FDBuyer: Sam’s Rules
Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Dairy Buyer magazine.
Perhaps the most famous part of Sam Walton’s autobiography, "Made in America," is in Chapter 17, "Running a Successful Company: Ten Rules that Worked for Me." Walmart’s founder, who grew up poor during the Depression in Missouri, learned the value of a dollar and of perseverance.
Mr. Walton, who died in 1992, never claimed that his ten rules would work for everyone. As he wrote in his book, "These rules are not in any way intended to be the Ten Commandments of Business. They are some rules that worked for me."
The wisdom in this abridged version of his rules is worth re-reading again and again.
Rule 1: Commit to your business. Believe in it more than anybody else. If you love your work, you’ll be out there every day trying to do it the best you possibly can, and pretty soon everybody around will catch the passion from you — like a fever.
Rule 2: Share your profits with all your associates, and treat them as partners. In turn, they will treat you as a partner, and together you will all perform beyond your wildest expectations.
Rule 3: Motivate your partners (associates). Set high goals, encourage competition, and then keep score. Make bets with outrageous payoffs.
Rule 4: Communicate everything you possibly can to your partners. The more they know, the more they’ll understand and the more they’ll care. Empowering your associates more than offsets the risk of informing your competitors.
Rule 5: Appreciate everything your associates do for the business. A paycheck and a stock option will buy one kind of loyalty. But nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise.
Rule 6: Celebrate your success. Find some humor in your failures. Loosen up, and everybody around you will loosen up. Have fun. Show enthusiasm — always.
Rule 7: Listen to everyone in your company and figure out ways to get them talking. The folks who actually talk to the customer are the only ones who really know what’s going on out there. Force good ideas to bubble up.
Rule 8: Exceed your customer’s expectations. If you do, they’ll come back over and over. Make good on all your mistakes, and don’t make excuses — apologize. Stand behind everything you do.
Rule 9: Control your expenses better than your competition. You can make a lot of different mistakes and still recover if you run an efficient operation.
Rule 10: Swim upstream. Go the other way. Ignore the conventional wisdom. If everybody else is doing it one way, there’s a good chance you can find your niche by going in exactly the opposite direction.
Discussion Questions
How relevant are Sam Walton’s ten rules for success for retailers today? Which are more or less so?
Sam’s Rules have a central theme — listen well and communicate with all levels of your enterprise. We can all learn from his sage advice. I’m guessing that the senior management team in Bentonville follows many of these rules every business day. Though Walmart does get dinged for being less than generous to their store associates — so not all of the rules are followed to the letter.
They are even more relevant today with all the new online competition facing retailers. These rules continue to guide Walmart even after 50 years of being the most successful retailer. I think Ron Johnson from JCP has a copy and lives by rule number 10.
Good, basic retail philosophy. Worked then. Works even better now. Online or offline. Smart man.
There’s a reason that Walmart is the largest retailer in the world. In and of themselves, the rules are not that special. Most retailers have similar rules written down somewhere. The thing that made Walmart so special is that they lived these rules, at all times, at all levels.
And this relates to current reality how? Maybe it’s just here in Phoenix, but I feel zero energy whether in Walmart or Sam’s Club.
These are great principles and we can only wish they applied in all retail…and in businesses, churches, schools. And then perhaps some glorious day, in government!
I had the opportunity to know Sam Walton very well, personally and professionally, and I still have all the memos and letters he sent me. He always referred to these points, above. There isn’t much anyone could say to refute these philosophies, even today, because they all make way too much sense.
Sam’s Rules are as applicable today as they were then. The only conflict within the rules I see may not be one he intended. Rule 2 about sharing profits with your associates and Rule 9 seem to be in conflict with each other. Unfortunately we can’t ask him which one took precedence.
My first reaction to this thread was “is this really even a question?” Of course, every commentator has weighed in with hearty endorsement of Sam’s Rules as well we should. And perhaps we owe Warren a vote of thanks for reminding us of them. As Ian points out, it seems even the Walmart folks have forgotten sometimes.
These basic rules can not only apply to the success of retailers today, but to other business models as well. There can be interpretations of Sam Walton’s ten rules as they would apply to different retailers, but the keywords are universal for all business models: motivate, communicate, share, commit and listen.
Sam Walton’s rules are good for any business, not just retailing. In our over segmented world of today, we tend to lose sight that people make the difference. The greatest failures today are the associates don’t talk with the customers and management is trapped in headquarters. We need to hire and train associates to be our customers’ eyes and ears. We need a fast, accurate communication channel to stay ahead of competition. Social media is years away from providing this. At a minimum, everyone in headquarters should spend one day a week in the store. They should be working and listening. This was Sam Walton’s way, and also the way of all the great retailers.
I would turn the question around and ask which of any of Sam’s rules aren’t relevant?
Among others the key focus of these rules was on the business (1,3,4,7), on people (internal/external)(2,3,4,5,6,7,8), on competition (1,9,10) and on entrepreneurship within (1,7,10).
As Sam was quoted, he wisely states that not all the rules apply to everyone and that they just happened to work for him. That said, and for example, how often do we read stories of companies who don’t understand their business (Sears/Kmart) their customer (Neflix)?
Sam’s rules can and should apply to most businesses and when they are employed they can help a company meet its goals.
I agree with Ian. Rules 1 and 9 seem to be the order of the day for the company.
Since the death of Mr. Walton, think about the flood of money, talent, and academic insight the retail industry has received. None of these lofty investments have even come close to emulating the impact that a simple man with a red pickup truck and a dog named Roy had on retailing.
Accordingly, I regard Mr. Walton’s principles as axioms. Certainly they may need some bending and shaping to conform to each company’s situation, but they are couched in inherent human behavior, and therefore will stand the test of time!
Sam’s Rules are required reading by all management level employees at Amazon.com. Jeff Bezos has built AMZN based in part on Sam Walton’s philosophy of success. That’s just about as “relevant” as you can get.
These basic rules Sam Walton lived by are relevant to businesses today. As he said, they may not work for everyone; but they did for him. Look what he built. You can’t argue with that.
Interesting to note that 7 of the 10 principles deal with relating to your associates and all of them are as true today as they were when the Walmart was started over 50 years ago.
I agree with Sam in theory, but compared to the 1970s, a lot has happened. The playing field for goods has been destroyed, and trust between vendor and independents is lousy at best. Rule #10 is the way to go if you want to survive, as I try to do what they can’t do very well. No one in this business can compete on the top 200 food items anymore, so focus on the fresh, and do it as well as you can. A decent living is out there for anyone who commits to this philosophy. Also, don’t forget to take care of your employees as best you can.
Customers and associates. It has to start in that position.
And, when retailers are feeling the business is slightly off kilter, and they are uncertain of the direction to take, they should start with the customers and associates.
Sam’s Rules have some universal truism. Perhaps his strongest point here is Rule # 2 — treating associates as partners, as they will soon treat you and others as partners.
These rules work for any company, retail or otherwise. The most important are communicate, listen and share. You do that and everything else is taken care of.
Mr. Walton nailed it and I see no contradictions. Sharing with associates is based on their contributions. A Senior VP has much more responsibility and risk than a part time stock person and therefor should share a weighted return. As far as the lower end of the employee ladder, Walmart does a superb job giving opportunity to people who likely would not get a job from the rest of us. From there, the “sharing” is up to the individual. You can start as a part timer and move up to store manager. If you choose to remain as you are, your sharing is a steady paycheck and the opportunity to work. Bonus for showing up simply does not make any sense.
It seems to me that you start with Rule 1, and it all flows from there. It all starts with the passion at the top of any organization, and how that passion flows down and infects/impacts everybody else, associates and customers alike. Passion is the first essential element of ANY business strategy!
So, if there were a passion meter, where do we think the national mass-market chains, from Walmart to Macy’s to Best Buy, and beyond, would stack up? What would their customers say?
Just asking….
These rules seem timeless. The only one that may need modification is expenses. We are in a state of flux with respect to the changing retail model and you have to be very careful not to over focus on expenses as you can save your way out of business.
I’m with Ian and Paul on this. In fact I’ll go one better — actually “9” better — as that seems to have overwhelmed all the others; not that the others aren’t important, but they’re not what WM represents today…to me at least.
I am intrigued by the frequent use of the word ‘partners.’ Who are Walmart’s partners and is their a lot of sharing going on as Sam recommends? Collaboration is a big word and hard to swallow for the biggest, but Sam is right by stating the advantages of making your partners (employees) feel they are part of the company’s success.
Many of these rules are good regardless of your business and even if you are in business. However, many of these are being ignored by Walmart today, especially rule number 2, which states to share your profits with all of your associates. Walmart associates are not the highest paid, or even have the highest opportunity to get more pay, in their industry. There are too many other retailers who pay more, incent their employees better, and offer a better work environment. Compare any Walmart to a Target, Whole Foods, Trader Joe’s, or the premier retailers in the USA, and there is a marked difference between them. Customer service is better at many competitors, product offerings are better, and growth is better…hmmmmm.
This will never, ever be out of date.