WalMart: Memo-gate Redux

I read the article and attached memo in the NYT this morning with dismay and disgust at the writer's obvious lack of situation awareness, perspective and context.

http://www.nytimes.com/2005/10/26/business/26walmart.ready.html

http://www.nytimes.com/packages/pdf/business/26walmart.pdf

He fails to put into proper context the impact of the demographics that WalMart, or any other (similar) retailer, employs and serves. He fails to understand, regardless of cost, the "switching costs" to migrate from publicly funded healthcare to privately funded healthcare may prove to be insurmountable to many of their associates. Notwithstanding, even IF WalMart were to offer an equal or similar healthcare package as Medicaid, the “switching costs” will still remain too high in relation to the incentive to switch (i.e., given that everything is equal, what is the incentive for these people to switch?). Does he, or any other critic, expect WalMart to run a miniaturized version of Medicaid? Or solve the national healthcare crisis? That is inane!

He states that associates who earn $17,500 could face $2,500 out of pocket expenses (14.3%); however, he does not specify how much of this would be derived from deductibles, non-covered services and prescriptions but leaves it for the reader to infer, assume it is a cost WalMart should have covered when in fact it could be related costs not covered by any insurance. High healthcare costs are something everyone faces, poor and rich alike. I would venture to guess that as incomes climb so does the amount of money spent on healthcare (I seriously doubt there is a $2,500 cap) because patients are more likely to demand more services, tests and medications and doctors are all too often more than happy to oblige.

Additionally, he takes out of context the issue of emergency room usage—which I am sure if he researched it thoroughly, he would find it was endemic in many companies which have low emergency room deductibles. Again, this behaviour reflects the demographics, high "switching costs", and the median education of the average associate, as well as the convenience the American society has become used to. Not to mention, that there is no disincentive not to use the emergency rooms, at least from the insured’s standpoint. That might explain why many insurance companies now carry high emergency room deductibles if the patient is not admitted, yet one way to defray the skyrocketing prices of healthcare.

Also taken out of context and omitting important things like statistics, are his quotes about the health of WalMart associates relative to the national population. I can wish I could write garbage like that, be well paid and not get sued.

And what is wrong with associates exercising on the job? Gee pushing a cart is really hard work! No one says Target is stupid (or brutal) for having its employees do exercise (it's amusing to watch).

From my experiences, it is not unusual for large corporations to offer several benefits packages, each tailored to specific demographics. Needs across the different demographics vary due to many variables, many well outside the control of WalMart. DOH!

His opening paragraph is one from someone who has OBVIOUSLY never worked in the retail industry and grasped the economics of such. Increasing part-time employees, having a set ratio of full-time to part-time employees is NOT a new strategy, nor is weeding out less productive workers, particularly senior ones. That is just business strategy and planning, or, maybe just common sense in action. Unbeknownst to him, WalMart is a business and not a not-for-profit charity organization.

He then goes on to take the comment about productivity in light of tenure out of context and shows a complete lack of understanding of what frequently goes on in a retail setting. What he describes may be attributed to poor lower level management or uninspired lower level management (as may be the case) or even lack of incentive (complacency); however, to correlate tenure directly with lower productivity is borderline ludicrous – save in the case of tenured professors that cannot be fired except for gross misconduct (that is for another time). His lack of fundamental understanding of tenure and the hierarchical dynamics within the retail setting is clearly demonstrated throughout the article. (I have experienced this all too often. I am sure through benchmarking and trending many interesting patterns will be revealed in regards to productivity which correlated to attitude and overall health.)

I could go on and dissect the entire article to demonstrate over and over his lack of situation awareness, perspective, and context; however, that is not the point of this blog, but rather raise public consciousness so that every consumer does not fall prey to sensationalistic reporting.

There are other “scandals” which have tarnished WalMart’s image; the immigrant one comes to mind. However, not so much in defense, but in explanation of, WalMart’s action, it is the consumer that drives the market, demand vs. supply, not the other way around (usually, generally). Consumers demand and expect goods, both basic and luxury, at bargain prices; however, they decry WalMart’s actions, both intentional and unintentional, to deliver the expected goods. They ignore and/or do not understand that there are many variables that affect pricing (e.g., competition, operating costs, etc.). Consumers, for the most part, do not realize their actions have fueled current business practices and furthered globalization on an even grander scale. There is an old saying:

“Be careful what you wish for, and more careful what you ask for…”

The same associates who demand lower pricing also demand better pay and benefits. This is unreasonable. Somewhere down the line, the cost of doing business has to be extracted while still meeting everyone’s expectations, remaining competitive and maintaining strategic positioning through the coming years.

There is a pervasive tunnel vision of associates, the public imposed on them by various factors such as education, misinformation as disseminated by the media and self-serving politician (Warren Harding proved that even idiots with charisma can hold office). Most fail to see the big picture or even the simple picture, WalMart, as any other company out there, is out to make a profit. (Hello! Forget objectivity… that takes too much work!) As cold as it sounds, human resources are capital, maybe even commodities. When you become subjective about running a business, you quickly lose sight of the path to your goal—to make a profit, the bottom line.

Why is it that when WalMart came to the aid of the Katrina victims, the news reported about it was minimal at best? Why did WalMart not capitalize on this goodwill effort? Why does WalMart not leverage is power of scale and effect change in attitudes from within in tandem with its PR campaign? WalMart’s supply chain innovations are legendary yet its human resources are still stuck in the industrial age. Although that may be an exaggeration, there is some truth to it.

It seems so much focus was giving the consumers rock-bottom prices through a lean mean supply chain; yet, somewhere along the line the key component of making this happen, human capital, was left on a shelf to gather dust, it was not developed in tandem with the technological innovations. Stale and disinclined management, from the top to the bottom, was isolated from the technology that was supposed to differentiate it from the KMarts, Targets out there. Yet this is not visible to the average consumer. The declining appeal of the stores, the HR scandals, the health insurance issues are visible to the average customer.

I’m not defending WalMart’s actions but instead calling for focus and action by both WalMart and the communities it serves instead of the constant blameshifting and headgames that is currently going on. It is of great disservice to all. WalMart is not the cause of or even major contributor to our troubled healthcare system but yet another symtom of it that is not going to go away with fancy PR or impassioned and inflammatory talk by their critics.

I am waiting for WalMart (and other companies in similar situations) to bring their HR practices in line with their technological innovations; however, I don’t see that happening anytime soon.

The memo published in the New York Times, is yet more talk. When are they going to stop talking the talk and walk the talk? How many more public floggings is it going to take before WalMart finally gets its act together? Does Sam need to come back from the grave to clean up this mess or is he looking down on all this and having the last laugh?

Stay tuned for the next in the series of Memo-gate.