Wal-Mart Reorganizes U.S. Operations
By Tom Ryan
Wal-Mart Stores is consolidating some of its operations,
while dividing the country into three regions with separate presidents. The
overhaul is expected to help the retailer in catering to local tastes, finding
real estate in saturated markets, developing and empowering local store talent,
and expanding e-commerce.
Under the structure, logistics, real estate and
store operations will all now be overseen by Bill Simon, its chief operating
officer. Each region will have a real estate team dedicated to determining
the best locations to build new stores or studying new store formats that might
be suitable for the local market. Eduardo Castro-Wright, vice chairman, said
this part of the restructuring is "intended to gain alignment in the critical
new store decision process by integrating Wal-Mart’s realty division with store
operations and logistics."
On the merchandising front, SVP of store merchandise
operations Andy Barron will oversee merchandise strategies for three new business
zones: Walmart West, Walmart South and Walmart North. Each zone will have its
own president, who will work with merchandising teams to stock items that match
local tastes. Jon Fleming, chief merchant, in a statement said Mr. Barron’s
team "will design merchandise strategies for each of Walmart US’s new geographic
business units and translate those strategies into executable, customer-focused
programs. In addition, the in-store presentation and store groups, currently
in the customer experience organization, will move to [Mr. Barron’s] store
merchandising execution team, close to our business units. For merchandising,
this means we’ll be even more connected with operations – and with our customers."
The
reorganization is also expected to "develop and grow our talent more quickly
and provide opportunities throughout the organization," according to Mr. Simon.
He added, "By reducing our market managers’ span of control, they will be able
to focus on developing their store managers and to implement new productivity
initiatives. The net impact will be stronger store managers with significantly
more growth opportunities in the future."
Wal-Mart also changed its regional
general manager structure by adding smaller regions at the senior director
level to augment VP regional general managers. Mr. Simon said, "This move creates
a stepping stone for market managers to gain leadership experience as they
grow. We have also changed the regional general managers’ span of control,
to allow them to develop their market managers with a laser sharp focus."
Finally,
Wal-Mart created Global.com with a goal of developing and executing a global
strategy for e-commerce; establishing cross-functional and cross-border relationships;
and creating technology platforms and applications across Wal-Mart’s markets.
The
changes come nearly one year after Mike Duke became Wal-Mart’s CEO.
Discussion
Questions: What do you make of Wal-Mart’s U.S. reorganization? Where
do you expect it will achieve the greatest efficiencies? What challenges
do they face in execution?
- Organizational
change memo from Mike Duke – Wal-Mart Stores - Organizational
change memo regarding Wal-Mart US from Eduardo Castro-Wright – Wal-Mart
Stores - Organizational
change memo from Bill Simon – Wal-Mart Stores - Organizational
change memo from John Fleming – Wal-Mart Stores - Organizational
change memo regarding e-commerce from Eduardo Castro-Wright – Wal-Mart
Stores - Wal-Mart
Combining Some US Units in Streamlining Move – The
Wall Street Journal
If the reorganization succeeds in its stated goals (“catering to local tastes, finding real estate in saturated markets, developing and empowering local store talent, and expanding e-commerce”), good for Walmart. But at first glance the structure sounds top-heavy and cumbersome. A company of Walmart’s size surely has the IT sophistication to provide localized content solutions without breaking itself into three separate merchandising organizations. (Macy’s, in contrast, is using its “My Macy’s” initiative to tailor local assortments while consolidating multiple buying groups to just one.)
It also sounds like Walmart has some retention and succession issues at play if it needs to hand out more “president” titles than ever before, and runs the risk of more diffuse decision-making. Interesting to see what other panelists have to say, especially if they are more familiar with the players and culture at Walmart.
Wow, is there trouble over at big blue? First Sam’s Club north of the border, then Sam’s Club south of the border, now a major reorganization in the main channel? Are they realizing that people are sick of buying low quality products? Or is the jig up on the whole ‘Walmart is the cheapest out there’ idea?
Walmart was due for an overhaul a long time ago and I’m not sure their positioning was correct for our current economic situation. Consumers who really want to save money will shop elsewhere. In the meantime, the PR machine will be running on all cylinders.
Reading the article, the only advantage I can see is that it creates more managerial slots.
Localizing assortment can be a good practice, of course, but it can also cut into Wal-Mart’s strengths–the cost efficiencies they get throughout their entire buying and logistics system. If they’re buying different products in different regions of the country, they may lose some of that leverage.
For us, the consumers…ho-hum.
Walmart is at that “too big to fail” stage and must do those things that keep them ahead of the curve. So far that has been their modus operandi and it has worked very well. They have their sourcing and cost controls well in line.
Now Walmart wants to get closer to the local customer, thereby directing them to give more authority to the “locals” on their team. It is part of the never-ending evolution improvement process that emanates from Bentonville.
In a recent blog post, I commented on what I saw as a trend toward the fragmentation of big retail in the new decade. This type of reorganization is the case in point.
This move on Wal-Mart’s part is really less about consolidation and more about a calculated fragmentation into smaller business units. The efficiencies of centralizing certain buying activities is an offset to the inefficiency of decentralizing other operational activities. And while Wal-Mart loathes inefficiency, this time there’s no choice.
The realization by Wal-Mart and others is that America is no longer one big market that can be sold with a single retail proposition. There is no typical American consumer anymore. This new structure is designed to deploy a variety of retail formats, geared very specifically to regional demographics and other realities.
Essentially, we are witnessing a total recalibration of their business to address a stark reality. The era of big-box domination is over.
This “decentralizing” strategy will have the greatest impact in associate development. Organizations, like individuals, are evaluated and trusted based on the human, technical, and conceptual skills that they deliver to others. Walmart has proven to be a powerhouse in the development of technical and conceptual practices in merchandising, allocation, finance, and marketing.
By finding, developing, and unleashing the human skills of the field operations teams, Walmart can help assure their ongoing growth in sales, customer satisfaction, and profitability. Great ideas come from everywhere. These field teams will have more than their fair share of innovative ones.
The caution for Walmart will be making certain that “fiefdoms” don’t spring up within the regions. Sharing the great ideas, and bolstering the entire organization has to remain a prime focus.
The creation of additional positions that allow individuals to gain experience can produce more people who are better prepared to take charge in the future. This process allows senior management to determine who is truly ready for the next steps.
The only danger is if you build in expectation that you can not fulfill. We have learned that if you develop a race horse, you have to give them room to run or you lose them.
It does sound like a talent retention strategy, but the addition of more bureaucracy in any organization isn’t ever a totally positive step.
I read this as more autonomy and focus to get the right product for the specific region/store/customer. I would say this is a smart and necessary move for Walmart as they approach saturation in their core supercenter business in the US. The organizational change demonstrates that the commitment is there. Had they made an announcement that they were improving localization without making changes in the organizational alignment and responsibilities, I would have been more skeptical.
How well this specific realignment will work, we shall see…as we all know the announcement is the easy part.
This is, in my view, a terrific move for WMT and is indicative of an inflection point in retailing. For decades, retailers have focused on reducing costs and have been consolidating and centralizing their decision-making, particularly in merchandising. This has led to, among other things, homogeneous assortments and indifference to the variations of local markets.
Here’s the question–are consumers the same in Miami as they are in Omaha? In San Diego? In Chicago? In Dallas?
Of course they’re not. Does making management and process changes to better recognize that fact and provide a more appropriate assortment to these variations make sense? Will it increase revenue? Of course it will. Will the incremental costs and complexity be offset by incremental revenue and margin? It will if the company is successful in moving its “center of gravity” out of the central office and closer to the individual selling floor. This is the true challenge, one that is much easier to talk about than to accomplish.
It had to happen. It needed to happen. The previous organizational structure of functional silos impeded collaboration; too many stakeholders wanted to influence every major initiative. The result was slow decision-making and diluted solutions, both of which run counter to Walmart’s competitive, market-driven culture.
What has made Walmart so powerful over the past two decades has been their shared sense of purpose, now characterized as “Save Money. Live Better.” This is more than a slogan, it’s the filter through which all decisions are passed. With this new organization, all relevant stakeholders are now on the same team, so to speak.
Decision-making, speed and effectiveness will improve. It had to happen because many senior executives were getting frustrated at the slow pace of innovation. That Walmart has in this reorganization emphasized growth opportunities for management shows that they acknowledge the ramifications of inaction on the retention of talent.
The noted organizational changes along with Walmart’s announcement that Sam’s in-store demos will be managed by a single third party provider (Shopper Events) speak to Walmart’s ongoing commitment to fostering a more nimble and cross-functional organization globally, online, at HQ, and in-store. It is the next turn of the screw as Walmart fulfills its “ten words” promise which you may remember breaks down into three separate mantras that guide Marketing (“Save money. Live better”), Merchandising (“win, play, show”) and Operations (“fast, friendly, clean”). Teed up by Mike Duke and followed by separate cross-referenced announcements from Bill Simon, John Fleming and Eduardo Castro Wright, it all came off as a symphony of synergy that positions Walmart as the author of a larger narrative while others scramble to plug holes.
The recently-announced series of changes also further balance the previously lopsided Bentonville-centric weight that had Walmart lumbering in the (distant-in-retail-time) past. Finally, Walmart’s willingness to vet and engage third parties to execute this larger vision (Shopper Events, Li & Fung) is yet another step toward shedding its old insular reputation.
Pretty agile for a battleship!