Walmart autonomy

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There's a much-linked recent story in the New York Post by Charles Platt, who "went undercover" to work on as a Walmart sales associate. Something that impressed him impressed and surprised me too:

Having pledged ourselves, we encountered the aspect of Wal-Mart employment that impressed me most: The Telxon, pronounced "Telzon," a hand-held bar-code scanner with a wireless connection to the store's computer. When pointed at any product, the Telxon would reveal astonishing amounts of information: the quantity that should be on the shelf, the availability from the nearest warehouse, the retail price, and (most amazing of all) the markup.

All of us were given access to this information, because - in theory, at least - anyone in the store could order a couple extra pallets of anything, and could discount it heavily as a Volume Producing Item (known as a VPI), competing with other departments to rack up the most profitable sales each month. Floor clerks even had portable equipment to print their own price stickers. This was how Wal-Mart detected demand and responded to it: by distributing decision-making power to grass-roots level. It was as simple yet as radical as that.

We received an inspirational talk on this subject, from an employee who reacted after the store test-marketed tents that could protect cars for people who didn't have enough garage space. They sold out quickly, and several customers came in asking for more. Clearly this was a singular, exceptional case of word-of-mouth, so he ordered literally a truckload of tent-garages, "Which I shouldn't have done really without asking someone," he said with a shrug, "because I hadn't been working at the store for long." But the item was a huge success. His VPI was the biggest in store history - and that kind of thing doesn't go unnoticed in Arkansas.

He was invited to corporate HQ as a guest at a management conference. "It was totally different from what I expected," he told us. "I thought it would be these fatcats talking about money, but no one even mentioned money. All they cared about was finding new ways to satisfy customers. I met everyone including the chairman of the company."

Another surprise, in the answer given by his pet-department supervisor as to why he had been with Walmart for 15 years:

His answer lay in the structure of the store. "It's deceptive, because Wal-Mart isn't divided into separate stores like a mall," he said. "But really, that's how it works. Each section is separate. This is - my pet store! No one comes here and tells me how to run it. I could go for weeks without a supervisor asking any questions." Here was the unseen, unreported side of the corporate behemoth. Big as it was, it was smart enough to give employees a feeling of autonomy.

Back in July 2007, I recounted how the auto department manager for the Chickasha Walmart kept his shop open late for our family, when our van lost a tire tread on the H. E. Bailey Turnpike, heading home from Texas. We had first called the AAA emergency number, which pointed us to a local repair shop, which didn't have the right tire in stock, and the tire store wouldn't be open until the following morning. The Walmart manager's initiative allowed us to get home that night. Otherwise we'd have had to stay the night in Chickasha or limp slowly home on the compact spare.

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Yogi Author Profile Page said:

That's amazing. I had no idea that the stores were run that way.

What Walmart has done is change the game by changing the level of work involved. In most companies, ordering an extra pallet of goods must be done at a higher level because the work required to accomplish it is higher level work. Walmart lowered the level of work needed to do many stock-related tasks.

They've also been good about giving people proper discretion over their work. The manager of a department probably doesn't need to see a supervisor very often, because the timespan of the tasks can be several weeks if not months. Many departments may be run at level 2, with a level 3 manager. This raises the level of work at the store, which also changes the game.

When you combine these two, lowering and raising the level of work in different ways, you make it almost impossible for others to compete with you. Toyota has done it with their operations and GM has almost no way to catching up, which is why the American automakers are always talking about how they are "now as good as the Japanese."

Walmart are smart operators who aren't stuck on self-aggrandizing. They really do focus more on the customer. That may end up being hard on the suppliers, but that's why you negotiate and sometimes walk away.

Jeff Shaw Author Profile Page said:

That's accurate.
That was my experience in the 10 years I spent in management. From New Mexico, Bartlesville, and Indianapolis, and points in between.

In the '80's, when I was an assistant manager, I went with my manager to an annual merchandise meeting where vendors displayed their wares. There was a furniture maker there showing off an inexpensive recliner. I was given the reluctant authority by my store manager, to buy an entire truckload of those recliners as my VPI. The executive buyer from Bentonville called me a couple of days later. He said are you SURE??? I said yes.

I sold every one of those relatively good quality $99 recliners in 3 days (200+, if I remember correctly). One reason: Our store was adjacent to huge mobile home park and nearby apartments. No one in the General Office in Bentonville would have known that, and corporately it would be impossible for executive management to know intimate details of specific market areas. It's one of the reasons they are successful.

Thanks for commenting, Yogi, here and elsewhere. It's nice to know when a blog post strikes a chord.

I was looking forward to reading your take on this, Forrest.

Jeff, that's a fascinating confirmation of Walmart's willingness to invest a degree of trust in local managers and associates.

I had had this impression that Walmart's inventory control methods were all about centralized computer tracking and making decisions in Bentonville based on that information.

Chickasha Escapee said:

"Otherwise we'd have had to stay the night in Chickasha..."

Dodged a bullet, there.

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This page contains a single entry by Michael Bates published on February 9, 2009 10:57 PM.

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