constantly reinvented and experimented. Sam tried to enter the shopping center business but failed. It was ten years too early, and getting financing and signing up stores took too much work.
When launching Sam’s club, they separated the Sam’s Club culture from Walmart culture. Given the separate culture, Sam said Sam’s Club felt like building a company all over again.
Sam traveled the world to understand other kinds of retail. Walmart launched hypermarts like those in other countries, where merchandising and grocery shopping are in the same store. It didn’t work in America, so Walmart pivoted to supercenters.
Cultures are different, but people are people. What motivates one group can motivate another. Sam learned the practice of company cheers from Korean and Japanese retailers. Company cheers have since become a process at Walmart and a staple in the hospitality industry as a way to get workers pumped up for the day.
Openness
Sam borrowed from Watson’s philosophy at IBM to never have more than four layers of management, from the chairman to any employee. This isn’t possible in many companies, but it’s admirable to strive for and even more admirable to succeed. A flat org structure lends itself to openness of ideas.
Sam had an open-door policy to anyone at the company who wanted to request and meet with him 1:1. Often, people would travel to his office and wait there all day to meet with him about something they thought was integral to the company. Sam was open to all ideas but still harsh in feedback when warranted.
Speed
Speed was a given at Walmart. It was core to the business. merchandise turned over every week, so they had to stay constantly up to date.
Merchandisers and operators would debate heavily every Friday, make decisions in meetings, and then move on.
Big is good?
Walmart started programs like Bring It Home to bring back American manufacturing. These programs have saved and created thousands of jobs and generated billions of revenue for American businesses.
Sam personally supported non-profits like Citizens Against Gov Waste and those advocating for free enterprise in America and worldwide. However, Sam didn’t have Walmart donate to non-profits directly, as he felt shareholders should get to choose how they give back instead of being forced to support his charities.
He viewed Walmart as a sustainable positive force. Supporting unsustainable positives is not business.
Legacy
A Walmart came to my hometown when I was in high school. I went several times, but Fry’s Electronics shares most of my department store memories. Reading Made in America gave Walmart a special place in my heart.
One of my favorite lessons from Sam’s memoir is that there is no reason to take things solemnly—business and life are games.
Sam admitted that he never would have written his memoir if he hadn’t gotten sick two years earlier. George Bush (41) awarded Sam the Presidential Medal of Honor. Hundreds of Sam’s associates were present. They gave their Walmart cheers. Many cried, knowing it was likely the last time they’d see Sam. Sam Walton passed away a few weeks later.
America needs more Sam Waltons and more companies dedicated to constant improvement and innovation. Big can be bad, but big can also be good. Our clients are institutions with massive impact. They need technology to empower them to be good actors. Companies like Walmart inspire us at Ender to transform an industry for the better.