January 10, 2007
Crazy Idea Might Work for Wal-Mart
It’s still early in 2007 but we may have already found the winner of the “crazy like a fox” award.
Mark Husson, a retail analyst with HSBC, told Fortune magazine he has an answer to many of Wal-Mart’s most pressing problems.
The solution it should be noted up front is far afield of the typical advice given to the retailer and its sheer audaciousness could lead some to conclude the plan is ill conceived or perhaps even downright crazy. Perhaps, it might be just crazy enough to work.
Here’s the crux of the major challenges facing Wal-Mart from Mr. Husson’s perspective.
The retailer has to deal with critics who daily accuse it of mistreating its employees. The bad publicity has led some shoppers to abandon Wal-Mart. It has also brought strong resistance in areas such as blue state cities where Wal-Mart has looked to build new locations.
The company has been hurt by a high percentage of turnover in the ranks of its store associates. Training new workers is a significant cost as sales are lost because inexperienced workers are not able to assist shoppers considering buying more of the upscale items the company is looking to sell.
According to Mr. Husson, Wal-Mart has it in its power to silence the critics, reduce turnover and build sales for a long time to come. All the company has to do is go on an earnings growth “holiday” for one-year to enable it to increase pay and benefits for employees.
“I could write the press release now,” he said. “‘Having done the right thing by consumers for so many years, it’s now time to do right by our employees. It will be good for America and good for our employee turnover as well.’”
The critics couldn’t complain about Wal-Mart not taking care of its own anymore. Even if they did, no one would hear them as the news of Wal-Mart’s largesse spread across media outlets.
Labor and local political leaders (primarily in so-called blue states) would no longer be able to keep Wal-Mart from opening new stores now that it had ‘done the right thing.’
Finally, Wal-Mart would attract and keep a better group of store associates. Those same people would be there to serve the many shoppers who once went elsewhere because of Wal-Mart’s reputation only to find themselves coming back for the very same reason.
Discussion Question: What do you think of Mark Husson’s ideas for Wal-Mart?
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Irrespective of all other concerns, it won’t work simply because of the nature of the groups generating the anti-WM energy. The reality and frustration that WM faces is that most of the “evils” they are accused of do not hold up when scrutinized with logic. Rather, many are emotional arguments furthered by extremist positioning. More importantly, power and influence is gathered and sustained amongst these individuals as a result of their WM opposition. There is no incentive to approve of anything WM does.
In all likelihood, the response would be a universal condemnation from detractors. This would be simply a “pr” move, an “empty gesture,” a “blatant attempt to distract attention away from the real issues.” While I’m not a fan of Bill O’Reilly, I can actually hear him predicting this response.
No, the opposition to WM has become less about the “issues” and more about the social politics. Amongst labor groups and highly liberal constituencies, it is impossible to gain power and influence without condemning WM.
My advise to WM is to run your business with integrity. Embrace even more the principles of servant leadership, and operate within the bounds of moral and legal acceptability. Allow the loyal opposition to shout and bluster.
The merits of Mr. Husson’s recommendations aside, the one element I found most attractive when compared to the normal wisdom trotted out, was the message that the company and its investors needed to look beyond themselves and the next quarter or several quarters to do what was necessary to make Wal-Mart strong for the long run. It was almost Jim Sinegal-like in its wisdom. Of course, Wal-Mart managing more like Costco would never work. Investors and analysts are always on that company to stop taking such good care of employees. It’s just not good business practice, you know. ;o)
Wal-Mart has a big bulls-eye for critics of its marketing, its merchandise content, its perceived negative effect on society, etc. It’s a convenient target, but its management must take the long view that all of these issues must be addressed in an integrated way, with an eye toward driving more top-line growth and thus earnings growth.
Penalizing your own shareholders by stalling your earnings for a year (following a tough 2006 to begin with) accomplishes nothing, especially given that many of these shareholders are your own associates who hold WMT stock through ESOP and other benefits programs. And capping your earnings for a year would represent an unlikely “mea culpa” from a company that fundamentally believes its business model is valid.
I think sometimes you should stop over-celebrating after the holidays are over. If Wal-Mart suspended earnings for a year the analysts would tank the stock and the company wouldn’t have to worry about having so many associates. Kudos to Mark Husson for an innovative way to get positive publicity for himself. I’m just not sure his idea would generate quite so much positive coverage for Wal-Mart.
At first look, I thought the idea was nuts but now I’m not so certain. In fact, the knee jerk “no” reaction I had is probably a recipe for business going forward as is, which, frankly is not very good at the moment.
Based on its own research, somewhere between two and eight percent of former Wal-Mart shoppers no longer buy from the retailer because of their perception about the company’s policies toward its own workers. Imagine if half of that number, one to four percent, came back and started shopping again. Remember that Wal-Mart’s sales are at the limping stage currently.
Next factor in the numbers of consumers who have never even considered shopping in Wal-Mart, in part, because of its treatment of workers. Take the objection away and more shoppers are coming through the door. Over the years, I’ve heard more than a few say they would go to Wal-Mart to shop if they believed it to be more supportive of its own. These people, by-the-way, are not affluent blue-staters or labor union organizers as some might assume. They’re people trying to get by like so many of Wal-Mart’s customers.
Finally, think about the opposition Wal-Mart faces trying to get a foothold in cities such as New York where the world’s largest retailer still does not have a store. How many places will Wal-Mart be locked out of and what would stores in those urban markets mean for the chain’s growth in the U.S.? Urban areas are the last frontier for Wal-Mart domestically. To grow, it needs to be in New York, Boston, etc.
A far fetched idea given Wal-Mart’s culture and history. Wal-Mart measures success, store by store on sales and profit performance. They meet every Saturday morning to discuss performance measures that are ingrained in their culture, and have VPs address the Associates in the audience on successes and shortfalls.
To think Wal-Mart could take “an earnings holiday” would be believing Wal-Mart could change the very values and measurements it holds itself accountable to in every store and department.
A creative idea, sure but one not at all likely to be considered by Wal-Mart leadership.
I think Mr. Husson has some good intentions but Wal-Mart is not going to go for it. Wal-Mart has built its labor model around high turnover. High turnover is what they want. They know the downside of high turnover and its effect on sales. What they lose on sales they gain from lower labor costs. Obviously not all companies can operate this way. Wal-Mart has become the largest retailer in the world by way of this labor model. Mr. Husson seems to suggest if Wal-Mart changes their ways, they could grow much faster. Seems to me that faster growth is the last thing Wal-Mart’s enemies want.
Wal-Mart’s treatment of its employees is only a small barrier that keeps them from opening new locations. A lot of it has to do with environmental, political, and community planning issues. Because of Wal-Mart’s size, there is nothing they can do to quiet their enemies. Wal-Mart would be wasting their time going around trying to appease every complaint from their radical extremist enemies. Think about it; despite all the barriers put into place to keep Wal-Mart from growing, they still build hundreds of new stores each year and sales increase by billions and billions of dollars. Often just one year’s increase in sales and new store openings at Wal-Mart is larger than what most of their competitors have accumulated over the life of their business. If Wal-Mart handed out 50% raises and free health care, Wal-Mart’s critics would still complain that it isn’t enough. The critics would then complain that the competition can’t match Wal-Mart’s pay and benefit package and the competitors are losing all their good employees to Wal-Mart.
Wal-Mart has never really cared about their stock price and I doubt they are going to start now.
This is a crazy idea. Wal-Mart has shareholders who are expecting earning performance and continued growth to support their investment in this company. An announcement like this would drive selling of the stock to an unheard of level, deflating the corporate value, Wal-Mart’s value as well as any future interest from the financial community. Wal-Mart would lose billions from just this fall-out alone. This would rate as the craziest idea (and most foolish one) ever to be implemented. Mark’s idea is not based upon fiscal reality nor financial awareness, since these are the issues which Wal-Mart has to abide by as it seeks out solutions for these issues.
Interesting idea. It seems to rest on the assumption that all that is weak about Wal-Mart has to do with the money it makes and what it does with that money. It completely leaves out of the question how that money is made, or the manifold problems that have to do with vendors, customer mis-perception, community infrastructure problems, etc. Our data shows that even these are not by any means all there is to the issue. In a way, this solution is playing the same game Wal-Mart is playing: create a public relations message that is strong enough and indirect enough that consumers and the public will buy it (literally). It is unfortunate, in my view, that we might consider this a real solution. Some might even call this solution somewhat cynical, but I would rather say that it is too limited in scope or based perhaps on not enough information.
Just to keep our points of reference straight. The two to eight percent shopper number is not for all Americans. This is how it reads in the Fortune article: “According to a 2004 McKinsey & Co. report, 2 percent to 8 percent of Wal-Mart customers surveyed have ceased shopping at the chain because of negative press.”
The idea is not as crazy as it sounds. Though it flies in the face of pure capitalism, the retailer could actually implement that idea and not experience any loss in sales. Moreover, the dot that doesn’t seem to get connected for the world’s largest retailer is that the ability of any company to keep their inventory properly managed and adequately stocked and customers serviced is directly tied to the quality of a company’s staff which is a reflection of a company’s pay scale and benefits. It is all tied together. It’s not just merchandise and low prices.
When you shop at a Supercenter and half the shelves are out of stock, that’s an indication of inadequate staff to say nothing of the lost sales because consumers have to go to another store to complete their shopping list.
If they just seriously remedied these real issues, they wouldn’t have to build another store to experience growth.
Mark’s idea definitely would not work in the unlikely event that Wal-Mart adopted it.
Quite simply, the frequently-stated reasons for the anti-Wal-Mart campaign are not the root cause for these campaigns.
I think it speaks volumes about the retail industry in general that so many industry insiders dismiss out of hand the idea of the biggest retailer in the world paying a decent wage to retain good employees.
For all the hand wringing over unfairness and mistreatment of employees, I have yet to see anyone chained to a checkout or pallet jack in a Wal-Mart store.
There are some tried and true-isms to remember:
1) An $8-10/hour job is an $8-10/hour job, whether at Wal-Mart, the grocery store, the gas station or the local fast food joint.
2) More is never enough (reference taxes and government programs).
3) The capacity to consume always outpaces the capacity to earn/supply, so simply “giving more to do the right thing” will never be enough, especially when “more” and “right” are defined by varied opinions.
4) High turnover is the very nature of low-skill jobs on the bottom of the pay scale except for those who take no action to do better. (Some people dislike change and are actually okay with a long-term, steady, low-responsibility job for a low, but steady paycheck. God Bless them. We need them too!)
5) Minimum wage jobs are not designed or intended as living wages to raise families on. Those who find themselves in that situation have made choices in life that neither Wal-Mart nor the Government nor anyone else is responsible for fixing.
6) Those who make themselves more valuable are more valuable.
On the last point, no one earns a pay increase simply by showing up and doing the same job at the same level for years on end. A day’s wage is the value of a day’s work. More valuable work nets more valuable pay.
The unions will take issue with all the points above, but that’s also why they’re on the decline.
Those who seek out and take on more responsibility, training, experience, leadership and so on soon replace themselves in the job they’re doing and are ready to step up to the next challenge.
I’ve seen this happen over and over again in Wal-Mart and many other places, which explains how a sharp, reliable and hard working kid can start out collecting shopping carts and end up running his own store. Even former Wal-Mart president Bill Fields started out in the back room.
Success in our environment depends on pleasing the consumer. If this is in fact true, then based upon Wal-Mart’s sales, they are pleasing more consumers than any other retailer in America and by a wide margin.
Everyone talks about Wal-Mart and attrition but no one actually makes valid comparisons. Compare Wal-Mart with McDonald’s, Burger King, KFC and other companies who employ a lot of low skill employees. Turnover doesn’t look so bad now does it?
Wal-Mart offers employment to many who couldn’t get in the door other places. I believe the best thing Wal-Mart can do for itself, its employees and shareholders is to continue to deliver value. As long as they do that, Wal-Mart will continue to grow, offer employees a place where they can advance themselves and offer stockholders a great investment.
If 2 to 8% of Americans won’t shop there, then it’s their loss. Don’t get the idea that any action that penalizes Wal-Mart shoppers to please 2 to 8% of America is going to be well received. Thank goodness business has yet to experiment with running itself like government.
Very creative and could help to silence — or at least quiet — the critics. Just two thoughts.
>First, there is an implicit assumption, I believe, that solving some of the problems will quiet the criticism and still the unrest. But, it’s not clear that this would be the result. It could well be that the critics will simply turn to another issue so they can continue to “bait the bear” and that the gains will only excite demands for greater increases.
>Second, while salary and health care are important considerations, most of the work in this area suggests that other managerial factors are more important in improving employee retention and converting that to improved store performance. (See the newest Coca-Cola Retailing Research Council report, “Getting to Great: Mapping Management Practices that Drive Great Store Performance” for the documentation.)
Great idea, Mark. How about you taking an earnings holiday to encourage your underlings at HSBC? Tell them that you will take no bonus, but will share it out amongst them, with the best performing getting the most. Should be good for next year’s bonus, or will it?
We all know that this plan would never actually happen as it was proposed due to investors wanting to see earnings growth year over year. Since earnings must grow, an increase in labor costs would mean one of two things. 1) Increased pressure on manufacturers to lower their cost of goods…again, or 2) An increase in price, which goes against the very nature of the business model that has made Wal-Mart what is is today.
I think we have high expectations of what we expect from Wal-Mart in terms of growth. It is unrealistic to think that any business can post substantial growth year over year perpetually. Eventually, there will be an inevitable cap to their growth as they reach their last remaining potential shoppers.
Wal-Mart is what it is. I would bet the vocal critics do not out-number the loyal shoppers seeking the low prices. Why silence the minority in hopes they will come to you and risk your base?
Secondly, there are other ways of increasing employee satisfaction. It is the outside-the-box thinking that got Best Buy all the PR for the benefits it gives its employees, which resulted in increased productivity. I’m sure there are cost effective ways to increase employee satisfaction without threatening the consumer base.
I wonder how long Mr. Husson would remain ranked amongst the top 5 performers in stock-picking prowess if he were to value companies who plan to decrease their shareholder returns as he suggests for Wal-Mart. Trading shareholder returns for publicity is pure folly.
No doubt Mark Husson’s plan to improve staff compensation would gain positive pr. Shareholders want the stock price to rise, and good pr, by itself, won’t do that. Wal-Mart could cut capital spending (foreign locations as well as North America) way back and probably gain the profit dollars to improve compensation. But Wal-Mart’s core values, their model, is based on the lowest possible overhead. Changing that model may be perceived by investors as so dangerous that the stock price could fall further.
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Irrespective of all other concerns, it won’t work simply because of the nature of the groups generating the anti-WM energy. The reality and frustration that WM faces is that most of the “evils” they are accused of do not hold up when scrutinized with logic. Rather, many are emotional arguments furthered by extremist positioning. More importantly, power and influence is gathered and sustained amongst these individuals as a result of their WM opposition. There is no incentive to approve of anything WM does.
In all likelihood, the response would be a universal condemnation from detractors. This would be simply a “pr” move, an “empty gesture,” a “blatant attempt to distract attention away from the real issues.” While I’m not a fan of Bill O’Reilly, I can actually hear him predicting this response.
No, the opposition to WM has become less about the “issues” and more about the social politics. Amongst labor groups and highly liberal constituencies, it is impossible to gain power and influence without condemning WM.
My advise to WM is to run your business with integrity. Embrace even more the principles of servant leadership, and operate within the bounds of moral and legal acceptability. Allow the loyal opposition to shout and bluster.
The merits of Mr. Husson’s recommendations aside, the one element I found most attractive when compared to the normal wisdom trotted out, was the message that the company and its investors needed to look beyond themselves and the next quarter or several quarters to do what was necessary to make Wal-Mart strong for the long run. It was almost Jim Sinegal-like in its wisdom. Of course, Wal-Mart managing more like Costco would never work. Investors and analysts are always on that company to stop taking such good care of employees. It’s just not good business practice, you know. ;o)
Wal-Mart has a big bulls-eye for critics of its marketing, its merchandise content, its perceived negative effect on society, etc. It’s a convenient target, but its management must take the long view that all of these issues must be addressed in an integrated way, with an eye toward driving more top-line growth and thus earnings growth.
Penalizing your own shareholders by stalling your earnings for a year (following a tough 2006 to begin with) accomplishes nothing, especially given that many of these shareholders are your own associates who hold WMT stock through ESOP and other benefits programs. And capping your earnings for a year would represent an unlikely “mea culpa” from a company that fundamentally believes its business model is valid.
I think sometimes you should stop over-celebrating after the holidays are over. If Wal-Mart suspended earnings for a year the analysts would tank the stock and the company wouldn’t have to worry about having so many associates. Kudos to Mark Husson for an innovative way to get positive publicity for himself. I’m just not sure his idea would generate quite so much positive coverage for Wal-Mart.
At first look, I thought the idea was nuts but now I’m not so certain. In fact, the knee jerk “no” reaction I had is probably a recipe for business going forward as is, which, frankly is not very good at the moment.
Based on its own research, somewhere between two and eight percent of former Wal-Mart shoppers no longer buy from the retailer because of their perception about the company’s policies toward its own workers. Imagine if half of that number, one to four percent, came back and started shopping again. Remember that Wal-Mart’s sales are at the limping stage currently.
Next factor in the numbers of consumers who have never even considered shopping in Wal-Mart, in part, because of its treatment of workers. Take the objection away and more shoppers are coming through the door. Over the years, I’ve heard more than a few say they would go to Wal-Mart to shop if they believed it to be more supportive of its own. These people, by-the-way, are not affluent blue-staters or labor union organizers as some might assume. They’re people trying to get by like so many of Wal-Mart’s customers.
Finally, think about the opposition Wal-Mart faces trying to get a foothold in cities such as New York where the world’s largest retailer still does not have a store. How many places will Wal-Mart be locked out of and what would stores in those urban markets mean for the chain’s growth in the U.S.? Urban areas are the last frontier for Wal-Mart domestically. To grow, it needs to be in New York, Boston, etc.
A far fetched idea given Wal-Mart’s culture and history. Wal-Mart measures success, store by store on sales and profit performance. They meet every Saturday morning to discuss performance measures that are ingrained in their culture, and have VPs address the Associates in the audience on successes and shortfalls.
To think Wal-Mart could take “an earnings holiday” would be believing Wal-Mart could change the very values and measurements it holds itself accountable to in every store and department.
A creative idea, sure but one not at all likely to be considered by Wal-Mart leadership.
I think Mr. Husson has some good intentions but Wal-Mart is not going to go for it. Wal-Mart has built its labor model around high turnover. High turnover is what they want. They know the downside of high turnover and its effect on sales. What they lose on sales they gain from lower labor costs. Obviously not all companies can operate this way. Wal-Mart has become the largest retailer in the world by way of this labor model. Mr. Husson seems to suggest if Wal-Mart changes their ways, they could grow much faster. Seems to me that faster growth is the last thing Wal-Mart’s enemies want.
Wal-Mart’s treatment of its employees is only a small barrier that keeps them from opening new locations. A lot of it has to do with environmental, political, and community planning issues. Because of Wal-Mart’s size, there is nothing they can do to quiet their enemies. Wal-Mart would be wasting their time going around trying to appease every complaint from their radical extremist enemies. Think about it; despite all the barriers put into place to keep Wal-Mart from growing, they still build hundreds of new stores each year and sales increase by billions and billions of dollars. Often just one year’s increase in sales and new store openings at Wal-Mart is larger than what most of their competitors have accumulated over the life of their business. If Wal-Mart handed out 50% raises and free health care, Wal-Mart’s critics would still complain that it isn’t enough. The critics would then complain that the competition can’t match Wal-Mart’s pay and benefit package and the competitors are losing all their good employees to Wal-Mart.
Wal-Mart has never really cared about their stock price and I doubt they are going to start now.
This is a crazy idea. Wal-Mart has shareholders who are expecting earning performance and continued growth to support their investment in this company. An announcement like this would drive selling of the stock to an unheard of level, deflating the corporate value, Wal-Mart’s value as well as any future interest from the financial community. Wal-Mart would lose billions from just this fall-out alone. This would rate as the craziest idea (and most foolish one) ever to be implemented. Mark’s idea is not based upon fiscal reality nor financial awareness, since these are the issues which Wal-Mart has to abide by as it seeks out solutions for these issues.
Interesting idea. It seems to rest on the assumption that all that is weak about Wal-Mart has to do with the money it makes and what it does with that money. It completely leaves out of the question how that money is made, or the manifold problems that have to do with vendors, customer mis-perception, community infrastructure problems, etc. Our data shows that even these are not by any means all there is to the issue. In a way, this solution is playing the same game Wal-Mart is playing: create a public relations message that is strong enough and indirect enough that consumers and the public will buy it (literally). It is unfortunate, in my view, that we might consider this a real solution. Some might even call this solution somewhat cynical, but I would rather say that it is too limited in scope or based perhaps on not enough information.
Just to keep our points of reference straight. The two to eight percent shopper number is not for all Americans. This is how it reads in the Fortune article: “According to a 2004 McKinsey & Co. report, 2 percent to 8 percent of Wal-Mart customers surveyed have ceased shopping at the chain because of negative press.”
The idea is not as crazy as it sounds. Though it flies in the face of pure capitalism, the retailer could actually implement that idea and not experience any loss in sales. Moreover, the dot that doesn’t seem to get connected for the world’s largest retailer is that the ability of any company to keep their inventory properly managed and adequately stocked and customers serviced is directly tied to the quality of a company’s staff which is a reflection of a company’s pay scale and benefits. It is all tied together. It’s not just merchandise and low prices.
When you shop at a Supercenter and half the shelves are out of stock, that’s an indication of inadequate staff to say nothing of the lost sales because consumers have to go to another store to complete their shopping list.
If they just seriously remedied these real issues, they wouldn’t have to build another store to experience growth.
Mark’s idea definitely would not work in the unlikely event that Wal-Mart adopted it.
Quite simply, the frequently-stated reasons for the anti-Wal-Mart campaign are not the root cause for these campaigns.
I think it speaks volumes about the retail industry in general that so many industry insiders dismiss out of hand the idea of the biggest retailer in the world paying a decent wage to retain good employees.
For all the hand wringing over unfairness and mistreatment of employees, I have yet to see anyone chained to a checkout or pallet jack in a Wal-Mart store.
There are some tried and true-isms to remember:
1) An $8-10/hour job is an $8-10/hour job, whether at Wal-Mart, the grocery store, the gas station or the local fast food joint.
2) More is never enough (reference taxes and government programs).
3) The capacity to consume always outpaces the capacity to earn/supply, so simply “giving more to do the right thing” will never be enough, especially when “more” and “right” are defined by varied opinions.
4) High turnover is the very nature of low-skill jobs on the bottom of the pay scale except for those who take no action to do better. (Some people dislike change and are actually okay with a long-term, steady, low-responsibility job for a low, but steady paycheck. God Bless them. We need them too!)
5) Minimum wage jobs are not designed or intended as living wages to raise families on. Those who find themselves in that situation have made choices in life that neither Wal-Mart nor the Government nor anyone else is responsible for fixing.
6) Those who make themselves more valuable are more valuable.
On the last point, no one earns a pay increase simply by showing up and doing the same job at the same level for years on end. A day’s wage is the value of a day’s work. More valuable work nets more valuable pay.
The unions will take issue with all the points above, but that’s also why they’re on the decline.
Those who seek out and take on more responsibility, training, experience, leadership and so on soon replace themselves in the job they’re doing and are ready to step up to the next challenge.
I’ve seen this happen over and over again in Wal-Mart and many other places, which explains how a sharp, reliable and hard working kid can start out collecting shopping carts and end up running his own store. Even former Wal-Mart president Bill Fields started out in the back room.
Success in our environment depends on pleasing the consumer. If this is in fact true, then based upon Wal-Mart’s sales, they are pleasing more consumers than any other retailer in America and by a wide margin.
Everyone talks about Wal-Mart and attrition but no one actually makes valid comparisons. Compare Wal-Mart with McDonald’s, Burger King, KFC and other companies who employ a lot of low skill employees. Turnover doesn’t look so bad now does it?
Wal-Mart offers employment to many who couldn’t get in the door other places. I believe the best thing Wal-Mart can do for itself, its employees and shareholders is to continue to deliver value. As long as they do that, Wal-Mart will continue to grow, offer employees a place where they can advance themselves and offer stockholders a great investment.
If 2 to 8% of Americans won’t shop there, then it’s their loss. Don’t get the idea that any action that penalizes Wal-Mart shoppers to please 2 to 8% of America is going to be well received. Thank goodness business has yet to experiment with running itself like government.
Very creative and could help to silence — or at least quiet — the critics. Just two thoughts.
>First, there is an implicit assumption, I believe, that solving some of the problems will quiet the criticism and still the unrest. But, it’s not clear that this would be the result. It could well be that the critics will simply turn to another issue so they can continue to “bait the bear” and that the gains will only excite demands for greater increases.
>Second, while salary and health care are important considerations, most of the work in this area suggests that other managerial factors are more important in improving employee retention and converting that to improved store performance. (See the newest Coca-Cola Retailing Research Council report, “Getting to Great: Mapping Management Practices that Drive Great Store Performance” for the documentation.)
Great idea, Mark. How about you taking an earnings holiday to encourage your underlings at HSBC? Tell them that you will take no bonus, but will share it out amongst them, with the best performing getting the most. Should be good for next year’s bonus, or will it?
We all know that this plan would never actually happen as it was proposed due to investors wanting to see earnings growth year over year. Since earnings must grow, an increase in labor costs would mean one of two things. 1) Increased pressure on manufacturers to lower their cost of goods…again, or 2) An increase in price, which goes against the very nature of the business model that has made Wal-Mart what is is today.
I think we have high expectations of what we expect from Wal-Mart in terms of growth. It is unrealistic to think that any business can post substantial growth year over year perpetually. Eventually, there will be an inevitable cap to their growth as they reach their last remaining potential shoppers.
Wal-Mart is what it is. I would bet the vocal critics do not out-number the loyal shoppers seeking the low prices. Why silence the minority in hopes they will come to you and risk your base?
Secondly, there are other ways of increasing employee satisfaction. It is the outside-the-box thinking that got Best Buy all the PR for the benefits it gives its employees, which resulted in increased productivity. I’m sure there are cost effective ways to increase employee satisfaction without threatening the consumer base.
I wonder how long Mr. Husson would remain ranked amongst the top 5 performers in stock-picking prowess if he were to value companies who plan to decrease their shareholder returns as he suggests for Wal-Mart. Trading shareholder returns for publicity is pure folly.
No doubt Mark Husson’s plan to improve staff compensation would gain positive pr. Shareholders want the stock price to rise, and good pr, by itself, won’t do that. Wal-Mart could cut capital spending (foreign locations as well as North America) way back and probably gain the profit dollars to improve compensation. But Wal-Mart’s core values, their model, is based on the lowest possible overhead. Changing that model may be perceived by investors as so dangerous that the stock price could fall further.