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The article is Slashdotted, I cannot load it. Let me explain something. Walmart follows 'classical management' of negative reinforcement and cutting expenses d

The article is Slashdotted, I cannot load it. Let me explain something. Walmart follows 'classical management' of negative reinforcement and cutting expenses down to the bone including salaries, benefits, and other stuff. They are willing to pay executives millions while letting most employees work for slave wages with little to no benefits to cut down on costs as much as possible. Costco follows 'participatory management' in which management gets involved with the employees and empowers them to make their own decisions. Executives are not paid millions and their salaries are based on how well the company does to encourage growth. Employees are paid more so they will be more productive and with good benefits to take care of health problems and family problems so they don't interfere with work. If the company is losing money, they do job cost analysis to see what products and services cost more to support than the revenue they bring in, and then quality is improved on those services and products and if it cannot then those products and services get cut instead of the people and new products and services replace them. Steve Jobs did this with Apple, cut out products and services that didn't bring in enough revenue to justify keeping them, cut his own salary as the iCEO, improved the quality of products and services or come up with new ones to replace them. Walmart and other 'classic management' companies just don't understand how to do that so they take it out on the employees instead.

xb95 13y ago
Wal-Mart has listed key executive compensation of around $63m USD this past year [http://insiders.morningstar.com/trading/executive-compensation.action?t=WMT http://insiders.morningstar.com/trading/executive-compensati...] and reported yearly revenue of $473,000m USD [http://finance.yahoo.com/q/ks?s=WMT http://finance.yahoo.com/q/ks?s=WMT]. I'd argue that spending 0.01% of revenue on key executive compensation (which is the 'paying executives millions' you talk about) is irrelevant to Wal-Mart overall and how much they can or can't pay their workers. Even if you stripped the executive compensation and gave it to the workers (2.2m of them), you'd only be handing out $30 to each person. That's a few hours of work total, and amortized over a year? Not a factor at all in the grand scheme of things. ... The article is well worth a read. It's interesting and insightful and discusses more interesting things like business models, target demographics, value-mindedness, etc. I recommend it if you can get it to load. (It was fine for me.)
- curveship 13y ago
  That's $63m to just the top 6 executives. Total executive compensation would be far far greater. And for comparison, Costco paid its top 6 only $19m, which I think is the GP's point: http://insiders.morningstar.com/trading/executive-compensation.action?t=COST http://insiders.morningstar.com/trading/executive-compensati... .
  - furtivefelon 13y ago
    I don't know, seems pretty reasonable, Costco revenue is 105B. Walmart has >4x revenue, and 19m*4=76m, more than Walmart. Based on your comparison, Walmart is paying their executives fairly.
    - yardie 13y ago
      About as reasonable as getting 9 women to make a baby in 1 month. This would only be true if those 6 executives were doing 4x the work of the executies at Costco. Conservatively, they might be doing 1.5x or even 2x the work. But I doubt they are putting in 160 hours a week.
      - twoodfin 13y ago
        Brad Pitt doesn't make a movie 10x faster either, and he certainly doesn't do 10x the work. But he's paid 10x what many other actors are paid. Is it reasonable? There's a lot of money to be made by the studio that can prove it's not by making consistent blockbusters without stars. But nobody has figured out how to do that yet, so Pitt keeps getting paid. Outcomes are what matter, not hard work. EDIT: I realized there is a studio that makes consistent blockbusters without stars: Pixar. In a way, they're like the movie studio equivalent of Costco, since they figured out a way to make hit movies with far, far fewer (but much higher paid) laborers. But like Costco vs. Walmart, Pixar can't make all the movies that the other studios can make, so they'll likely always have to settle for a small chunk of total box office receipts.
        13y ago
hearty779 13y ago
This is so wrong that I just have to laugh. Yes, Costco DOES pay its executives millions. http://insiders.morningstar.com/trading/executive-compensation.action?t=COST http://insiders.morningstar.com/trading/executive-compensati... Can you name one Fortune 500 company that doesn't pay executives millions? Facebook, Google, and Apple pay its executives millions, and yet its contracted janitors get low hourly rates. Where's your rage?
- Amadou 13y ago
  I think you are missing the forest for the trees. The point is that costco's approach reduces the "spread" between management and employees, not that it eliminates it. From moringstar, Costco CEO's compensation was ~$18.5M, Walmart's was ~$62.5M. In 2006 (the easiest numbers I could find) the average Walmart employee earned ~$10/hr vs $17/hr at Costco. Walmart employees also had less health coverage (<50% vs ~80%) and were responsible for %33 of the cost vs %8. source: The High Cost of Low Wages - Harvard Business Review. http://hbr.org/2006/12/the-high-cost-of-low-wages/ar/1 http://hbr.org/2006/12/the-high-cost-of-low-wages/ar/1
  - hearty779 13y ago
    The article you cite is not a peer-reviewed journal paper. Apple's head lawyer alone made $68 million last year, not to mention other executives. No outrage?
    - Amadou 13y ago
      I don't think peer review is necessary to confirm the relative levels of compensation as stated by the article. If you think those numbers are not accurate you are welcome to cite other sources for the wage levels. As for bringing up Apple, are you trying to make me defend Apple? I'm no fan for a whole host of reasons, red herrings though they may be.
    - nknighthb 13y ago
      How many Apple employees are on foodstamps and/or medicaid?
calbear81 13y ago
I think we're forgetting that the Walmart customer is not the Costco/Trader Joe's customer. I would argue that Walmart pays minimum wages because they can and their customer base doesn't really value the benefits of paying higher wages and 'participatory management' - primarily lower turnover and thus more engaged/invested employees who deliver better service and higher productivity. Walmart most likely sees their employees as replaceable and the average Walmart customer is driven by low prices and not great customer service. To that end, the lower the Walmart cost structure, the more margin they have to work with to stay competitive (without having to lower CEO salaries, etc. of course). Costco and Trader Joe's are known for great customer service and easy return policies. Based on my observations, people who shop at Costco like to save money, but it's from a best value angle and not from an absolute cheapest I can get angle. The Costco consumer has to be willing to shell out an annual membership fee up front and you're buying in bulk which means you have to be able to pay for goods you use in the future. Trader Joe's wants to be the neighborhood store and that means they need happy employees, not employees who are thinking about how they're going to pay for the knee surgery they badly need. I'm probably making broad generalizations of the different customer bases here but it's what I've personally observed.
- bluedino 13y ago
  >> I think we're forgetting that the Walmart customer is not the Costco/Trader Joe's customer. I would say the same for the employees. Your average Walmart worker would probably be washed-out in a shift or two at Trader Joe's. Everyone at TJ's is busting their ass, Walmart employees seem to just be standing around doing nothing but talking to one another.
  - calbear81 13y ago
    I wonder if it's because the jobs at TJ are so coveted that employees know if they don't bust their ass, someone will happily take their position? I feel the same way about In-N-Out which pays above market, people there always seem to try a bit harder to be pleasant and helpful.
    - 13y ago
vasilipupkin 13y ago
I am not sure why anyone would want to be an executive, unless one gets paid millions. Executives work crazy hours, travel all the time and don't see their families. Who would want to do that, if not for the millions ? Sure, some would, but not many
- msandford 13y ago
  If you're working as an executive for the millions you're doing it wrong. The millions you get paid as an executive are what enable you to work crazy hours; you can afford a maid and a cook and a nanny so that your ability to work isn't impeded. There are some perks like a nice car and a big house or whatever. But fundamentally that pay is because you bring a lot of value to the company and it needs your hours desperately. It will pay to make most/all distractions disappear.

xb95 13y ago

Wal-Mart has listed key executive compensation of around $63m USD this past year [http://insiders.morningstar.com/trading/executive-compensation.action?t=WMT http://insiders.morningstar.com/trading/executive-compensati...] and reported yearly revenue of $473,000m USD [http://finance.yahoo.com/q/ks?s=WMT http://finance.yahoo.com/q/ks?s=WMT]. I'd argue that spending 0.01% of revenue on key executive compensation (which is the 'paying executives millions' you talk about) is irrelevant to Wal-Mart overall and how much they can or can't pay their workers. Even if you stripped the executive compensation and gave it to the workers (2.2m of them), you'd only be handing out $30 to each person. That's a few hours of work total, and amortized over a year? Not a factor at all in the grand scheme of things. ... The article is well worth a read. It's interesting and insightful and discusses more interesting things like business models, target demographics, value-mindedness, etc. I recommend it if you can get it to load. (It was fine for me.)

curveship 13y ago
That's $63m to just the top 6 executives. Total executive compensation would be far far greater. And for comparison, Costco paid its top 6 only $19m, which I think is the GP's point: http://insiders.morningstar.com/trading/executive-compensation.action?t=COST http://insiders.morningstar.com/trading/executive-compensati... .
- furtivefelon 13y ago
  I don't know, seems pretty reasonable, Costco revenue is 105B. Walmart has >4x revenue, and 19m*4=76m, more than Walmart. Based on your comparison, Walmart is paying their executives fairly.
  - yardie 13y ago
    About as reasonable as getting 9 women to make a baby in 1 month. This would only be true if those 6 executives were doing 4x the work of the executies at Costco. Conservatively, they might be doing 1.5x or even 2x the work. But I doubt they are putting in 160 hours a week.
    - twoodfin 13y ago
      Brad Pitt doesn't make a movie 10x faster either, and he certainly doesn't do 10x the work. But he's paid 10x what many other actors are paid. Is it reasonable? There's a lot of money to be made by the studio that can prove it's not by making consistent blockbusters without stars. But nobody has figured out how to do that yet, so Pitt keeps getting paid. Outcomes are what matter, not hard work. EDIT: I realized there is a studio that makes consistent blockbusters without stars: Pixar. In a way, they're like the movie studio equivalent of Costco, since they figured out a way to make hit movies with far, far fewer (but much higher paid) laborers. But like Costco vs. Walmart, Pixar can't make all the movies that the other studios can make, so they'll likely always have to settle for a small chunk of total box office receipts.
      - 13y ago

hearty779 13y ago

This is so wrong that I just have to laugh. Yes, Costco DOES pay its executives millions. http://insiders.morningstar.com/trading/executive-compensation.action?t=COST http://insiders.morningstar.com/trading/executive-compensati... Can you name one Fortune 500 company that doesn't pay executives millions? Facebook, Google, and Apple pay its executives millions, and yet its contracted janitors get low hourly rates. Where's your rage?

Amadou 13y ago
I think you are missing the forest for the trees. The point is that costco's approach reduces the "spread" between management and employees, not that it eliminates it. From moringstar, Costco CEO's compensation was ~$18.5M, Walmart's was ~$62.5M. In 2006 (the easiest numbers I could find) the average Walmart employee earned ~$10/hr vs $17/hr at Costco. Walmart employees also had less health coverage (<50% vs ~80%) and were responsible for %33 of the cost vs %8. source: The High Cost of Low Wages - Harvard Business Review. http://hbr.org/2006/12/the-high-cost-of-low-wages/ar/1 http://hbr.org/2006/12/the-high-cost-of-low-wages/ar/1
- hearty779 13y ago
  The article you cite is not a peer-reviewed journal paper. Apple's head lawyer alone made $68 million last year, not to mention other executives. No outrage?
  - Amadou 13y ago
    I don't think peer review is necessary to confirm the relative levels of compensation as stated by the article. If you think those numbers are not accurate you are welcome to cite other sources for the wage levels. As for bringing up Apple, are you trying to make me defend Apple? I'm no fan for a whole host of reasons, red herrings though they may be.
  - nknighthb 13y ago
    How many Apple employees are on foodstamps and/or medicaid?

calbear81 13y ago

I think we're forgetting that the Walmart customer is not the Costco/Trader Joe's customer. I would argue that Walmart pays minimum wages because they can and their customer base doesn't really value the benefits of paying higher wages and 'participatory management' - primarily lower turnover and thus more engaged/invested employees who deliver better service and higher productivity. Walmart most likely sees their employees as replaceable and the average Walmart customer is driven by low prices and not great customer service. To that end, the lower the Walmart cost structure, the more margin they have to work with to stay competitive (without having to lower CEO salaries, etc. of course). Costco and Trader Joe's are known for great customer service and easy return policies. Based on my observations, people who shop at Costco like to save money, but it's from a best value angle and not from an absolute cheapest I can get angle. The Costco consumer has to be willing to shell out an annual membership fee up front and you're buying in bulk which means you have to be able to pay for goods you use in the future. Trader Joe's wants to be the neighborhood store and that means they need happy employees, not employees who are thinking about how they're going to pay for the knee surgery they badly need. I'm probably making broad generalizations of the different customer bases here but it's what I've personally observed.

bluedino 13y ago
>> I think we're forgetting that the Walmart customer is not the Costco/Trader Joe's customer. I would say the same for the employees. Your average Walmart worker would probably be washed-out in a shift or two at Trader Joe's. Everyone at TJ's is busting their ass, Walmart employees seem to just be standing around doing nothing but talking to one another.
- calbear81 13y ago
  I wonder if it's because the jobs at TJ are so coveted that employees know if they don't bust their ass, someone will happily take their position? I feel the same way about In-N-Out which pays above market, people there always seem to try a bit harder to be pleasant and helpful.
  - 13y ago

vasilipupkin 13y ago

I am not sure why anyone would want to be an executive, unless one gets paid millions. Executives work crazy hours, travel all the time and don't see their families. Who would want to do that, if not for the millions ? Sure, some would, but not many

msandford 13y ago
If you're working as an executive for the millions you're doing it wrong. The millions you get paid as an executive are what enable you to work crazy hours; you can afford a maid and a cook and a nanny so that your ability to work isn't impeded. There are some perks like a nice car and a big house or whatever. But fundamentally that pay is because you bring a lot of value to the company and it needs your hours desperately. It will pay to make most/all distractions disappear.