by Patricia Sellers
“Control your expenses better than your competition. This is where you can always find the competitive advantage.”
That was said, simply enough, by Wal-Mart founder Sam Walton. And though today it’s widely known that Wal-Mart is the world’s most efficient retailer, a little-known fact is that for 25 years–long before Wal-Mart became America’s largest retailer–it ranked No. 1 in its industry for the lowest ratio of expenses to sales.
Efficiency runs in the water here in Bentonville, Arkansas, where I’ve spent the past 36 hours. I hadn’t been to the center of the retail universe since 1996, when Wal-Mart crossed the line of $100 billion in annual sales. This past year, the company, which started in 1962, crossed the $400 billion line.
And while it’s now 17 years since Sam has died, the rules he established when he opened his first five-and-dime, on Bentonville’s town square, still apply. On Monday night, when I had dinner with Wal-Mart financial services president Jane Thompson and seven other corporate officers, everybody chipped in $20 a piece for the wine. That’s because Wal-Mart’s founder refused to pay for alcohol of any kind.
Over at the home office (which Sam Walton preferred to “headquarters” because he thought the latter term sounded highfalutin), I ran into Mike Duke, Wal-Mart’s CEO who took charge in February. I asked Duke if I could take a peek of his office–which are Sam’s old digs–and as he escorted me into the tiny room, he noted with pride, “Same wood paneling from 30 years ago.” Duke’s fanciest decoration is an aquarium in the corner. “That’s from David Glass,” he said, referring to Wal-Mart’s chief after Sam, “and I’m just trying to keep the fish alive.” What did Duke add to the space? “Just the pictures on the wall,” he replied. Two framed photos above his desk show Sam’s first store and below that, a picture of the world. “Because that’s where we’re focused now,” the CEO said.
Before moving into Wal-Mart’s top job, Duke headed international operations and worked in a low gray shed next door. At 40,360 square feet total, this may be the world’s smallest office responsible for $100 billion in sales. (Berkshire Hathaway’s headquarters in Omaha comes close, in terms of efficiency. See Monday’s Postcard on “How Warren Buffett manages his managers“). Now Doug McMillon, who succeeded Duke as international chief, works out of the unsightly barracks, where a few fortunate execs get a jailhouse-type window through which, as Duke says, you have to crank your neck to see the sun.
I was invited to Bentonville by Wal-Mart’s women officers, a group that just passed 100 in number and self-finance their events by chipping in $100 each every year–another mark of management’s extreme self-denial. (Anyone who sells to Wal-Mart knows that its managers aren’t allowed to accept even a bottle of water without paying for it.) Yesterday, at their special “Coins2Day Most Powerful Women” event, I interviewed Susan Chambers, EVP of Wal-Mart’s Global People Division, and Ursula Burns, the new CEO of Xerox –which you’ll read more about on Postcards later. Before the day ended, Thompson, the financial services chief, drove me past the spot where Sam Walton is buried, alongside his wife, Helen. It’s a barely noticeable grave in a crowded cemetery tucked behind Wal-Mart’s home office. Even in the afterlife, Sam Walton is saving money.