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Sam Walton on How to Treat Employees


I’d like to share a surprising quote from the book Made in America, a sort of conversational biography of the founder and manager of Wal-Mart, Sam Walton, who said:

The larger truth that I failed to see turned out to be another of those paradoxes — like the discounter’s principle of the less you charge, the more you’ll earn.  And here it is: the more you share profits with your associates — whether it’s in salaries or incentives or bonuses or stock discounts — the more profit will accrue to the company.  Why?  Because the way management treats the associates is exactly how the associates will then treat the customers.  And if the associates treat the customers well, the customers will return again and again, and that is where the real profit in this business lies, not in trying to drag strangers into your stores for one-time purchases based on splashy sales or expensive advertising.  Satisfied, loyal, repeat customers are at the heart of Wal-Mart’s spectacular profit margins, and those customers are loyal to us because our associates treat them better than salespeople in other stores do.  So, in the whole Wal-Mart scheme of things, the most important contact ever made is between the associate in the store and the customer.

Those words were spoken in 1992 or before.  Now 21+ years later, when you think of Wal-Mart, do you think of a role model for collaboration between corporations and employees?  I don’t.  Take, for example, this New York Times article from earlier this year, which makes a recent addition to a years-long story of Wal-Mart and wage disputes.

Walton goes on to say (back in 1992):

Theoretically, I understand the argument that unions try to make, that the associates need someone to represent them and so on.  But historically, as unions have developed in this country, they have mostly just been divisive.  They have put management on one side of the fence, employees on the other, and themselves in the middle as almost a separate business, one that depends on division between the other two camps.  And divisiveness, by breaking down direct communication, makes it harder to take care of customers, to be competitive, and to gain market share. … Anytime we have ever had real trouble, or the serious possibility of a union coming into the company, it has been because management has failed, because we have not listened to our associates, or because we have mistreated them.

It’s been about a generation since Walton spoke those words, but they seem just as applicable today.

Anyway, if you’re keeping a reading list, Made in America is an easy read that I highly recommend.

For further reading:

Check out my previous post on one way how not to treat employees.