Those of us familiar with Wal-Mart’s ways (meaning most of America) find the company’s new social responsibilty push perplexing. What do you make of a company that tries to be more environmentally responsible, and now is promoting diversity, yet has a heinous record as far as its rank-and-file workers are concerned?
Answer: In both cases, Wal-Mart is doing what it does best, namely beating up on vendors. It’s easier for Wal-Mart to changes its partners than change itself (funny how that parallels the way a lot of people in relationships operate).
Not that any effort for the good should be disregarded, even if it is out of a need to burnish the company’s poor public image. But let us also not forget, despite many of the innovative elements of this program, that it is being applied only externally. Wal-Mart is currently a defendant in the largest class-action discrimination lawsuit in history, brought on behalf of 1.6 million women. And it also has a terrible record of employment practices in general, including successful prosecution for requiring employees to work “off the clock,” meaning without pay. This from a company already notorious for rock-bottom wages.
The real significance may be best explained, strangely enough, in a book review by Omer Bartov, “The Anti-Hero as Hero,” in The New Republic. Bartov observes that the only people who can do real good, the kind that makes a practical difference, may inevitably be tainted by evil, “members of the very organization that set the ball rolling toward the abyss.” Now he was talking about the Holocaust, but the lesson seems to apply here as well.
The Financial Times ran two stories on this topic yesterday, one on the new push to require vendors to have more minorities and women on the team directly involved with Wal-Mart:
John Fleming, Wal-Mart’s chief merchandising officer, said in an internal memo last week that the company “will be reaching out to key suppliers to solicit their support and participation in bringing more diversity to the team of supplier representatives who have direct involvement in providing merchandise to Wal-Mart”.
Mr Fleming told the FT the company wanted to “reach out and engage the best and brightest talent” that its suppliers had, and expected as a result to see “a greater level of diversity with the supplier partners that we are working with”.
The initiative follows a drive by Wal-Mart’s legal department – which generates about $200m of business for outside firms annually – to pressure its outside counsel to give more prominence to women and ethnic minorities in key decision-making positions on its account.
The programme led the retailer to take away business from two law firms that failed to meet its objectives, and to stop giving new business to several others.
It is going to be interesting to see, in the long term, how much this program benefits the target groups. If the women and minorities are merely seen as Wal-Mart tokens, it may not do them much long-term good at their current employer, particularly if other companies do not emulate Wal-Mart’s move. But they’d gain account experience that would be a plus if they were to change firms. And Wal-Mart is a famously difficult account. An attorney I know discourages her clients from taking on Wal-Mart as a customer unless they are certain they can handle the comapny, because she has seen Wal-Mart drive other suppliers out of business with its demands. If you can survive Wal-Mart, you can probably survive anything.
But even if other companies emulate Wal-Mart’s strategy, how long will it take before the women and minorities are no longer seen as beneficiaries of affirmative action? That’s unknowable at this juncture, but I have a sneaking suspicion that it will take longer than one might think. It’s a chicken and egg problem: until the composition at the top echelon of most companies becomes more representitive of society, instead of suburban country clubs, vendors will not surprisingly field a client service team with demographics broadly similar to the account.
The program Wal-Mart implemented with the law firms is nevertheless intriguing, and could serve as a starting point for other companies. From the FT story, “Wal-Mart Lays Down the Law:”
When it wrote to its top 100 law firms in June 2005, the letter wasn’t about billing….The letter asked for statistics on hiring and retention of women and ethnic minorities….”Wal-Mart will end or limit our relationships with law firms who fail to demonstrate a meaningful interest in the importance of diversity,” it said…
Wal-Mart now has more than 150 corporate lawyers handling “a volume of work and a velocity that is probably unlike anything our colleagues in the US have to deal with”. It may also be the most diverse in-house law department in corporate America: more than 40 per cent of Wal-Mart’s lawyers are female, and nearly a third are ethnic minorities.
“That we were able to tap into a talent pool and grow this department at a rapid rate and diversity was the result of upgrading the talent. That’s not something that everybody in our profession necessarily understands,” he says.
But Wal-Mart’s efforts also went beyond the company itself, and the June 2005 letter went beyond asking firms for overall statistics on diversity.
After discovering that talented minority and women lawyers were often not getting access to its business, even while a firm’s overall diversity profile looked good, Wal-Mart took a look at the way the firms assigned business. It noticed that 82 of the key “relationship partners” who assigned its work in the firms were white males.
As a result, Wal-Mart asked each company to nominate at least three candidates for the job of “relationship partner”, and to include at least one woman and one black, Hispanic or Asian lawyer on the list…
As a result of the review, Wal-Mart made 40 changes and moved $60m of business from white male to minority and female relationship partners, putting them into a position of influence in the firms in an unprecedented move that reflected its influence as one of the biggest legal customers in the US private sector. It also stopped doing business with two firms….
Following the review, which moved $60m of business from white male to female and minority partners in the firms, Thomas Mars, Wal-Mart’s general counsel, says all 100 partners involved became more responsive on its diversity issues.
“We saw an uptick in the commitment of the firms to diversity,” he says. That included the white male relationship partners who he says “realised the company might not only take the business away from their law firm, but that it might take it away from them and give it to someone else in the firm.”
As well as firing two firms for failing to respond to its requirements on diversity, Mr Mars says Wal-Mart has also stopped giving work to a number of other firms. “They either haven’t been able to, or I prefer to think they’ve chosen not to do, the things we asked them to do,” he says.
“The usual excuse is that we can’t find minorities, or we just can’t find women lawyers who are willing to move to . . . and you can fill in the blank. Believe it or not, we’ve had people say ‘we can’t find people to move to Chicago’.”
That argument, he says, is unconvincing at Wal-Mart: “We haven’t had any difficulty getting talented people to come to Bentonville, Arkansas.”