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Operations Management

How Sam’s Club made good jobs for frontline employees

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John Furner knew he’d come to a special place when he stepped into the Lubbock, Texas Sam’s Club in the fall of 2017.

Furner had just taken on the president and CEO role for the membership-only retail warehouse chain, and he’d gone to the Lubbock location to ask the manager questions about operations. But when he asked for a tour, the manager brought over a dozen team leaders to serve as guides. As they walked around the club, the manager let the team leaders explain the ins and outs of daily operations.

“It was very clear: Show me a great group of team leaders in a club, and I’ll show you a great club,” Furner said during a recent talk with MIT Sloan professor Zeynep Ton and her management of services students.

After that visit, Furner started looking for the same type of environment in every store. It also helped serve as part of the framework for a reinvestment in good jobs for frontline employees at Sam’s Club. These employees include the men and women at the checkout registers, the ones behind the butcher and deli counters, and at the bakeries. The move generally increased revenue and membership since its implementation — despite the company closing more than 60 stores and eliminating about 10,000 jobs in 2018.

“You could say ‘Let me wait until the revenue gets better, and then I’ll invest in people.’ Or ‘let me invest in people, and then hopefully, the revenue follows,’” Furner said. “So we decided on the second choice, which was invest in people at the same time we were investing in productivity tools.”

 

Furner is now the CEO and president of Walmart U.S. — Walmart Inc. owns Sam’s Club — and he was joined by Walmart U.S. Executive Vice President and COO Dacona Smith during his talk with Ton. Here’s some of what they learned pursuing good jobs at Sam’s Club.

Product quality is a direct reflection of employee quality

When Furner’s leadership team started to plan out changes, he brought in behavioral economists to model what a successful membership looked like — someone who decided to join Sam’s Club and renewed their membership year after year — and the reason for that long-term membership.

“The answer continually led back to: A great quality product at a value delivered when the customer is looking for it,” Furner said. “That quality starts with fresh food, in the case of Sam’s.”

And the quality of that fresh food, Furner said, is a direct reflection of the quality of the people hired to order, prepare, and handle that food every day at the wholesaler. But when Furner looked at the highest paid workers, he saw that they weren’t the ones behind the meat counter or at the bakery, they were the workers in the back offices away from customers.

One of the first things Sam’s Club did to address this imbalance was increase its wages. Employees who completed a training program could see their pay rise by as much as $7 an hour. The consequence, Furner said, was a drop in frontline employee turnover — in some cases by as much as 70% — in different parts of the company. And the long-term result was that teams stayed together and looked after each other, said Furner, who himself started as an hourly associate in a Walmart garden center.

“We just centered on the idea that hourly leaders in the building are committed, they love it, they stay together, many times that’s their hometown, they don’t want to go anywhere else,” Furner said. “If we take care of them, they’ll take care of everything else.”

Employees like a challenge, not an unpredictable schedule

Along with the increased wages, Sam’s Club reduced its product variety, and simplified and automated some processes.

“As the [stock-keeping unit] count came down, the club became easier to manage. Our in-stock positions were better,” Furner said. “The most unusual thing was the member response. We took a 20% SKU reduction, and our members were thanking us for all of the new items.”

With fewer displays to move around — and less frequently — customers were able to more easily find items they wanted. In Fort Worth, Texas, where this SKU reduction was tested, a woman came up to thank a store’s leadership for stocking a particular electric toothbrush, Furner said. The store had actually been carrying the item for a decade, it was just too difficult to find.

Simplifying shelving and automating some processes with new technology and artificial intelligence encouraged associates to take more challenging jobs.

Smith said he saw this happen in a store where the deli department hadn’t received new automating technology like its neighboring meat and produce sections. Not only was turnover still a problem, Smith said, but “we saw folks in the deli trying to move to meat.” Once that technology was incorporated into the deli section, however, the deli turnover rate dropped.

“It became very clear that it’s not enough just to raise pay. You also have to simplify the job,” Smith said.

Sam’s Club also switched to block scheduling to help many employees work in predictable shifts and made it easier to establish certain status and inventory check-ins throughout the day. Having that structure then helped managers know how many people were needed on staff to accomplish a particular goal.

“If you don’t have a predictable way of doing things, it’s hard to provide a schedule that’s predictable,” Smith said. “What we found is if we don’t have a pretty consistent way of doing things, it’s also challenging to provide the technology to deliver what we need to deliver.”

Employees want to be heard and to contribute to problem-solving

Furner and Smith emphasized throughout their talk the importance of a sense of belonging.

Furner said there’s now an Ask Sam tool where employees can send a voice or text message and ask any question they want to a team monitoring the app. If one of those team members can’t answer it, they send it on to someone who can.

“Humans want to be heard, they want to be acknowledged,” Furner said.

Similar to Furner, Smith also started his career with Walmart working as an hourly associate, pushing carts and assembling bikes at the same store where his mother was a manager.

Now an executive at Walmart U.S., Smith visits Walmart stores to talk with associates and he said he gets ideas on solutions to problems that aren’t typically talked about.

“They look at business differently. They usually come up with solving real issues,” Smith said. “I really feel that time spent in store taught me the value of the frontline associate. It’s absolutely what makes it all work, and also where you get some of the best ideas from.”

A good jobs approach can transform expenses into investments

Throughout the conversation, the executives emphasized the systemic way Sam’s Club approached good jobs. And for those skeptical about investment in people over profits, Furner said while Sam’s Club did take a hit after investing in wages, the following quarter it bounced back, and overall revenues, earnings, and membership since then “have been solid.”

“The content drives the work, the delivery drives the work, the volume drives the work,” Furner said. “And so every piece of the puzzle has to be thought through. When the whole system comes together, the expenses become investments.”

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