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Doug McMillon: How I Knew It Was Time to Raise Pay at Wal-Mart

3 min read

Doug McMillon, CEO of Wal-Mart Stores Inc. of Bentonville, said a visit he took to a store in Denver helped him decide the company needed to raise worker pay.

McMillon participated in the 15th annual Emerging Trends in Retailing conference Thursday at the Springdale Convention Center, an event hosted by the University of Arkansas’ Sam M. Walton College of Business. 

Wal-Mart announced in February it would increase the minimum wage it paid about 500,000 of its hourly employees to $10 an hour by February 2016. The plan is part of a $1 billion investment the retailer plans to make in its workforce.

Smucker Co. CEO Richard Smucker asked McMillon about the wage increases during a casual question-and-answer session.

McMillon said that during a store visit in Denver, he asked the manager and several employees what needed to be changed. The employees pointed to a hamburger stand in the parking lot.

“They’re paying $10 an hour to start and we pay $9,” McMillon said. “OK, that can’t happen. Let’s get that fixed.”

McMillon said Wal-Mart has traditionally held a strict line on expenses.

“As we did that, as Wal-Mart is known to do, sometimes we go too far,” he said. “We found the ditch on the other side of the road. … We’re trying to get it back to the middle of the road without going all the way to the other ditch on the other side of the road.”

By raising wages and implementing other workforce changes over the next two years, McMillon said the Walton family and the retailer’s board of directors are playing a long game, choosing to invest now toward a payoff that will come later. Until then, he predicts wage-related pressure on the company’s bottom line.

But at an event tied to Wal-Mart’s annual shareholders’ meeting on Friday, McMillon said the wage increases are already yielding returns.

“Our job applications are going up and we are seeing some relief in turnover,” McMillon said, according to Reuters. McMillon did not provide details, but said the company could raise wages in the future, beyond the next hike coming in February.

Smucker also asked McMillon about the growing influence of online sales on modern retailing. Smucker suggested Wal-Mart had an advantage because of its established brick-and-mortar stores and its developing e-commerce division.

McMillon said customers are changing the way they shop, buy and pick up merchandise.

“We don’t have it all figured out yet,” McMillon said. “We have a big and quickly growing e-commerce business. That world is changing retail in a rapid way.”

At the start of the session, Smucker, whose grandfather founded Smucker Co., read off a list of major firms founded and maintained by families. Wal-Mart was founded by Sam Walton and is still heavily influenced by Walton family members.

McMillon said Sam Walton instilled some basic principles and values in the company. But beyond those principals and values, Wal-Mart must be continually changing to stay contemporary, he said.

“Change is good,” McMillon said. “All of us need to be changing our business deliberately to cause it to have a future and be relevant.”

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