Memo to Wal-Mart: Healthier Credibility Will Attract Healthier Employees
Wal-Mart is the largest, most successful retailer in the world. How successful? In 2004, Wal-Mart's sales totaled $288 billion, more than retail giants Home Depot, Kroger, Costco, Target, and Albertsons, combined. Obviously, Wal-Mart's leadership is doing just fine without the generous advice its critics are so eager to offer. But a look at the company's press clippings in recent days helps illustrate the importance of leadership credibility.
Last week, Wal-Mart announced it would establish a $25 million private equity fund to invest in businesses owned by women and minorities. The fund will provide equity capital to women- and minority-owned businesses seeking money for acquisitions, joint ventures, and expansion. This is potentially welcome news to Wal-Mart workers who--in the face of a pending class-action lawsuit charging the company with discriminating employment practices--are worried about their employer's commitment to women and minorities.
On Monday, chief executive H. Lee Scott announced a new lower-premium health plan aimed at making insurance more affordable to Wal-Mart's 1.3 million U.S. employees. The plan, which the company will launch in 2006, will lower premiums by 40 to 60 percent. In addition, Wal-Mart will establish in-store clinics for workers who might otherwise rely on costly hospital emergency room visits for routine medical needs. This is great news to Wal-Mart employees, more than half of whom do not partake in the company's healthcare coverage.
Then, in a speech to Wal-Mart employees on Tuesday, Scott outlined company plans to become a better corporate citizen. He announced environmental campaigns to reduce solid waste, cut store greenhouse-gas emissions, improve the fuel efficiency of its delivery trucks, and convert to renewable energy sources. And he astonished many business watchers when he called on Congress to increase the minimum wage, which he said is "out of date with the times." By now, Wal-Mart associates should be feeling pretty good about their employer.
But on Wednesday, media reaction to a leaked memo from Wal-Mart benefits director Susan Chambers undoubtedly left employees wondering about their leadership's real intentions. The twenty-seven-page document suggested some "bold steps" to control rising employee-benefit costs. Chambers' recommendations included capping life-insurance payouts at $12,000, increasing health-insurance premiums for employees' spouses to deter them from buying coverage, and requiring some physical exertion in every job description, such as requiring cashiers to retrieve shopping carts from the parking lot. Not only would these actions reduce the costs of benefits for existing employees, but as Chambers put it, they "would also dissuade unhealthy people from coming to work at Wal-Mart."
Consistency between an organization's stated values and its leaders' actual behavior is critical to credibility. When there is discrepancy between what leaders say and what they do, employees immediately and rightly recognize those leaders as frauds. So when Wal-Mart's leaders talk about helping minority business owners, improving the environment, and helping underpaid and uninsured workers get ahead, it sounds great. But when employees read one leader's manifesto on lowering healthcare costs at their expense, they can only assume that all of the company's leaders are impostors.
Once workers suspect that management has played them, when they think, accurately or not, that what they want most is now unavailable to them, they withdraw, become defensive and cynical, start gossiping, and begin causing trouble. And here's the irony for Wal-Mart: Without a sense of purpose or a larger cause, money becomes the unaligned worker's sole motivation. Studies show that what employees want--ore than money or benefits--is to believe that they are working in meaningful jobs. As a result, the "price" for asking employees to compromise their personal values--when a leader's memo destroys employee passion, say--is that compensation moves to the top of their list of on-the-job aspirations. What choice do we leave them, in that case?
Will this week's events noticeably weaken Wal-Mart's dominate position in the retail world? Not hardly. But the inconsistent messages will leave employees wondering about the company's real motives. They'll wonder if they established an equity fund to give women and minorities a boost in business, or to mitigate class-action monetary damages. They'll wonder if their CEO is advocating a higher minimum wage to help his workers, or to hamper competitors who pay less than Wal-Mart. And they'll wonder if management is changing the healthcare plan to make insurance affordable to everyone, or to make cashiers more fit for gathering carts in the parking lot.
The lesson for the rest of us is simple: Job candidates are more apt to choose an employer for the organizational values it espouses and practices rather than the financial rewards it offers. Those organizations that recognize the role values play in leadership, and that live by the values they profess, will win the war for talent by attracting and retaining the best workers.
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Last week, Wal-Mart announced it would establish a $25 million private equity fund to invest in businesses owned by women and minorities. The fund will provide equity capital to women- and minority-owned businesses seeking money for acquisitions, joint ventures, and expansion. This is potentially welcome news to Wal-Mart workers who--in the face of a pending class-action lawsuit charging the company with discriminating employment practices--are worried about their employer's commitment to women and minorities.
On Monday, chief executive H. Lee Scott announced a new lower-premium health plan aimed at making insurance more affordable to Wal-Mart's 1.3 million U.S. employees. The plan, which the company will launch in 2006, will lower premiums by 40 to 60 percent. In addition, Wal-Mart will establish in-store clinics for workers who might otherwise rely on costly hospital emergency room visits for routine medical needs. This is great news to Wal-Mart employees, more than half of whom do not partake in the company's healthcare coverage.
Then, in a speech to Wal-Mart employees on Tuesday, Scott outlined company plans to become a better corporate citizen. He announced environmental campaigns to reduce solid waste, cut store greenhouse-gas emissions, improve the fuel efficiency of its delivery trucks, and convert to renewable energy sources. And he astonished many business watchers when he called on Congress to increase the minimum wage, which he said is "out of date with the times." By now, Wal-Mart associates should be feeling pretty good about their employer.
But on Wednesday, media reaction to a leaked memo from Wal-Mart benefits director Susan Chambers undoubtedly left employees wondering about their leadership's real intentions. The twenty-seven-page document suggested some "bold steps" to control rising employee-benefit costs. Chambers' recommendations included capping life-insurance payouts at $12,000, increasing health-insurance premiums for employees' spouses to deter them from buying coverage, and requiring some physical exertion in every job description, such as requiring cashiers to retrieve shopping carts from the parking lot. Not only would these actions reduce the costs of benefits for existing employees, but as Chambers put it, they "would also dissuade unhealthy people from coming to work at Wal-Mart."
Consistency between an organization's stated values and its leaders' actual behavior is critical to credibility. When there is discrepancy between what leaders say and what they do, employees immediately and rightly recognize those leaders as frauds. So when Wal-Mart's leaders talk about helping minority business owners, improving the environment, and helping underpaid and uninsured workers get ahead, it sounds great. But when employees read one leader's manifesto on lowering healthcare costs at their expense, they can only assume that all of the company's leaders are impostors.
Once workers suspect that management has played them, when they think, accurately or not, that what they want most is now unavailable to them, they withdraw, become defensive and cynical, start gossiping, and begin causing trouble. And here's the irony for Wal-Mart: Without a sense of purpose or a larger cause, money becomes the unaligned worker's sole motivation. Studies show that what employees want--ore than money or benefits--is to believe that they are working in meaningful jobs. As a result, the "price" for asking employees to compromise their personal values--when a leader's memo destroys employee passion, say--is that compensation moves to the top of their list of on-the-job aspirations. What choice do we leave them, in that case?
Will this week's events noticeably weaken Wal-Mart's dominate position in the retail world? Not hardly. But the inconsistent messages will leave employees wondering about the company's real motives. They'll wonder if they established an equity fund to give women and minorities a boost in business, or to mitigate class-action monetary damages. They'll wonder if their CEO is advocating a higher minimum wage to help his workers, or to hamper competitors who pay less than Wal-Mart. And they'll wonder if management is changing the healthcare plan to make insurance affordable to everyone, or to make cashiers more fit for gathering carts in the parking lot.
The lesson for the rest of us is simple: Job candidates are more apt to choose an employer for the organizational values it espouses and practices rather than the financial rewards it offers. Those organizations that recognize the role values play in leadership, and that live by the values they profess, will win the war for talent by attracting and retaining the best workers.
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MCI/WorldCom's Interpretation of "Management Foresight"
MCI, formerly known as WorldCom before its infamous $11 billion accounting scandal, announced this week payments totaling $331 million to sixteen states and the District of Columbia to settle tax fraud lawsuits. These settlements follow the company's similar agreement with Mississippi for $118.2 million, and precede a likely resolution with South Carolina. The states accused MCI of operating a four-year sham intended to avoid paying state taxes.Here's how the scheme worked: Designed by MCI's accounting firm KPMG, the plan's objective was to shift income received from MCI's subsidiaries in various states to its subsidiaries in states with more favorable tax rates. From 1999 to 2002, MCI reduced some subsidiaries' taxable income by charging them royalties, which it cleverly called "management foresight" fees. The subsidiaries deducted those royalties from state taxes as business expenses, greatly reducing their tax liability in their states. Then, MCI illegally allocated income from the fees to subsidiaries in states that exempt royalties from taxation. In all, MCI hid over $20 billion in taxable income.
Under the settlements, MCI avoids admitting any wrongdoing. Instead, the company would like us to believe it's doing everyone a favor. "These agreements benefit MCI and the states alike by enabling us to put this issue behind us in a fair and equitable manner," said MCI's Carol Ann Petren. MCI seems to have a strange perception of fair and equitable. "Early on the company only offered us $1.5 million," said Georgia revenue commissioner Bart Graham. Georgia's portion of the final settlement is $39.7 million.
MCI settled the lawsuits just in time. Verizon has offered to acquire MCI for $8.46 billion--with a catch: MCI must resolve the state litigations before the merger. With that hurdle removed, MCI shareholders can now approve the acquisition when they vote October 6.
But there was perhaps a bigger motivation behind the settlements. Verizon's offer price was contingent on the amount it cost MCI to resolve the state litigations. Not surprisingly, state investigators say the settlements allow MCI to pay less than eighty cents for every dollar of avoided tax liability.
The best definition of foresight is prudent care in providing for the future. MCI confused foresight with deception, and substituted prudence with recklessness. When its shareholders vote this week to turn the scandal-plagued company over to Verizon, ethical business people--and tax collectors--everywhere will say, "Good riddance!"
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Author George Brymer's comments about the leaders who get it, and those who never will.
