Walmart 2.0

Depending on your perspective, the word “disruption” has either negative or positive connotations. If you’re new to an industry, disruption can be a means with which to establish yourself. But if you’re a dominant player in that industry, disruption usually represents a threat to your hard-won perch, and possibly to your existence.

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Walmart, the planet’s biggest retailer, made its name by undercutting its competitors on prices while innovating in areas such as distribution and logistics to reign supreme in the brick-and-mortar stores arena. However, the Bentonville, Ark.-based company–along with nearly every other retail operation in existence–has been forced to reckon with one of the biggest disruptors in recent memory: Seattle-based Amazon, which, within the space of 20 years, transformed itself from an online bookseller to the world’s fourth-most valuable company and the most dominant–by far–online retailer. Thanks to Amazon and its ilk, shoppers have become accustomed to browsing for what they want from the comforts of home, potentially putting a big question mark over the long-term existence of brick-and-mortar stores.

Walmart’s chief people officer, Jacqui Canney, says the company is fully aware of what’s at stake.

“Our customers are driving what we do–they’re changing the ways in which they shop and live, and that’s why we’re thinking about our online and offline experience,” says Canney, executive vice president for the retailer’s global people division.

At Walmart, Canney–who joined the company after spending most of her career at consultancy Accenture–oversees the people strategy as the company undertakes its quest to achieve “digital maturity,” gearing up to compete in a world in which shopping is increasingly a digital activity while maintaining its dominant presence in the brick-and-mortar realm.

“Our ultimate goal is a frictionless, seamless shopping experience for our customers, whether it’s online or offline,” she says. “That’s the quest we’re on because our customers’ expectations are only going to get higher.”

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“Bricks and Clicks”

Fred Foulkes, a Boston University professor and longtime observer of Walmart’s business strategy, says the company appears to be positioning itself well for a battle of retail dominance with Amazon.

“The world wants bricks and clicks–Walmart has bricks and wants clicks, and Amazon’s got clicks and wants bricks,” he says, referring to the online retailer’s recent move to open physical bookstores in a small number of cities and its acquisition last year of Whole Foods Market Inc.

By keeping expenses low and offering a wide selection of goods at lower prices than nearby competitors, often in under-served rural locations, Walmart founder Sam Walton led the company from a single discount store in Rogers, Ark., in 1962 to a retail behemoth with 371,000 employees (or “associates,” in Walmart parlance) across nearly 2,000 stores and clubs at the time of his death in 1992, shortly after he was awarded the Medal of Freedom by President George H.W. Bush. Last year, the company employed 2.2 million associates around the world, and its global sales totaled $485 billion. (For more than 22 years, Walmart has owned the No. 1 spot on HRE’s Nation’s Largest Employers list.

Walton was a retail innovator, deploying pioneering logistics strategies (no Walmart store could be more than a day’s drive from a company distribution center, for example), sharing sales trends with store managers via satellite and keeping associates motivated (via in-store rallies and stock grants that allowed many employees to retire comfortably) to steamroll competitors. The company remains profitable even in today’s challenging retail terrain, with U.S. same-store sales growing for each of the last 13 consecutive quarters and online sales expanding rapidly.

“It’s been an amazing story, the discipline that [Walmart] has exercised to keep their strategy working,” says Foulkes, professor of organizational behavior at B.U.’s School of Management and director of its Human Resources Policy Institute.

Walmart’s series of recent acquisitions–last year it acquired online retailer for $3 billion, giving Walmart access to the site’s innovative pricing software–are part of a strategy to compete aggressively in the e-commerce space, says Foulkes.

“Retail is competing with a lot of other service industries in an era of 4-percent unemployment,” says Pete Sanborn, global practice leader and HR transformation consultant at Aon Hewitt.

Retailers are finding themselves in the same boat as companies in other industries, such as tech and financial services, that are competing with Silicon Valley for tech talent and are being forced to get creative in how they find and lure that talent in, says Sanborn. Unlike those other industries, however, retail has a generally poor reputation when it comes to the employee experience, he says.

“We saw a dip in employee engagement across all industries last year, but the dip was most pronounced in retail,” he says. Retailers are trying to adjust, raising starting wages and experimenting with scheduling innovations that allow employees to, for example, bid for the most desirable hours based on their tenure and job performance and creating a core of full-time workers supplemented by part-timers who can fill in during busy times, he says.

Indeed, another thing Walmart has in common with its biggest rival is unflattering publicity about its workplace environment.

Amazon was the subject of a scathing New York Times article in 2015 that depicted a Darwinian corporate culture in which white-collar employees were encouraged to criticize each other, work brutally long hours and were pushed to their limits by unreasonably demanding bosses. Reacting to the Times story, founder and CEO Jeff Bezos said, “This is not the Amazon that I know,” and promised an investigation.

For its part, Walmart has been long pilloried for paying its workers low wages and offering them skimpy benefits. During the 1990s and 2000s, the company was hit with wave after wave of class-action lawsuits by employees alleging overtime violations, sexual harassment by managers and gender discrimination, to name a few. Labor groups used the company as a rallying cry for organizing efforts, painting it as an exploitative employer whose practices were ultimately driving down wages and opportunities for middle-class Americans.

In 2015, the company’s leaders, including CEO Doug McMillon, announced that Walmart would spend $2.7 billion to raise its starting wage for new employees, offer them more training and make work schedules more predictable.

Canney says Walmart has spent heavily to upgrade its reputation as an employer. In January, the company announced that, as a result of savings it will see as part of the tax-reform bill passed late last year, it will raise its starting wage for hourly employees from $9 to $11 per hour. It will also expand its leave policies to give full-time hourly employees 10 weeks of maternity leave and six weeks of paid parental leave. It will also award bonuses of up to $1,000 per employee, based on their tenure.

Keeping Customers “Delighted”

Walmart and other retailers have little choice other than to improve their HR practices, says Sanborn.

“Retailers must create an attractive and competitive employee-value proposition in the midst of a tight labor market,” he says.

Large retailers building their online presence need web designers who can create a customer experience similar to that of Amazon, as well as data scientists and analytics experts who can determine where online customer traffic is coming from and adjust prices in the face of supply and demand. Many are adopting a multichannel strategy in which customers order products online and pick them up at the retailer’s physical stores.

To compete successfully with Amazon, Walmart will need a culture that attracts and retains the type of talent that’s helped make Amazon, Google, Facebook and others into the dominant players in today’s global economy, says Foulkes. These are employees who are attracted to flexibility, innovation, financial rewards and risk-taking.

“Clearly, you need the right talent, and it needs to be motivated and compensated appropriately,” says Foulkes, citing General Electric, which adopted a different pay and promotion plan for technical roles. “You’ve got to have very different HR practices and policies to recruit and retain these people.”

Walmart is doing much more than simply raising wages, however. It’s created Walmart Academies, which are physical locations in the back of stores where associates can learn about management responsibilities, such as running a store department, using mobile tools, and leading and motivating associates. Through virtual-reality training tools, they can experience a simulated store opening on a Black Friday, for example, to practice preparing for those often-tumultuous events.

The goal is “learn in the back, practice on the store floor,” says Canney. “Ultimately, you can learn how to be a store manager, which is a coveted role in many of the communities we serve.” Store managers, she adds, earn up to $170,000 a year.

The Academies are supplemented by apps. If, for example, an associate is stocking shelves and is queried by a customer looking for a particular lightbulb, the associate can use a mobile device to see whether the store has it in stock, then walk with the customer to the location where the lightbulbs are or help the customer order the lightbulb online if it isn’t in stock.

“Associates can use these devices to provide the service a customer expects, and hopefully the customer will be delighted with their experience and will keep coming back,” says Canney.

Foulkes says it’s notable that Canney comes from Accenture.

“It’s probably a brilliant move to bring someone like her, from Accenture, to oversee Walmart HR,” he says. “Accenture is, essentially, a group of knowledge workers and, to a certain extent, Walmart is going to look more like that in the future.”

The Four Pillars

In laying out its strategy, McMillon has spoken about the retailer’s “four pillars,” which are to make life easier for busy families, being the most-trusted retailer in areas such as food safety and quality and prices, becoming a digital enterprise and “changing the way we work.”

The last entails being more nimble and less bureaucratic.

“These four areas are what we’re measuring ourselves against as we become a more digitally mature company,” says Canney.

One of the key drivers behind Walmart’s transformation is design thinking.

“We’re applying design thinking to how we solve problems,” says Canney. “It’s not just the product on the shelf, but the experience you have as a customer.”

This has led to noticeable changes in Walmart’s physical stores, including “Scan and Go” stations that allow customers to check themselves out and, at its Sam’s Club division, a process that lets customers check out via a button on their phones.

These days, customers can use a Walmart app on their phones to shop for groceries online and then pick up their orders at a nearby Walmart store. The service, expected to be available at 2,000 Walmarts by the end of this year, lets customers select the time they want to pick up their orders, which are loaded into their cars by Walmart associates.

“It’s receiving great marks from busy moms,” says Canney.

In the home office, the company is implementing continuous feedback for associates, including a digital tool that will let managers not only provide continuous feedback but tie it to goals and measure progress against those goals in real time. “We haven’t abandoned annual reviews, because we still believe they’re important for measuring progress,” says Canney.

In the HR department, she says, the staff has been given tools that allow them to predict attrition rates, identify better hires and spend more time talking to candidates.

“We want to be able to identify potential in our people, give them the tools to do their job really well and let that potential shine,” says Canney. In that vein, assessment has become a bigger part of the company’s recruitment process and is being combined with what Canney calls a “system of development” to help associates continuously improve once they’re hired.

There’s also been a change in the culture at headquarters, in particular an effort to reduce the time it takes to develop and roll out new initiatives, says Canney. “Traditionally, we had a really long tail to operationalize, but working cross-functionally, sprints, prototyping–these have been embedded more deeply in how we work,” she says. “We’re moving more quickly, and a digital system of development is just an example of what we’re pivoting to.”

This strategy includes what Canney refers to as “collisions,” or collaborations between employees working in different departments to come up with new concepts for improving customer service or new apps or services that could be delivered in an exciting new way. “These ‘collisions’ are how ‘Scan and Go’ came to life,” she says.

“The way to do this properly is to have cross-functional teams,” she says. “We’re spread out here on a big corporate campus, and if you’re not physically sitting together, you might end up going down a path where you’re delivering something that’s not wanted. But when you put people together, the product becomes better because the iteration is more connected.”

At Walmart, teams may now include someone from the merchandising unit, a data scientist or someone from the data team, a designer and someone from HR working together to come up with and refine new ideas or concepts, says Canney.

In terms of getting managers onboard, “digital leadership,” or the ability to understand and master digital trends, is now a required competency for all of Walmart’s top corporate officers, says Canney.

“Given where we are in our transformation, we’ve decided that our officers need to understand how digital trends work, stay up to date on those trends, identify ways of using them to our advantage and lead by example,” she says, adding that the initiative has been well received.

Coming to work at Walmart represented a homecoming of sorts for Canney, who joined in 2015. “My first job ever was as an hourly associate at a small store in Westwood, N.J.,” she says. “I learned so much, not only about customer service and merchandising, but in building confidence in myself. I remember telling my dad that I was going to ask for a raise, and he said, ‘Well, I don’t know … .’ Well, I went for it, and I got that raise.”

In fact, the evolving digital strategy is a “going-back-to-the-future” moment of sorts for Walmart, says Canney, noting that the effort harkens back to Walton’s principles of listening to customers and associates, and avoiding bureaucracy at all costs.

“In a sense, we’re standing on our history as we evolve with the customer,” she says.

Andrew R. McIlvaine
Andrew R. McIlvaine is former senior editor with Human Resource Executive®.