The Wal-Mart Decade: How a New Generation of Leaders Turned Sam Walton's Legacy into the World's #1 Company by Robert Slater

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Table of Contents

Read an Excerpt

PART ONE
WAL-MART TODAY

CHAPTER 1
Celebrating in a Basketball Arena
June 7, 2002. Thousands of Wal-Mart loyalists storm into the cavernous Bud Walton Arena on this summer morning in Fayetteville, Arkansas. The blaring music, the screaming crowds, the bright lights assault the senses-it is, after all, only six in the morning!
Hard to believe, but when the annual shareholder meetings began more than thirty years earlier, Sam Walton, Wal-Mart's founder, huddled with five other people around a table at a coffee shop next to a company warehouse and speedily dispensed with business.
In stark contrast today, the Wal-Mart gathering lasts six hours. It is, at least for that morning, the greatest show in town. No other company in the world puts on a show for shareholders quite this spectacular. One after another, executives race to the stage, adrenaline pumping, fists waving, and smiles on their faces. Roaring with approval, the crowds pour their hearts and souls into an event that has all the trappings of a pep rally or a political convention. Whoever said that a shareholder meeting had to be stuffy or formal?
Other corporations race through annual shareholder meetings. Why shouldn't they? The way others conduct these meetings, they are too boring for anyone to want them to last more than fifteen minutes. The Wal-Mart attitude is different: If you're going to assemble twenty-thousand Wal-Mart loyalists under one roof, the least you can do is give them a rousing good time. And so Wal-Mart turns its event into a wild weeklong celebration, replete with canoe rides, concerts, fireworks, seminars, visits to a company distribution center, and, lest anyone forget why they had all come together, tours of the home office in Bentonville, a thirty-minute drive to the north.
The Wal-Mart assemblage takes up nearly every seat in the 19,300-seat arena, making this the largest corporate annual meeting in the world. More in keeping with a sporting event than a corporate gathering, the visitors wear every possible combination of company buttons and banners and hats. The red hats and banners identify one Wal-Mart division, the green, another. The reds and greens applaud and scream unendingly, but they save the loudest roars for that golden moment when someone on the stage mentions the name of their division. Then a section of the arena erupts, and you really feel as if someone has just scored the game-winning basket for the home team.
The Wal-Mart audience-"First Lady" Helen Walton and her four children, executives, rank-and-file employees ("associates," in Wal-Mart parlance), the board of directors, shareholders-gathers here on this day with one purpose in mind: to rejoice. Every year they travel-some of them thousands of miles-to take part in this corporate festival with the dual purpose of learning more about the place at which they work and to celebrate the achievements of the past year. Never have they had more to celebrate.
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It has been just over ten years since Sam Walton died, leaving behind a discount merchandise business that few believed would ever make waves but that has defied the imagination of even the greatest of skeptics. At first there just seemed no way that a backwater retailer like Sam Walton could make a mark. Too many of the big boys in retailing had already established footholds in the big cities, the only places that counted for a retailer. But Sam Walton had two very important things going for him: First, he was perhaps the greatest merchant of his era. He had an uncanny instinct for sensing what products would sell, at what prices they would sell; where to locate stores, and what those stores should look like.
FREE TO DO AS HE PLEASED
And he also had a vision that was both prescient and revolutionary: He became the first mass merchant to focus on the small-town backwaters of America. Initially the skeptics howled derisively, mocking a man with such foolhardy pretensions. The skeptics, as it turned out, helped him enormously, as their dissent served to alert others how foolhardy it was to do retailing anywhere but in the large cities. Had the other large retail chains followed young Walton into those small communities, they probably would have pulverized his burgeoning initiative, since he had so little experience and financial support. But they paid little attention to what he was building, leaving him free to build what he wanted at his own pace. And build he did. At the time of his death, on April 5, 1992, Walton had built Wal-Mart into a $43.8 billion enterprise.
Just as doubters greeted the first Wal-Mart stores with deep skepticism, so after Walton's death new Cassandras predicted that Wal-Mart would disappear or at least slowly atrophy. "The betting in dozens of tiny stores around the country," wrote Time magazine somberly two weeks after Sam Walton's death, "is that Wal-Mart will reach its own plateau."
Because of his death, "the soul of his corporation will change." The betting may have been based on wishful thinking: How nice it would have been for Wal-Mart's competition if the passing of its founder did indeed mean that the chain of discount stores would atrophy or at least reach that plateau. It seemed a safe bet. With Sam Walton's death, the ownership of the company automatically shifted to his widow and four children. Often such family-run corporations cannot withstand the death of the founder. There was just no reason to assume that Sam Walton's retailing genius was transferable to other family members. Indeed, without its soul, Wal-Mart's demise, however slow, seemed a safe bet.
The Walton family had no desire to see The House That Sam Built wither and die. Besides, Wal-Mart was a gold mine, and there was no telling to what heights it might grow under the right leadership. The Walton family exercised shrewd intelligence in realizing how unwise it would be to tamper with the founder's creation; how unwise to tamper with the transition plans that Sam Walton had set in motion.
And so, although many aspects of Wal-Mart changed in the ensuing decade, the essence of the place, the culture and the business philosophy that Sam Walton had devised, remained. For the Walton family, these were crucial decisions, staying involved in the company and insisting that the Sam Walton Way be forever enshrined as company doctrine. John Walton, Sam's son and in 2002 a Wal-Mart board member, recalled: "We thought it was crucial to all of our futures that there be no question about the family's commitment." For no one could be sure that as the company grew, which seemed inevitable, it would be possible to let the past dictate the future to such a degree.
Some central figures, usually for reasons of ego, do their best to assure that a company cannot function smoothly without them. Call it a death wish. Call it a feeling of insecurity bred by a fear that the company under one's heirs might perform better than it did under the founder. So these central figures simply refuse to create a leadership team to carry on after their death. If they do choose the next generation of leaders, company founders often select them in their own image. To do otherwise would be to suggest that the founder's brand of leadership was flawed and needed modification.
To be sure, with the same attention to detail that he had shown his stores, Sam Walton created a transition team that would guarantee his posterity. He painstakingly groomed a new leadership team comprising the Walton heirs and a professional group of managers, a group that he felt confident would insure the survival of his original vision.
But a large measure of Sam Walton's genius was in selecting a leadership team he knew would be unmistakably different in personality and leadership style from his; but that, he was confident, would remain loyal to the main tenets of his business philosophy. In truth, the founder had little choice but to pick successors who differed from him. No one in his midst had his very special qualities, as they would readily admit. What he could have done but chose not to-and this is where his genius came in-was to simply ignore the question of succession. He could have left it to those just below him to hash things out after his death, but he must have understood that such a strategy of indifference might have created a most unwelcome vacuum.
He wanted to make sure that a leadership team was already in place, ready to simply carry on once he left the scene. That is precisely what he did. He did not let himself be bothered that his successors would operate in a different manner from his. He understood that the Wal-Mart of his day, relatively small in comparison with what it might become, had benefited from a leader who could make frequent contact with customers and associates. His low-profile, small-town-oriented Wal-Mart did not require the leadership skills that a much larger, more complex, and more exposed company would.
To his credit, Sam Walton understood that the next generation of Wal-Mart leaders would not be able to run the company with the kind, personal touch that he had; they would have to grapple with all sorts of issues that were avoidable when the company was much smaller. They would have to rely on their colleagues a few rungs below them to develop the personal touch with store managers and employees that had been the signature of Sam Walton.
He thought of himself first and foremost as a merchandiser, as someone who had a knack for creating the kind of store environment that would appeal to the customer. He was chiefly concerned with assuring harmony among store managers, employees, and customers; he had much less time for such organization-wide issues as technology, distribution, and logistics. Those were issues that people in the home office would take care of, and he wanted as little to do with the home office as possible. It was, in one of his favorite phrases, a necessary evil. He worked at the people level, not the administrative one. Not only did the post-Walton leadership team believe in growth; they were perfectly attuned to do all that was required to advance Wal-Mart's growth. Most importantly, they were risk-takers, and it was that leadership trait that separated them from Sam Walton more than anything else. While they showed respect for the way Walton expanded the company, they always noted how grudging he was in approving new initiatives, how he always made them jump through hoops to push this technology or that. To be sure, Walton took risks. He took a risk in believing that customers from small towns would flock to his stores for cheap goods rather than drive miles to stores in the cities. He took a risk by amassing huge debt to build the first Wal-Mart stores. But for Sam Walton, the risks were small compared with those taken by the new leadership team.
It is this leadership team and its remarkable accomplishments during the past decade that is the focus of this book. A core theme throughout these pages is the challenge that the leadership team faced in deciding when and how to implement Sam Walton's vision and when and how to implement its own strategies. All through the decade after Walton's passing, it met that challenge remarkably well. In early June 2002, thousands of Wal-Mart devotees come to the shareholder meeting in Fayetteville to celebrate a glorious reality: Not only had Wal-Mart successfully survived the death of its founder; this new generation of Wal-Mart leaders, molded in Walton's image, fanatically devoted to his culture and business philosophy yet mindful of the new complexities of twenty-first-century corporate life, had created the most powerful company growth engine in the world.