No soft sell at Lee's Garage

Wal-Mart CEO uses Web site to advise managers, sometimes in harsh terms

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February 23, 2006|By NEW YORK TIMES NEWS SERVICE

In a confidential, internal Web site for Wal-Mart's managers, the company's chief executive, H. Lee Scott Jr., has a rare, unscripted moment when one manager asks him why "the largest company on the planet cannot offer some type of medical retirement benefits."

Scott first argues that the cost of such benefits would leave Wal-Mart Stores Inc. at a competitive disadvantage but then, clearly annoyed, he suggests that the store manager is disloyal and should consider quitting.

Scott uses the Web site to communicate his tough standards to thousands of far-flung managers.

Judging by the managers' questions, Scott has an internal public-relations challenge that in some ways mirrors the challenge he faces from outside critics.

And while Scott's postings are usually written in a careful, even guarded manner, they can often be revealing - for example, showing a defensiveness and impatience with critics - that Scott normally keeps under wraps.

Copies of Scott's postings covering two years were made available to The New York Times by Wal-Mart Watch, a group backed by unions and foundations that is pressing Wal-Mart to improve its wages and benefits. Wal-Mart Watch said it received the postings from a disgruntled manager. While the existence of the Web site, and Scott's participation, has been known, transcripts have never been made public before.

The Web site has a folksy name - Lee's Garage, because Scott pumped gas at his father's Kansas service station while growing up.

But its tone is at times biting. In his response to the store manager who asked about retiree health benefits, Scott wrote: "Quite honestly, this environment isn't for everyone. There are people who would say, `I'm sorry, but you should take the risk and take billions of dollars out of earnings and put this in retiree health benefits and let's see what happens to the company.' If you feel that way, then you as a manager should look for a company where you can do those kinds of things."

Mona Williams, a Wal-Mart spokeswoman, said Scott responded so sharply because of the manager's sarcastic tone. The question, she said, indicated that the manager had failed to understand how competitive retailing is and thus would not be able to convey that to his subordinates.

"At Wal-Mart, we communicated very candidly with one another," she said. She added that Scott's tone did not deter employees from asking questions, noting that 2,147 questions have been asked since April.

The Web site shows many sides of one of the nation's most powerful executives. He denounces managers who complain about the company or their subordinates. He frets about the success of discount rival Target. He exhorts employees to act with integrity. He mocks General Motors for problems caused by its generous benefits. He rejects a manager's suggestion that Wal-Mart has created "a culture of fear," and he hails Wal-Mart's performance in Hurricane Katrina.

Scott has made some of these points before in public speeches, but in these confidential e-mails to managers, he delivers far blunter insights in much greater detail.

Lee's Garage was set up in 2004 to improve communications with managers after a wave of particularly bad publicity, including a federal raid that rounded up 250 illegal immigrants who cleaned Wal-Mart stores and a class action lawsuit charging sex discrimination, filed on behalf of 1.6 million current and former women employees.

Williams, the Wal-Mart spokeswoman, said a public relations assistant screened the questions and Scott dictated responses to an aide.

When the site was created in January 2004 at Scott's suggestion, it was accessible only to salaried managers. It became available in October to all 1.3 million employees in the United States.

The questions posted on the Web site range from the self-interested (when will managers receive a raise?) to the competitive (will the merger of Sears and Kmart hurt Wal-Mart?) to the academic (is Wal-Mart technically a monopoly that could be broken up?).

At several points, Scott addressed criticisms that Wal-Mart health plan was too stingy toward its employees. He said that Wal-Mart's health plan "stacks up very, very competitively" with other retailers.

In a knock at companies that provide more generous benefits, Scott wrote: "One of the things said about General Motors now is that General Motors is no longer an automotive company. General Motors is a benefit company that sells cars to fund those benefits."

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