A Different Management Strategy for Walmart

Lee Scott will be making some changes in the way Walmart is run.

Over the long term, Mr Scott believes, the legal tussles will make Wal-Mart a better company. But that is going to require a rather different style of management. Sam Walton, who founded the company in 1962, liked to encourage a folksy, entrepreneurial spirit in which anyone could work their way to the top: some 70% of Wal-Mart's senior managers were once hourly-paid workers. Mr Scott started with the company in 1979 and went on to run its logistics, which includes America's biggest trucking operations. "Sam always liked to take people back," says Mr Scott. "One truck driver I fired five times and Sam hired him back four times." But the harsher environment of today and the threat of lawsuits means such tolerance is no longer possible. More discipline will be required.

So Mr Scott says that he is trying to develop a system that still rewards people for taking risks, but ensures that they also operate within more clearly defined boundaries. Mistakes have to be dealt with quickly and appropriately, even if that means sacking people. If getting that balance right were not difficult enough, Mr Scott is also aiming to reduce the huge cost to Wal-Mart of replacing tens of thousands of workers each year.

Size can kill when it comes to business. Despite the efficiencies of scale, the management problems from vast numbers of employees can be crippling to any business. That is why I believe that sooner or later WalMart will lose its position as #1. It happens to everyone.