Extreme Decentralization at Walmart

11 February 2009 at 4:06 pm Leave a comment

| Peter Klein |

A fascinating NY Post story on Walmart by a reporter who went undercover and got hired as an entry-level worker. The story reveals a surprising amount of decentralization for a firm sometimes regarded as some kind of Taylorite dinosaur. (Thanks to Rafe Champion for the pointer.) Excerpt:

Having pledged ourselves, we encountered the aspect of Wal-Mart employment that impressed me most: The Telxon, pronounced “Telzon,” a hand-held bar-code scanner with a wireless connection to the store’s computer. When pointed at any product, the Telxon would reveal astonishing amounts of information: the quantity that should be on the shelf, the availability from the nearest warehouse, the retail price, and (most amazing of all) the markup.

All of us were given access to this information, because — in theory, at least — anyone in the store could order a couple extra pallets of anything, and could discount it heavily as a Volume Producing Item (known as a VPI), competing with other departments to rack up the most profitable sales each month. Floor clerks even had portable equipment to print their own price stickers. This was how Wal-Mart detected demand and responded to it: by distributing decision-making power to grass-roots level. It was as simple yet as radical as that.

We received an inspirational talk on this subject, from an employee who reacted after the store test-marketed tents that could protect cars for people who didn’t have enough garage space. They sold out quickly, and several customers came in asking for more. Clearly this was a singular, exceptional case of word-of-mouth, so he ordered literally a truckload of tent-garages, “Which I shouldn’t have done really without asking someone,” he said with a shrug, “because I hadn’t been working at the store for long.” But the item was a huge success. His VPI was the biggest in store history — and that kind of thing doesn’t go unnoticed in Arkansas.

Entry filed under: - Klein -, Management Theory, Strategic Management, Theory of the Firm.

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