Inside Walmart’s Masterclass in Reputation Rehab
(Bloomberg Opinion) — A decade ago, Walmart Inc. It was among the most criticized companies in America.
It has been criticized for eliminating mom-and-pop retailers; for not paying his workers enough while his founding family made the Waltons one of the richest people in the United States; To create a culture of cheap, disposable products. It was so hated that communities rallied to keep Walmart stores out of their backyards.
Today, the company is no longer corporate America’s No. 1 bogeyman. And when Chief Executive Officer Doug McMillon leaves his post at the end of January, restoring Walmart’s reputation will be remembered as one of the centerpieces of his legacy.
It will also be one of the most permanent. As Walmart enters the age of artificial intelligence, what its executives learned while transforming the company’s image appears to have shaped their approach to emerging technology and the people it might displace.
Until the McMillon era began in 2014, the retailer’s business model relied on cutting costs wherever possible, including keeping wages low for front-line workers. In the company’s narrative, this strategy was part of a noble mission to serve low- and middle-income customers; Walmart argued that offering them cheaper products allowed them to stretch their dollars even further. Its slogan is: “Save money, live better.”
But the treatment of employees was driving people away from stores and hurting businesses. When McMillon took over, the company had experienced several consecutive quarters of negative or flat same-store sales growth.
Instead of ignoring the bad press or hiring an army of public relations people, tactics the company has used in the past, McMillon decided to try something different: Invest $2.7 billion in Walmart employees.
This figure included salary increases, but more importantly, it created a path for employees to be promoted and move up the chain; to turn what was once considered just a low-paying job into a real career. The retailer began offering training and better benefits, including paying for training that would prepare employees for emerging jobs within the company.
When Walmart stopped viewing its front lines as so disposable, it attracted more ambitious and dedicated employees. Retention has increased by more than 10% since 2015, the Wall Street Journal recently reported in an article detailing the company’s efforts. Hiring has become an easier task for field management roles, 75% of which are filled by employees who started their careers as hourly employees.
But in 2015, Wall Street rebelled against the plan. When McMillon announced the $2.7 billion investment at the shareholders meeting, the company’s shares lost a fifth of their value in a day.
But a decade later, we have the data: On McMillon’s watch, shares have returned nearly 420% and Walmart’s market value has more than tripled. Even as Amazon.com Inc.’s recovery slows, Walmart remains the largest publicly traded company in the United States by sales. The last 10 years at Walmart have become a true case study of what happens when you invest in people; Harvard Business School published its research on the experiment last month.
Today, businesses have a new tool to cut costs: Artificial Intelligence. However, Walmart seems to be proceeding more carefully than other giant companies. “This creates a big difference between the strategies of Walmart and other large employers where AI is merely a tool to fire employees,” says Leonard Schlesinger, a Harvard Business School professor and a co-author of the HBS case study at Walmart.
This doesn’t mean Walmart is ignoring AI. In fact, McMillon said: “It’s clear that AI is going to change literally every business.” The company has partnered with OpenAI so customers can purchase products through ChatGPT. AI helped the retailer automate its warehouses and manage its supply chain; productivity, he says, will help keep headcount steady even as sales increase.
But as AI destroys many entry-level jobs, Walmart’s history has helped it understand how important these roles are to the company’s future. After all, McMillon started at the company as a teenager working in a warehouse. His successor, John Furner, also started as an hourly employee at Walmart. The company closely examines how artificial intelligence will affect the workforce and tries to prepare its employees for the future. “Our goal is to create the opportunity for everyone to get to the other side,” McMillon said. Compare this to comments from Accenture PLC’s CEO, who said the company was “off the compression timeline” of employees who couldn’t be retrained for the AI age.
It is this kind of rhetoric that has given rise to a new group of companies that will take on the role of corporate bogeyman. This time around, Walmart may well avoid being tapped for that role.More from the Bloomberg Opinion:
This column reflects the author’s personal views and do not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.
Beth Kowitt is a Bloomberg Opinion columnist covering corporate America. He was previously a senior writer and editor at Fortune Magazine.
More stories like this available Bloomberg.com/opinion
