Wal-Mart Sponsors Debate About Wal-Mart
By George Anderson
In a recent speech, Wal-Mart Stores CEO Lee Scott said, “You won’t find any case studies at the Harvard Business School highlighting answers for companies of our size and scope. If we were a country, we would be the 20th largest in the world. If Wal-Mart were a city, we would be the fifth largest in America. People expect a lot of us, and they have a right to. Due to our size and scope, we are uniquely positioned to have great success and impact in the world, perhaps like no company before us.”
In another case of exploring uncharted territory, Wal-Mart is bringing together a group of noted economists to the nation’s capital to debate whether the company’s impact on the economy as a whole and local communities is positive or negative.
Nate Hurst, a Wal-Mart spokesperson, said, “This is a first step in engaging in a dialogue that will be important to this company and to this country. There is a lot of information out there, and we want to try to get it all in the room and talk on a pretty high level about what the U.S. looks like with Wal-Mart in it.”
Some question the apparent risk Wal-Mart is taking by holding a conference where speakers will, at least in some cases, provide negative assessments of the company.
As an Associated Press report points out, even supporters of Wal-Mart see room for improvement. Jerry Hausman, economics professor at the Massachusetts Institute of Technology, is among those.
“Wal-Mart has brought lower prices to people, but some of Wal-Mart’s labor practices are questionable,” he said.
David Neumark, a senior fellow at the Public Policy Institute of California, a supporter of conservative economic policies and Wal-Mart, conducted a study to determine the retailer’s impact on employment. The study using data supplied by Wal-Mart looked at 3,066 of the company’s store openings in the U.S.
“The evidence is, on balance, more consistent with the claims of critics of Wal-Mart, although questions remain,” he told Business Week.
“The story we find is that Wal-Mart hurts wages, not so much in retail, but across the whole county,” he added.
Moderator’s Comment: Where do you come down? Is Wal-Mart’s economic conference an act of public strategy genius or a really bad mistake? What does the
company do to follow up the conference?
According to the Business Week report, the publication obtained advanced copies of all the findings to be presented at the Wal-Mart conference and
found even supporters “raise uncomfortable questions about Wal-Mart’s business model. Other studies validate the notion that it undercuts wages and benefits.”
Lee Scott and company will be presenting the results of an economic analysis study it commissioned Global Insight Inc., to conduct. Wal-Mart is said to
have given Global Insight access to all its internal wage and benefit information.
While there will be those who question its results, Global Insights maintains the study was independent. An advisory committee including representatives
from the American Enterprise Institute (a conservative think tank) and Brookings Institute (a liberal think tank) participated in the project.
The results of the study will be published on Global Insights’ web site on Friday. –
George Anderson – Moderator
Wal-Mart cannot stop the truth: it’s like many other organizations, having both positive and negative sides. It’s a positive sign for the company that it didn’t just hire a high school cheerleading squad to sing its praises. In the past, that’s exactly what they would’ve done. It would be reasonable to engage with more of its critics directly and constructively, addressing its negative issues directly rather than the denial and evasion often used in the past.
Wal-Mart is a huge organization that needs to think more like an economy (macroscopically) rather than tactically. Wal-Mart’s impact is tremendous, and their new management needs to recognize that the best way to determine the vision of the organization is by looking forward through the windshield, rather than driving by looking backwards through the rear-view mirror.
Ironically, Wal-Mart’s greatness and its Achilles heel is its people. Recent lawsuits focused on this, and Wal-Mart needs to innovate employee satisfaction, stakeholder interaction and community programs in ways which better impact their customers and their communities than they have in the past. Their opportunity to change is now.
Placing people first might benefit Wal-Mart more in the long-run rather than profits. This is a difficult position for any business, even Wal-Mart.
Couragous? Kudo’s? Great leaders? Rah, Rah, Rah. For a moment I thought I was reading the comments from an Amway convention. This move, like all Wal-Mart moves, is meant for Wal-Mart – period. It’s like all other public relations moves they have been making. It goes right along with the millions of dollars spent telling each community that they need them. In my own area, it’s nearly every five minutes on every radio station. This is nothing more than part of the continued plan.
What’s really happened over time is that Americans have been convinced to drink the Kool-Aid. And, afterwards, once they have been drinking it for a while, they don’t like the taste. The problem is they continue to drink in spite of knowing that it will eventually kill them. It’s sort of like being addicted to cigarettes – you read the warning, but still light up.
Studies? Sure, spend away and publish away. The fact is, with regard to real change, it’s unlikely. What it will do is continue to encourage those who are and those who will, to keep sipping the Kool-Aid.
Keep in mind, that in order to conquer the world, everyone has to be a Wal-Mart shopper. In order to be one, it’s much better for them if you fit the demographic of the typical shopper. The whole thing works better that way. The question is, will it be next week according to their plan or will it take a while longer and are we willing to fight?
I believe there is a better way. The likelihood of convincing the drunk, however, is not going to be easy.
I heartily endorse the Wal-Mart approach. If you have “the truth” on your side, you have nothing to fear from forcing all the cards onto the table. And if you’re wrong, there is no better way to get right than to begin by forcing all the cards onto the table, and then making changes if you need to. This is absolutely the right approach, if you have the guts to make the changes.
Looks like Wal-Mart does. I give them very high marks for this courageous and leading move. Bodes well for the future of a company the size of a medium size country.
“Never complain, never explain.” Whether attributed to Jackie Kennedy, Benjamin Disraeli, Jack Kent Cooke, Henry Ford II, or John Wayne, this code should be considered by WM. Their so-called economic conference cannot, under any circumstances, produce a favorable image shift for the Bentonville Bullies.
My main concern is that the forum will consist of economists and others who have little if any experience in the real world, and by that I mean the world of the vast majority of the people in this country who live from paycheck to paycheck as their buying power actually shrinks on an annual basis.
I’m always amazed to hear how well these economic “gurus” claim the economy is doing when wages at the lower levels have been virtually stagnant for several years now while the costs of basic necessities such as food, fuel and shelter have risen sharply.
Census figures indicated that over 60,000,000 Americans today earn less than $25,000 per year. I’m simply not sure that a group of economists and academics can understand the concept of living the way these people are forced to live.
Wal-Mart has made its fortune on the backs of this class of people and now they want to move upward into the middle class. What will this mean to people who have been forced to rely on Wal-Mart’s low prices to get by? Are they going to be abandoned?
If Wal-Mart makes the same amount of profit by selling higher priced merchandise to fewer people, will these economists and gurus still claim the economy is doing fine and even growing even as the majority of the work force, those at the bottom, are tightening their belts even farther?
Nope, I think this whole campaign by Wal-Mart to improve its image is nothing more than hype and that this so-called forum has a foregone conclusion involved that will result in no real improvement anywhere except maybe to Wal-Mart’s bottom line.
Very interesting indeed. I know there is a tremendous amount of data that shows the negative impact Wal-Mart has on an economy. Some will argue that the low prices they offer offset the low wages and benefits.
Therein lies the key of the debate. Is everyone accountable for their own actions and situation? I think we’d all like to say yes. “I went to college, worked hard, and got a good job. Why should I have to support those who made different choices?” But that ignores the human side of it. In fact, if you believe that statement and then you donate to charities, you are contradicting yourself.
Food for thought: You work as a cashier for Fry’s. Wal-Mart opens up in the shopping center across the street. Your boss tell you “sorry, we’ve had to cut back and we are reducing your hours by 50%.” Geez. Money is really short in supply now. You need to save money. So what do you do? You go across the street to buy your groceries so you can save money. Now you’re feeding the very animal that just put you in your current situation.
Should be an interesting debate.
Great comments, everyone. I completely agree with many of the points of view expressed here. We completed an enormous study 7 months ago to uncover the actual factors that make Wal-Mart so successful, and the results were not what we expected, and seem to run counter to the near-unanimous opinions out there. Just one bombshell: we found that after a survey of 3800 items across 60 cities and 4 competing channels (about half a million price comparisons) that Wal-Mart’s prices are actually higher on 85% of items.
Anyway, our research across dozens of industries shows that all organizations are “hard-wired” to deflect, ignore, minimize, and discredit high-intensity information (critical information that is insulting and worrisome). That Wal-Mart is setting the stage to explore this information is laudable to say the least, and a wonderful role model; but it is highly unlikely, in our experience with exactly these kind of situations, that Wal-Mart will be able to make effective use of the information it hears. I have little doubt that the discussions will be frank and may even be quite probing. To make effective use of this kind of information will be extremely difficult.
Our research also shows that high-intensity information is generally the most important that any organization can have. First of all, it deals with issues critical to the organization (by definition). Secondly, it will always be information that the organization is not currently absorbing or processing (also by definition). Our case studies of hundreds of organizations have found that every one of their failures was the result of ineffectively processing this data. So on that issue, I feel that our data says that uncovering or encountering this information, whether it be via a discussion forum or any other means, is the most important thing any organization can do.
With the sour waters of bad news rising around the bastions in Bentonville, it’s important that Wal-Mart take the offensive. If applying technology to retailing better than any other retailer and bringing lower prices to the marketplace at the expense of killing Main Street, frustrating unions and keeping wage rates down is a bad thing, then let the debate begin. This will put a spotlight on the issues that have been raised and give Wal-Mart access to its attackers’ arguments face-on.
The economic and political worlds are moving so fast these days that the company or organization that says that certain things can’t or should not be done is interrupted by some organization or company doing it. That’s what Wal-Mart has done, is doing, and is now preparing itself to fight – the elements it has surpassed or diminished.
I would give kudos to Wal-Mart’s management team for what I see as a very strategic business decision. The commissioning of the study is, in my opinion, acknowledgement of their learning from past history (good and bad) and a positive demonstration of willingness for accountability to the company’s internal and external stakeholders. It will be interesting to observe how Wal-Mart implements any insights gained from the study.
With Wal-Mart controlling 25%+ of major category sales, it is a move of gutzy genius. Historically, they have played to mom, the flag and apple pie. Now that they are under siege, and, assuming they know the results, they ask for forgiveness. As the old adage says, it is better to ask for forgiveness than to ask permission. This, their war room and selective leaking of their Black Friday sales prices, should give them many positives in the eyes of the public.
It is always a good idea to control the debate when possible. While Wal-Mart cannot control the reports being produced, they have set the stage by controlling the questions being asked.
The economics of Wal-Mart are extremely important and arguably the most relevant to any business. However, I agree with Camille -there are many other ways of looking at Wal-Mart’s impact. I would love to see how sociologists, anthropologist, historians, etc evaluate Wal-Mart, both in the US and abroad.
I look forward to seeing the results of this debate and how Wal-Mart responds to it. Whether this is a genius PR move or a terrible mistake will be determined largely by how Wal-Mart responds to the findings. If they own up to the problems that are uncovered and appear to make a sincere effort to address them, this should have a positive impact on Wal-Mart.
Jack Welch said that it was really important to address the “real truth.” You may not like it, but you need to face it. Wal-Mart appears to be following this advice. The debate will continue to take place with or without this meeting. To Wal-Mart’s credit, bringing a group of stakeholders together to discuss issues is a commendable step. I do wonder if economists are the only experts who should be involved with presenting the “real truth” of Wal-Mart’s impact on society, responsibility to society, and impact on the economy. It’s hard to tell what the outcome will be based upon one meeting; however, it definitely will be interesting to see what happens at the meeting and, even more importantly, what happens as a result of the meeting.
I think this is a waste of time and Wal-Mart should just go about its business being Wal-Mart. They need not respond to all the crackpots who make up all kinds of facts to justify their cause. No matter what Wal-Mart says or does, their enemies are always going to come up with some kind of fact or analogy to contradict Wal-Mart. Wal-Mart has nothing to worry about so long as people are lining up long and deep to both work and shop at Wal-Mart stores. Wal-Mart has served this country well providing low prices to all Americans while providing many of our nation’s unemployable and downtrodden citizens with a means to survive. Unfortunately, the welfare mentality has become so widespread that too many people now think corporations rather than individuals should be responsible for level of earnings and health care.
First and foremost, it’s never a good idea to publicize or make public a study or experiment you don’t already know the results of. Is Wal-Mart really ready to act on any consensus reached? One wonders.
Students of history will recall the rise of the great American industrial monoliths…US Steel, the railroads, and so forth. Throughout our history, we’ve developed huge companies with enormous economic power who become targets for populist attention (deserved and undeserved). Inevitably, arrogance and inattention to this societal imperative has brought most of those companies to their knees.
I think that if one measured the economic impact of the largest of those corporations at the time, it might be similar to the scale Wal-Mart is experiencing. If Lee Scott is looking for business case models, perhaps he’s looked there.
Reaching back, one of the mistakes of those early giants was remaining uncaring about the societal response to their labor practices, as well as the environmental impact of their manufacturing processes. Wal-Mart’s issues are similar but different.
Giving credit again to a brilliant management team, perhaps Wal-Mart has learned from history and is attempting to navigate a different path.
If I had people gunning at me, and I believed I was right, I’d welcome a public forum with them. Clearly, Wal-Mart believes it is right (although I’m sure it doesn’t believe it is perfect), wants to get to know its critics better and is no doubt interested in setting some things straight if it can. The debate will happen regardless, with them or without them. But considering the stakes, I’d call the move gutsy and straightforward — like the Wal-Mart execs with whom I am personally acquainted.
I am surprised that there is no commentary on the fact that Wal-Mart controlled the data released and only “samples” of wage data were included.
After reading the study, lower wages are offset by lower prices leaving a higher percentage of disposable income. Now consider that their target market doesn’t have a disposable income and this conclusion doesn’t seem to make much sense in context.
Last, the study admits that it doesn’t cover the whole picture. When aggregating all retail jobs together, the impacts on the hardest hit sector (grocery) is somewhat masked. At the same time, the grocery industry has improved markedly with the entrance of Wal-Mart.
Could we really expect any company to release information to the public that reflected negatively on the company?