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CLEVELAND—When Thomas M. Coughlin arrived early one morning at Wal-Mart headquarters in 1978 for a job interview with founding father Sam Walton, he saw an unassuming man in the parking lot, on hands and knees, retrieve a newspaper from under a car and deposit it into a trash can.
"Very impressive," Coughlin said to himself. "Here's an employee who hasn't even punched in yet, and he's already doing his job."
Several hours later, when he walked into the chairman's office for his much-anticipated meeting, Coughlin found the "maintenance man" sitting behind Walton's desk. Mr. Sam was clearly not one to leave any job undone. And the young job applicant knew he had found the right place for his career.
Addressing a luncheon session of the HBS 2001 Global Alumni gathering, Coughlin, now president of the Wal-Mart Stores Division, used Wal-Mart as a case study on the conference theme "Innovation, Transformation, and Growth" regaling his audience with anecdotes and insights drawn from his twenty-three years with the company.
Since its founding in 1962, Wal-Mart has grown from a single store in a small, southern town into an icon of American retailing, with 2,700 outlets and a work force of more than a million "associates." When Coughlin first joined the company, income totaled about $28 million on sales of $678 million. Last year, sales rang in at more than $190 billion, registering profits of some $6.3 billion. Projections for next year are calling for—ka-ching—around $215 billion in sales.
"Our growth has come from our ability to innovate and transform our organization into what customers expect," Coughlin said. "You can't make good decisions unless you know what they're thinking. In addition, we focus on constant change and improvement, and as we became larger, we learned to compete, because we had to do things better than our contemporaries."
Beyond the desk
To accomplish that, Wal-Mart has developed a culture and capabilities that enable it to listen closely to both customers and employees.
Executives spend more time visiting stores than sitting behind a desk. (Dressed in a Wal-Mart uniform, Coughlin often hits the road with one of the company's truck drivers.) Using state-of-the-art information technology, department managers make merchandise decisions based on reams of up-to-date data that they share with suppliers. Gross margins are as well known as sports scores, and whether it's clothing or computers, the company knows what's selling and where.
By stocking and displaying items that reflect the needs of the community where each store is located, Coughlin said, Wal-Mart builds an all-important bond of trust with its customers. An important development that strengthened that bond, he added, was the concept of "everyday low prices."
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| Gross margins are as well known as sports scores, and whether it's clothing or computers, the company knows what's selling and where. | |
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"When I first arrived at Bentonville, we did markdowns like just about everybody else in the industry, where it's commonplace to send out sixty circulars a year touting specials. But we decided that if people knew they could get the best price from us no matter when they shopped, they would be all the more likely to come." Customer survey results, not to mention the company's bottom line, attest to the effectiveness of that innovation.
Coughlin also expressed pride in Wal-Mart's penchant for fast action—a modus operandi that was established years ago by the founder. "Sam's mentality was 'try it, fix it, change it.' He wasn't interested in presenting problems to a committee and then waiting around," Coughlin said, adding that he also abides by the advice of another leader, General George S. Patton: "A good plan today, [well] executed, is better than a great plan tomorrow."
Experiment and measure
At the same time, Coughlin added, the company's leadership style favors listening and cooperation, not top-down command-and-control.
"We get good results by working with our associates and letting them try new things—with the proviso that they measure the effects of what they've done and come back to us with an evaluation of their efforts. Going forward, our most important job is growing talent. More than anything else, that will determine how well the company does in the future."
Coughlin recalled advice from General Norman Schwartzkopf, his father, a former detective in the Cleveland Police Department, and legendary UCLA basketball coach John Wooden.
"Norm told our management group that at one time or another, every leader faces a situation where he or she doesn't really know what to do. 'When that happens,' he said, 'just do what's right.' As for my dad, he kept telling me when I was younger that nothing teaches better than experience—even when you think you know it all. As Coach Wooden put it, 'It's what you know after you know everything that really counts.' That's what good businesses are all about. At Wal-Mart, we're always learning."
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