The Bully of Bentonville

by Anthony Bianco

  Forget that annoying smiley face: The truest symbol of the post-Walton Wal-Mart is a supercomputer whirring quietly away in a temperature-controlled room in the David Glass Technology Center in Bentonville. Built within a converted aluminum plant located two miles from the home office, the center is home to Wal-Mart’s 1,000-person Information Systems Division. Unlike the headquarters, which buzzes with the constant comings and goings of manufacturers’ representatives vying to get their products onto Wal-Mart’s shelves, the Glass Center is strictly off-limits to outsiders. A small placard hanging on the wall in the lobby offers a discreet hint as to why security is so tight, as well as explaining the company’s innate paranoia. “We must be inventing and implementing faster than the competition is stealing,” it reads. The Glass Center houses what is easily the business world’s largest computer database. The 460-terabyte capacity of its data warehouse dwarfs Amazon.com’s thirteen terabytes, AT&T’s twenty-six terabytes, and is equal to nearly half of the information archived on the Internet. 4

  Wal-Mart uses its great digital brain not only to figure out what to put on its shelves and to streamline the movement of merchandise through its distribution system, but also to closely monitor and evaluate its employees. “I could tell you last year on July thirteen during the hours of 7 and 8 P.M. how much sales a store did and how much of it was rung up by Sally Jo, the cashier with operator number 342 [within] that hour,” says Bill Thomas, a longtime store manager who recently left Wal-Mart. 5

  Wal-Mart also relies on its centralized computer system to devise work schedules, with the aim of suppressing payroll costs by fully staffing a store only when it is busiest. To better match the supply of workers with the need for their labor, the computer generates hour-by-hour projections of customer traffic and future merchandise deliveries. It then matches them up with workers’ pay levels, availability, and so on to produce a weekly schedule for each store. As a result, associates’ schedules not only vary weekly, but are subject to change on short notice. In effect, store workers now are on call virtually round the clock, subject to the dictates of a mainframe in Bentonville. In creating a retailing machine that spun faster and ground finer than any other in business history, Wal-Mart progressively transformed its store workers into faceless, low-cost, and frequently replaced component parts.

  Although Walton himself set this demoralizing process in motion, he humanized Wal-Mart by his presence, his human touch. He worked hard at inspiring employees, poring over information sheets in advance of store visits to better personalize the chitchat and praise that he lavished on associates. And in keeping his door open wide to one and all as an arbiter of grievances, Walton conferred upon the lowliest worker the right to assert her individuality to an extent that is rare in a large corporation. You’re less likely to feel like a machine part when you can sit down with the boss and speak your mind.

  To ward off the threat of unionization, Walton had entered into a kind of moral compact with his employees. You won’t make top dollar working here, he’d told them in so many words, but if you work hard and stick around awhile you’ll share in the profits just like management does and you will be treated with respect as a member of the extended Wal-Mart family. Or, as Walton put it in Made in America, “If you’re good to people, and fair with them, and demanding of them, they will eventually decide you’re on their side.” 6 Walton’s notion of fairness was skewed by Ozark traditionalism, but his patronizing attitude toward women did not prevent the New Deal that he offered workers from outgrowing its initially expedient aims and taking deep root within the company. Under Walton, Wal-Mart developed a reputation within retailing as a great place to work even as it continued to pay lower wages than did its competitors.

  However, the special compact that bound Wal-Mart to its workers through the Walton era expired unceremoniously some time after Mr. Sam did, as Glass made brilliant use of new technology to systemize and standardize every aspect of Wal-Mart’s operations. Even as Glass was hailed on Wall Street for “saving” Wal-Mart during the latter half of the 1990s, company workers were bailing out at record rates. Glass didn’t seem to care. Why should he? Wal-Mart was producing record profits. One can only conclude that the continuing mass exodus of workers was part of the plan—or at least the tolerable by-product of an overriding emphasis on cost efficiency.

  Walton’s open door to employees clanged shut, leaving Wal-Mart workers in thrall to a colossal, ultraefficient machine that Glass and his handpicked successor Lee Scott—master retail technicians both—continued to hone as the digital age progressed. Although Walton’s egalitarian concepts and rah-rah rituals still live on within the company, they now seem to exist mainly to camouflage the grim workaday realities of stores squeezed mercilessly to deliver the sales and profits the home office has programmed them to produce. “Wal-Mart workers, from store managers to hourly clerks, are frequently taxed to the limit, both physically and psychologically,” concluded Ellen Rosen of Brandeis University in her 2004 study, The Quality of Work at Wal-Mart. 7

  There was no way—short of relocating Ozarkers en masse—that Wal-Mart could have maintained the homogeneity and docility of its workforce as its expansion carried it from its natural rural habitat into urban America. Walton conceded as much in his autobiography, which was completed just before he died. In cities, he acknowledged, “we have more trouble coming up with educated people who want to work in our industry, or with people of the right moral character and integrity. Folks in small towns in Iowa and Mississippi are more likely to want to work for what we can pay than folks in Houston or Dallas or St. Louis. And, yes, they’re probably more likely to buy our philosophy in the country than they are in the city.” 8

  An optimist to the end, Walton believed that the company could overcome the perceived inadequacies of the urban labor pool by indoctrinating new hires in the Wal-Mart Way. “A smart, motivational, good manager can work what some outsiders call Wal-Mart magic with folks anywhere,” Walton continued. “It may take more time. You may have to sift through more people, and you may have to become more skilled with your hiring practices. But I truly believe that people anywhere will eventually respond to the same sort of motivational techniques we use.” 9

  As Wal-Mart moved into more competitive urban markets, the company had to resort to one motivational technique that had always been a last resort for Walton: money. To attract applicants, the company boosted its starting wage significantly above the federal minimum wage, while keeping it lower than at other big retail chains, preserving its decisive labor cost advantage. In his Los Angeles speech in 2005, Scott made the incredible claim that “Wal-Mart has dramatically upgraded the nature of retail work in America.” This is true only in the very limited sense that the company pays a bit more than many of the small, independent retailers that it drives out of business.

  But when it came to working that old “Wal-Mart magic” on employees, neither Glass nor Scott filled Walton’s shoes. As Wal-Mart’s founder, he had epitomized the company in a way that no successor ever could. For all his Ozarker parochialism, Walton was simply inimitable as Wal-Mart’s cheerleader-in-chief. He was succeeded in this role not by the shy and charm-challenged Glass, but by Don Soderquist, who was Wal-Mart’s second-ranking executive when Walton died and would remain Glass’s right-hand man throughout his tenure as CEO. An amiable, relentlessly positive Midwesterner, Soderquist was nearly as ebullient in his enthusiasm for all things Wal-Mart as Walton himself. More or less by acclamation, Soderquist became Wal-Mart’s “Keeper of the Culture,” eventually writing a quasi-autobiography called The Wal*Mart Way that doubled as a hardcover indoctrination manual for employees.

  In their eagerness to draft behind Walton’s inspirational powers, Soderquist and Glass stopped just short of stuffing their late mentor and propping him up behind his desk. Instructions went out to the stores to put up a framed photo of the founder near the employee time clock. Although Sam’s Pledge was deemed too ghoulishly personal to preserve, most o
f the inspirational techniques Walton had devised—the company cheer, the revival-like Saturday-morning meetings in Bentonville, the Ten-Foot Rule, and so on—survived his passing and often were performed by Soderquist and other managers in explicit homage to Mr. Sam. “The greatest fear we had after Sam died was not whether we could open new stores, but would we be able to preserve the culture that he’d created,” Soderquist recalled years later. 10

  Discontent in the ranks already was evident by the 1993 annual meeting, held in Fayetteville just a year after Walton’s passing. In his remarks to some 17,000 shareholders, many of whom doubled as employees, Sam’s brother, Bud, got up and bluntly criticized management’s recent decision to trim payrolls in some stores to maintain profit margins. “Maybe the executives should take a pay cut instead,” grumbled Bud, who, at age seventy-one, remained a director and a senior vice president (and a large stockholder).

  The crowd roared its approval as Glass, Chairman Rob Walton, and their fellow directors sat stone-faced behind Bud onstage. “I want the people in operations to understand how these people feel.” Glass patronizingly dismissed Walton’s concerns. “Bud spends most of his time fishing these days,” he told a reporter. The next year, Mr. Sam’s only sibling again sat onstage but wasn’t allowed to speak at what was his last annual meeting. 11 He died a year later on a Caribbean cruise. 12

  Like Glass before him, Lee Scott rose through the ranks by excelling at the mechanical aspects of retailing, playing an indispensable part in Wal-Mart’s technology-induced rebound in the latter half of the 1990s. With his cherubic, sandy-haired good looks and cheery demeanor, Scott was much more approachable than Glass. But he, too, was an uninspiring communicator who was so uncomfortable with public speaking early in his career that he dreaded the Saturday-morning meetings. Whenever Walton called on him, Scott recalled, “I would shake and my voice would crack.” 13

  As the third native Ozarker in a row to head the company, Scott assured it a large measure of continuity just by showing up for work each day. Born sixty miles north of Bentonville in Joplin, Missouri, Scott grew up just across the Kansas border in tiny Baxter Springs, where his father owned a gas station on Route 66 and his mother taught music at the elementary school. To pay his way through nearby Pittsburg State University, Scott worked the night shift for $2 an hour at a factory that made steel molds for tires. He married in college and lived with his wife and baby son in a ten-by-fifty-foot mobile home. After graduating with a degree in business, Scott went to work as a dispatcher with Yellow Freight Systems, a big trucking concern.

  Scott was running Yellow Freight’s terminal in Springdale, Arkansas, when he drove to nearby Bentonville in 1977 to try to collect from Wal-Mart on a disputed $7,000 bill. Glass, then Wal-Mart’s chief financial officer, was unmoved by Scott’s arguments, but was sufficiently impressed with the twenty-eight-year-old’s moxie that he offered him a managerial job in the Bentonville distribution center. Scott declined and got off an exit line now enshrined in Wal-Mart lore. “I’m not the smartest guy that’s ever been in your office,” he told Glass, “but I’m not going to leave the fastest-growing trucking company in America to go to work for a company that can’t pay a $7,000 bill.” 14 Two years later, Scott did just that, signing on to run Wal-Mart’s fledgling transportation department. (Tightfisted to a fault, Wal-Mart never did make good on that $7,000 bill.)

  Despite his stage fright, Scott was an aggressive, even abrasive, manager. As a new recruit, he came on so strong in pushing warehouse managers to unload trucks faster that Soderquist took him aside after one meeting and told him to cool it. “He told me that if my intention was to irritate and annoy everyone in the room, I had succeeded,” Scott recalled. 15 Every time a truck driver was drunk on the job or otherwise derelict in his duties, Scott sent out a memo scolding all of his drivers and threatening to fire anyone who flouted one of the countless rules he’d laid down. Infuriated by Scott’s bullying, a delegation of truck drivers walked through the open door and asked Walton to fire him. Instead, Walton called the headstrong vice president of transport into his office. After enduring a long gripe session with the drivers, he made Scott shake each man’s hand and thank him for coming forward. In time, Scott adapted to Wal-Mart’s egalitarian ethos, but without quite being humbled. As CEO, he liked to recount in interviews how he had to fire one driver five times because Walton insisted on hiring the man back four times.

  The quietly cocksure Scott made himself invaluable to Glass by building what is now the nation’s largest trucking fleet while employing the latest in computer technology to continually squeeze more cost efficiencies out of transport. Promoted up and out of transportation into a series of senior logistics posts, Scott took the lead in upgrading and expanding the company’s distinctive hub-and-spoke distribution network to equally beneficial effect. In 1995, Glass tested Scott by moving him out of logistics and putting him in charge of merchandising, an area in which he had no experience. Even so, the rising star helped Wal-Mart’s return to form in the latter half of the 1990s by methodically cutting $2 billion of excess inventory, in part by convincing suppliers to ship smaller orders more frequently.

  By the time Scott succeeded Glass in early 2000, he had mastered his nerves and was capable of delivering a respectable speech to any sort of audience. But if Walton had been the corporate equivalent of the Reverend Billy Graham, Scott came across like the boyish, mild-mannered director of the church choir. In other words, the new CEO needed his own Soderquist to excite and inspire the employee masses—and he got him in the outsized person of Thomas Martin Coughlin.

  Like Soderquist, Coughlin was an Ozarker by calling, not birth. The son of a police detective, he had grown up in Cleveland and headed west to college, graduating from California State University in 1972. Coughlin followed in his father’s footsteps in a sense, joining R. H. Macy’s West Coast division as a store detective. Early one Saturday morning in 1978 he was sitting with his wife, Cynthia, in their car outside Wal-Mart headquarters awaiting a 5:30 A.M. job interview with Walton. Coughlin was explaining to his wife why he wanted to move to the hinterlands—Bentonville just that week had installed its first traffic light—to take a job as vice president of security for a company without a frisson of R. H. Macy’s cachet, when a man in a khaki shirt emerged from the building and began chasing windblown newspapers around the parking lot. To Coughlin’s amazement, the dutiful khaki-clad employee turned out to be Walton. “People here respond differently than what I’m used to,” Coughlin later told his wife. “It’s not a situation where it’s someone else’s job. If there is something to be done, you jump in and do it.” 16

  At six feet four and a bruising 275 pounds, Coughlin was big and brash and altogether hard to miss as he swaggered around in his custom-made, lizard-skin cowboy boots. Much as the role of Wal-Mart’s head bouncer seemed to suit Coughlin, “loss prevention,” as Wal-Mart termed his domain, did not contain him for long. On his rise through the ranks at Wal-Mart, he worked in virtually every division of the company. As the first operations chief of Sam’s Club, he spent much of the 1980s flying around the country with Walton, opening new warehouse stores and shotgunning the occasional game bird. Coughlin swallowed Walton’s store-centric management philosophy whole, morphing from a gimlet-eyed store dick into a talented merchant very much in the populist, out-among-the-folks mold of his mentor.

  While Soderquist had been a gracious, honey-tongued evangelist, Coughlin was the culture keeper as enforcer. He quoted General George Patton—“A good plan violently executed today is better than a great plan tomorrow”—almost as often as he did Walton and was famous within the company for padlocking the office of a store manager who did not spend enough time out on the floor mixing with customers and workers. 17 After Walton died, Coughlin refined the founder’s rather long-winded ten rules of business into five Zen-like imperatives that he pounded into the brains of his colleagues at every opportunity. Stock it. Price it right. Show the value. Take the money. Teach
them. Coughlin would forgive an honest mistake, but he was murder on subordinates who lied, cheated, or stole. “Anyone who is taking money from associates and shareholders ought to be shot,” he said in 2000 (a comment that would come back to haunt him five years later, when documents came to light suggesting that he had subordinates create fake invoices to get Wal-Mart to pay for his personal expenses, from hunting vacations to a $1,359 pair of custom-made alligator boots, to a $2,590 dog pen for his Bentonville home).

  Big Tom Coughlin was definitely not a man to cross. But he was also someone who would send you a card on your birthday or help you find the right doctor for your ailing spouse. He kissed so many babies as he made the rounds of the stores that shoppers easily could have mistaken him for a candidate for political office. Many employees looked on Coughlin as the one home-office executive they knew for certain was on their side. At Wal-Mart’s annual meeting in 2003, a female department manager from New Mexico sat impassively through the raucous proceedings until Coughlin got his turn at the microphone. “For him, I stand,” she told her companion. 18

  Picking up where Glass and Soderquist had left off, Scott and Coughlin got off to a rousing start by the measures that count most on Wall Street. From 2000 through 2004, Wal-Mart boosted its annual sales by $100 billion, to $256 billion in total, an impressive 64 percent gain. Net income more than kept pace—rising 68 percent, to $9 billion—showing that the new executive team was continuing to use Wal-Mart’s technological prowess to pound cost efficiencies out of an increasingly far-flung empire of stores.

  Scott and Coughlin managed to accelerate Wal-Mart’s growth even as they brought the rate of employee turnover down from 70 percent to a bit under 50 percent by 2004. They achieved this not by loosening the company’s purse strings and paying their employees better wages or giving them richer benefits, but rather by using a few of those terabytes of computer power in the Glass Center to more carefully screen job applicants. In essence, Wal-Mart consciously evaluated for a variety of pliant traits in job applicants that add up to the kind of servility Walton prized in his Ozarks population. By design, two-thirds of Wal-Mart’s new hires now come from segments of the population not in their prime earning years: senior citizens, students, and second-income spouses. Virtually every job candidate—even the most outwardly docile grandparent—must undergo computerized aptitude and personality tests designed by Bentonville. To wear the blue smock, it helped to score high on multiple-choice questions like these: