Walmart has one of corporate America’s most complicated HRM stories

In the mid-2000s, it would’ve been tough to convince anyone that Walmart was a good place to work—including business journalist and historian Rick Wartzman, who wrote in his last book that the company’s workers had been “placed on a path to impoverishment.” The pay was so low that at least one manager kept numbers of social services on hand should workers need referrals to housing, grocery, or medical assistance during their shifts, according to Wartzman.

But in the past two years, Walmart has made positive headlines by expanding benefits for full-time workers to include covering 100% of tuition and books for employees, 10 weeks of paid parental leave for birthing parents, and on-demand mental health counseling.

Wartzman, who was part of the Los Angeles Times team that won a Pulitzer Prize for its reporting on Walmart in 2004, explores how the company’s people management practices have evolved in his recent book, Still Broke: Walmart’s Remarkable Transformation and the Limits of Socially Conscious Capitalism. He told HR Brew about Walmart’s HRM journey, what finally pushed the corporation to make changes, and whether he believes they’re enough.

Anne Hatfield, Walmart’s senior director of global communications, declined to comment on this interview.

This interview has been edited for length and clarity.

From your research, what was it like to work in founder Sam Walton’s Walmart?

He always paid low wages, but I think there were two things that allowed him to transcend that. One was charisma…He famously would fly his own plane to store after store. He’d wear the “Sam” name tag—as if people didn’t know who he was—and go and talk to his frontline folks.

The other part was cash. [He had] a profit-sharing plan…when money was invested in Walmart stock for frontline employees. There are legendary stories of frontline workers and frontline managers who became millionaires…People took a lot of pride in working there.

Your book depicts an erosion of frontline workers’ pride in the early 2000s. What happened?

One is just sheer growth and size…[There were] around 5,000 stores, when you include Sam’s clubs—it’s so big that it’s really hard to get your arms around.

The other thing is they got rid of [to cut costs was] profit sharing…There were more and more things that were done over the years to just cut labor expenses…workers were being forced to work off the books, they weren’t being paid fairly for the hours they were putting in.

Because of its size, [Walmart] came in the crosshairs of not only the Food and Commercial Workers Union, but [also] the Service Employees International Union…Both unions launched simultaneous public campaigns against Walmart…holding it up as an emblem of all the things wrong with corporate America.

When did Walmart’s corporate strategy start to change?

In the wake of Hurricane Katrina…FEMA got a black eye for its inability to deliver food, medicine, and water…Walmart picked up the slack…Lee Scott, then CEO said, “Hey, how could we use our scale, our size for good every day, just like we did in Katrina?”

That began a series of initiatives—they [donated] billions of pounds of food to food banks…they lower the price of prescription drugs…[But] the slowest place they were ever able to move on…was on wages, because that really cuts right at their business model.

Why did Walmart finally raise pay in 2015?

Some of it was the data they had collected [from employees] and HR leaning in. But look, I can’t believe you needed to do a giant segmentation study to realize [that] your workers who were then…averaging $7.65 an hour were struggling to make ends meet.

It was business operations…[There was] incredibly high turnover…By 2013…inventory [was] just piling up to the point that literally you couldn’t get in the door…Stores were dirty. Judith McKenna, one of their top executives, [walked] into a store. She says to one of her colleagues, “Oh, when did we start using brown floor tile?” And he said, “That’s not floor tile, that’s dirt”...Customer satisfaction was declining. And store sales were going down quarter after quarter.

Doug [McMillon] came in [as CEO] and yes, there had been pressure…[to raise pay], but he was just looking at the business and realized he needed to invest in his workers in a way they had not.

So, to put it simply, underpaying workers got too expensive?

That’s a great way to put it.

How is Walmart doing today, in terms of worker compensation?

Given the context of their history, their business model, [and] where they come from, it’s been a remarkable transformation. But at the end of the day, more than half [of hourly] Walmart workers, 800,000 or more, are making less than $29,000 a year. That’s terrible.

What can HR teams learn from Walmart’s recent efforts?

Walmart’s done really well listening to their critics by and large and having uncomfortable conversations…I do give them credit for realizing that they needed to begin to invest more in their workers and beginning that process. I wish they’d greatly accelerate the pace of change.

Walmart, like many companies over time, [drinks] their own Kool-Aid…I think that there’s an empathy gap in corporate America and a lived-experience understanding gap.

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