It's not what you think.
On October 14th, Wal-Mart conducted its 22nd Annual Meeting for the Investment Community, featuring 5 of its top management, and 14 analysts from companies like Morgan Stanley, Merrill Lynch, and Wells Fargo.
In his introductory remarks, CEO Doug McMillon referred to creating "more ownership among our associates." He was not talking about actual financial ownership, in a company that is tightly controlled by the Walton billionaires. McMillon meant more "buy-in" from his workers--but even that would be inaccurate. McMillon described "ownership" this way: "When our department managers take ownership and run a store within a store, that part of the store looks better and runs better, it drives more sales, has happier customers. That ownership is what we are after."
Wal-Mart is focusing on the lower level managers, not the frontline cashiers and clerks.
The Wal-Mart narrative for this analysts' event repeatedly focused on what Doug McMillon called the "significant commitment" the retailer had made to its "store associates." Wal-Mart announced several months ago that starting wages at Wal-Mart would be pegged at $9 and hour this year, and $10 an hour next year. But retail workers months ago began campaigning for a minimum of $15 per hour---leaving Wal-Mart workers at 66% of the goal. McMillon said increasing wages was necessary to "get the talent we need," and it was "the right thing to do." But the timing for $15 per hour is apparently not "the right thing" yet.
Wal-Mart CFO, Charles Holley, made it clear that raising wages has hurt Wal-Mart's stock value: "This program will result in increased cost of about $1.2 billion this year and an incremental $1.5 billion next year. Now this is $2.7 billion of investment over a two-year period. In fact, in fiscal year 2017 this wage investment represents approximately 75% of our earnings per share reduction."
Last February, McMillon told his workers: "We're also strengthening our department manager roles and will raise the starting wage for some of these positions to at least $13 an hour this summer and at least $15 an hour early next year." "As important as a starting wage is," he added, "what's even more important is opportunity, and we'll continue to provide that ladder that any of you can climb... Today's cashiers will be tomorrow's store or club managers. Today's managers are tomorrow's vice presidents. Tomorrow's CEO will almost definitely come from inside our company."
But Wal-Mart's career ladder is missing some rungs. At the analysts' meeting, McMillon described his company's upward mobility this way: "Ideally this starts to look like a ladder...We want people to join the Company and have an opportunity to move up. We want to create a meritocracy...some of the longer-tenured associates, we are trying to guide them towards running one of the departments because that gives them an opportunity to move up...We really want to develop a pipeline of talent and to some extent have. But with our growth we have stretched that and needed to come back and put some of the rungs in the ladder in the right place."
What Wal-Mart is really doing is bulking up on low-level managers. Greg Foran explains Wal-Mart's strategy: "We have added in the last few months 8,000 department managers who are empowered to run their departments and be great merchants." He then listed all the reasons why Wal-Mart has a huge stretch to make its bottom tier workers satisfied: "If you pay your people competitively, if the managers are really engaged and they are good, if you train people, you give them the right schedules, you're going to see happier associates, you will see a marked improvement in the shopping experience."
But Associates aren't going to be "happy" that Wal-Mart is forcing some of its workers to jump off the ladder. U.S. stores CEO Greg Foran used the metaphor of a waterfall: "What is happening is that as we are making these changes it is cascading down. And we are seeing turnover in some of the areas, which, once again to be candid, we are forcing in some cases." In other words, some workers are being pushed out of their job.
Foran also candidly noted that when the retailer ranked its 4,597 American stores last February, based on a metric they call their "clean, fast and friendly" scores, that only 16% (735 stores) were at their initial goal. As of October 1st, Foran boasts that 67% (3,080) meet their initial goal. That means 1,517 Wal-Mart stores don't meet Wal-Mart's clean, fast and friendly measures. "I want to be clear," Foran said, "we've still got lots of room to improve." Is the world's largest retailer admitting that 33% of its stores are dirty, slow and unfriendly? Foran concludes that his research has found "a really good correlation" that "the higher your score is in clean, fast, and friendly, the higher your sales." Any shopper could have correlated that.
Greg Foran left the Wall Street analysts with an idyllic vision of what they would find if they visited a Wal-Mart store "on one busy afternoon." "I think you'll see we've got clean floors. We've got better fresh...There's a better in-stock. Store managers and department managers are visible on the sales floor. Associates are more friendly. They are wearing their vests and they've got their new name badges on that say Our People Make the Difference."
Better wages, better health and retirement benefits, better schedules, better training---these are what make "happier Associates." It will take more than clean floors and new name badges to increase worker "ownership." It does not appear that Wal-Mart is anywhere near ready to climb that ladder.
Al Norman is the founder of Sprawl-Busters. His most recent book is Occupy Wal-Mart.