Sam Walton: Made in America

“In retail, you are either operations driven—where your main thrust is toward reducing expenses and improving efficiency—or you are merchandise driven. The ones that are truly merchandise driven can always work on improving operations. But the ones that are operations driven tend to level off and begin to deteriorate.”
“From the time I took out my first bank loan—the $1,800 to buy that ice cream machine for the Ben Franklin down in Newport—I was never really comfortable with debt. But I recognized it as a necessity of doing business, and I had gotten pretty good at accumulating it. For a while, I would just go down to the local bank and borrow whatever I could to build a store or buy something we needed to grow the business.”
“In that sense, I think my style as an executive has been pretty much dictated by my talents. I’ve played to my strengths and relied on others to make up for my weaknesses.”
“The larger truth that I failed to see turned out to be another of those paradoxes—like the discounters’ principle of the less you charge, the more you’ll earn. And here it is: the more you share profits with your associates—whether it’s in salaries or incentives or bonuses or stock discounts—the more profit will accrue to the company. Why? Because the way management treats the associates is exactly how the associates will then treat the customers. And if the associates treat the customers well, the customers will return again and again, and that is where the real profit in this business lies, not in trying to drag strangers into your stores for one-time purchases based on splashy sales or expensive advertising. Satisfied, loyal, repeat customers are at the heart of Wal-Mart’s spectacular profit margins, and those customers are loyal to us because our associates treat them better than salespeople in other stores do. So, in the whole Wal-Mart scheme of things, the most important contact ever made is between the associate in the store and the customer.”
“You can’t praise something that’s not done well. You can’t be insincere. You have to follow up on things that aren’t done well. There is no substitute for being honest with someone and letting them know they didn’t do a good job. All of us profit from being corrected—if we’re corrected in a positive way. But there’s no better way to keep someone doing things the right way than by letting him or her know how much you appreciate their performance. If you do that one simple thing, human nature will take it from there.”
“When you own and manage your distribution and logistics channel, you have a great competitive advantage over companies that rely on third-party suppliers. It automatically shortens your lead times, but also you can constantly look for ways to improve your operation and try to make it more efficient. You never have to rely on what’s going on in somebody else’s shop. In our case, we generally know where things are in relationship to when we want them to arrive, so we can schedule and plan to move goods into the stores at the right time. That maximizes our in-stock positions, which is vital. You can’t generate sales unless you have the product there when the customer wants it.”
“A lot of this goes back to what Deming told the Japanese a long time ago: do it right the first time. The natural tendency when you’ve got a problem in a company is to come up with a solution to fix it. Too often, that solution is nothing more than adding another layer. What you should be doing is going to the source of the problem to fix it, and sometimes that requires shooting the culprit.”
“So you see what I mean when I say you have to think small to grow big.”
“It’s obvious that most companies would be much better served by basing managers’ pay on the performance of the company or return on investment to the shareholders or some yardstick which clearly takes into account how well they’re doing their job. And the formula has to make sure that profits are divided fairly among workers, management, and stockholders, according to their contributions and risks.”
“But all this requires overcoming one of the most powerful forces in human nature: the resistance to change. To succeed in this world, you have to change all the time.”