Wal-Mart Sticks to Vendor Relations Code

Discussion
Dec 12, 2006

By George Anderson


The recent departure of Julie Roehm from Wal-Mart has thrown on a spotlight on the company’s strict policies concerning relations with vendors.


Ms. Roehm, it has been reported, was seen by many within the company to have gotten too cozy with DraftFCB, an agency that won part of the Wal-Mart advertising business just last month.


Working with Wal-Mart has always been strictly business for vendors since Sam Walton founded the company.


Ed Clifford, president-CEO of the Bentonville/Bella Vista Chamber of Commerce, once worked for Wal-Mart in merchandising. He told Ad Age, “There was no interaction between suppliers and Wal-Mart associates other than a meeting … where you talked about product.”


Wal-Mart is famous for its tiny white rooms where buyers and vendors meet. Each room has a plaque that lists its ethics code.


Wal-Mart Global Ethical Principles


  1. Follow the law at all times;

  2. Be honest and fair;

  3. Never manipulate, misrepresent, abuse or conceal information;

  4. Avoid conflicts of interest between work and personal affairs;

  5. Never discriminate against anyone;

  6. Never act unethically – even if someone else instructs you to do so;

  7. Never ask someone to act unethically;

  8. Seek assistance if you have questions about this Statement of Ethics or if you face an ethical dilemma;

  9. Cooperate with any investigation of a possible ethics violation; and

  10. Report ethics violations or suspected violations.

Discussion Question: Does Wal-Mart have it right when it comes to its strict rules on conducting business with vendors? Do personal relationships with
vendors compromise a buyer/category manager’s ability to make good business decisions? Are there times when strict policies block business opportunities?

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28 Comments on "Wal-Mart Sticks to Vendor Relations Code"


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Charles P. Walsh
Guest
Charles P. Walsh
15 years 5 months ago
A buyer operating under this system can meet with a supplier and make decisions and negotiate on product selection, promotions and pricing based purely upon the merits of each, rather than be influenced consciously or unconsciously by some transactional relationship with a supplier. For those who have not operated under such an arrangement it may seem silly or over the top, but Wal-Mart’s operating principles have played a part in the changing attitudes of the retail and supplier communities towards such exchanges. It was common practice just 15 years ago for suppliers to entertain retail buyers (except Wal-Mart) with dinners, sporting and theatre events and in some cases with expensive gifts at Christmas time. These practices have largely given way, not just with the times, but in part because of Wal-Mart’s leadership in this area. Wal-Mart takes a “black and white” approach because it is much simpler to comply with for the buyers. There is no questions or gray areas when it comes to the policy. No gratuity means No gratuity, no matter it be… Read more »
Greg Wilson
Guest
Greg Wilson
15 years 5 months ago

A personal relationship is akin to giving away your secrets. You can have a satisfactory business relationship without it getting personal. Part of the negotiating skills is knowing your target, being personal you give away some high ground.

Herb Sorensen, Ph.D.
Guest
15 years 5 months ago

Personally, I am very pleased that RW commenters so generally support WM’s ethical stand. I agree. At the same time, the conflict with “relationship marketing” has been noted. However, a relationship oiled with gratuities in ANY size or form is antithetical to one based strictly on its merits: the products and service delivered. But that doesn’t mean that a WM buyer can’t favor a vendor who is pleasant and efficient to work with.

Daryle Hier
Guest
Daryle Hier
15 years 5 months ago

Overall, Wal-Mart is doing what every good company would do. Although I tend to personally blame agencies (a rant for another day) for most of our ills in advertising and marketing, but how can you blame them for pulling out all the stops. Chemistry is very important and can mean a lot when business partners are trying to deal with each other to get the best for the situation. Knowing your partner is critical when trying to get insight and if a few nights out is what it takes, you do it — it’s much more valuable than any face to face in a sterile environment. It’s the norm, but it’s still amazing how everything is so much bigger when WM is involved.

Mark Burr
Guest
15 years 5 months ago

Who can argue with the rules? Simple, straight forward, reasonable. Any and of all of them could be found on just about every company’s ethics statement. There’s nothing unusual about them.

What’s really at play here is a clash of style. Nothing more, nothing less. There isn’t really anything “unethical” about anything on the surface here (unless there’s more to the story).

This sounds much more like a clash of style in management and culture than a question of ethics. It’s likely that the person in question may have been going to be successful at the expense of others that may not have been.

I smell more of a personal vendetta than anything. It may simply be more like one vendor got a contract contrary to someone else’s preferences. For this, the punishment can be devastating in a culture such as Wal-Mart.

The departure of the executive in question may be the best thing to ever happen to her for her career.

Ed Dennis
Guest
Ed Dennis
15 years 5 months ago
In this case it would appear that Wal-Mart violated its own principles with the hire. Your best indications of future actions is always past actions. With this, I would advise all to look at the character of anyone who is being hired. Ask “Tell me about yourself”? If this leads to the headhunter-rehearsed response simply say “I want to know what is really important to you – beyond the job.” If a person cannot think of a few things they are devoted to, then you might want find someone who will talk about devotion to family, religion, or something bigger than themselves. Ethical problems are not the result of temptation. Ethical problems are the result of greed. In general, someone who is focused only on themselves is an ethical mess. You can fix most ethical problems at the front door and by knowing which areas (purchasing, advertising, marketing) are going to receive the most pressure and working with the individuals to help them keep their heads on straight. There is no cruise control here!
Steven Collinsworth
Guest
15 years 5 months ago
Wal-Mart is correct in its enforcement of its code and ensuring vendors/manufacturers do not contaminate the process. However, Wal-Mart, in order to ensure its future growth and stability, needs to educate its own buyers and merchandisers on other important issues of the day, such as Consumer Behavior, Buying Patterns, Consumer Loyalty, etc. in an effort to become less centric in their thought. Wal-Mart has been insulated from the “real world” for a number of years and is now paying the price for being so internally focused. It’s not a crime, but it is the path so many companies have gone down; it is almost trite. I applaud them for finally understanding that price is not the only draw for consumers. Their issue is going to be, “how do we overcome this price label” issue. I am still not saying they should corrupt their own process. They need to become the leader again, but this time in understanding the consumer versus just the lowest price wins. This will be a rocky road, because many CPG companies… Read more »
Laura Davis-Taylor
Guest
Laura Davis-Taylor
15 years 5 months ago
Having worked for a company that’s done business with Wal-Mart for many years, I can verify how strict this policy is. However, once in the door, they do have vendors that they favor due to personal chemistry as well as good work. Maybe it’s not front page news, but it happens. They’re still human beings. Also, having been an agency person for many years, I know firsthand how hard it is to get beyond the sexy pitches to get a true feel for the people behind the Agency teams. Yes, the rules were clear. But part of me feels sorry for Ms. Roehm that she’s having her name so glaringly in the spotlight over this. After all, going to dinner with an agency is often seen as chemistry check and is hardly a personal affair or under-the-table kickback. It’s almost too bad that she didn’t do it with every prospective agency rather than the one that ultimately won the business. Who knows…maybe she did? There are many sides to this story, I’m sure, but the… Read more »
Robert Leppan
Guest
Robert Leppan
15 years 5 months ago
Other “BrainTrusters” have come down on the side of Wal-Mart for setting and enforcing a strict code of ethics. In this I agree. What is sad is the waste of time/money by the advertising agencies who were part of the review process. Think of the manpower, travel to Bentonville for briefings, the spec creative. On an account of this magnitude, agencies would have pulled out all the stops. All of these agencies (except possibly one), did nothing wrong. Now the process has to kick off again. So to me the process is somewhat suspect…I’d be curious if Ms. Roehm had a lot of decision-making power or did she head a search team within Wal-Mart, who were part of the review process? If Wal-Mart had a team involved in the agency search, where were they and her boss during this review? On agency searches, the entire review team should meet together to brief, hear agency pitches then to anonymously grade agency submissions — each member with an equal vote. So riding in a Aston Martin by… Read more »
Edward Herrera
Guest
Edward Herrera
15 years 5 months ago

Yes, every company should have a standard or expectation for the behavior of their employees. How the law is interpreted and to what degree it is enforced will have an impact on participation. Many employees have no loyalty to their company of employment and some employees have no regard for the company’s policies.

I think the polices have become too controlling and it tells the employees “we don’t trust your ability to separate business and friendship.”

John Collins
Guest
John Collins
15 years 5 months ago

The whole world of business is built on relationships. I think their policy is counterproductive.

Paula Rosenblum
Guest
15 years 5 months ago
With all due respect to my esteemed colleagues, I think we’re missing the point. Wal-Mart may not take gifts from companies to individuals, but it sure does expect and demand preferential treatment from vendors in every other way. I understand that there’s a sense that it became more “personal” — but the distinction is lost on me. I’ve taken plenty of prospects to dinner who never bought from me, and I’ve been wooed by vendors who I never wrote a kind word about. I still charge a fair price for my services, and expect my vendors to do the same. The real question in my mind is “Is Sam Walton rolling over in his grave over the company’s business practices, period?” Wal-Mart’s gotten more than it’s share of bad press this past year. The marketing bruhaha is one of the smaller matters that the company has allowed to be blown way out of proportion. The company is on a PR campaign to re-engage its customer base. They managed to alienate these customers by attempting to… Read more »
Bobby Clemmons
Guest
Bobby Clemmons
15 years 5 months ago

They clearly have the right and they have the right to enforce it. Knowing them well, I find it unbelievable that someone so intelligent can be hired and not understand that it is a rule everyone is expected to practice — they drill it in.

It ultimately is about the customer. Wal-Mart is looking out for their customer and they want product and business decisions to be made for that reason. Our company has the same rule and it is difficult in dealing with some customers because their decisions can often be swayed by personal relationships. So it not only potentially hurts their business, it can hurt my business as well.

Ben Ball
Guest
15 years 5 months ago

“I hate to make rules, because then you have to keep them”

Benjamin Franklin (I think)

As Race Cowgill points out, many companies have rules they don’t strictly enforce, which makes them useless at best and malignant at worst. The problem with rules is that there is an always an exception, and everyone thinks they are it. If management (parents, teachers, commanding officers, etc.) allow those exceptions they simply undermine the culture of the organization and their own credibility. Wal-Mart has made the decision that vendor interaction requires rules. Now they have to keep them, and they do.

Karin Miller
Guest
Karin Miller
15 years 5 months ago

I saw this code when I first visited Bentonville in 1987, long before Wal-Mart was #1. I accidentally violated it in 1994 when I forgot to delete the WM buyer from the list of customers my company was sending promotional coffee mugs, and received a very serious letter reprimanding me.

Now, with buyers handling categories that generate hundreds of millions in sales, it makes more sense than ever. These policies set WM apart, and clearly they have not hurt!

Dan Raftery
Guest
15 years 5 months ago

Two mistakes were made in January: Wal-Mart offered a job to Ms. Roehm and she accepted it. Both the company and she knew of the code of ethics. And both knew of her resume and style. It appears that in their desire to spiff-up a dull image, corporate strategists thought they could tame a highly successful advertising jungle cat or at least change her spots. Who did they think they were they kidding?

Gene Hoffman
Guest
Gene Hoffman
15 years 5 months ago

The perception of Wal-Mart’s integrity is enhanced by its Global Ethical Principles, tough and as sanitary as they may seem to be. All things considered, I believe Wal-Mart has it right.

My opinion is based my experiences in the more honorable days of journalism. Years ago I worked for the Philadelphia Bulletin, which was then the country’s largest evening newspaper. They had a strict policy than no employee in any department could meet with any supplier or influence peddler outside the office. No lunches, dinners, drinks, personal goodies or gifts of any kind to the individual or his/her relatives were ever allowed to be received. If so, you were let go. As a result The Evening Bulletin developed and sustained a reputation for honest and totally objective reporting for as long as evening newspapers were the most viable and timely media source. So I repeat, I think Wal-Mart practices good principles.

Race Cowgill
Guest
Race Cowgill
15 years 5 months ago
Wal-Mart’s code sounds great. But, as so many organizations have found out, a written code does not create behavior. We have studied hundreds of organizations with various written codes, some of them quite strict (“You will be fired immediately if you do any of the following…”). But the actual practice of a company does not live up to the code in any single case we have studied. Unfortunately, Wal-Mart is no different — it is still just an organization like every other organization. Wal-Mart is no different from any other organization in that it has a Master System that processes and mis-processes information every second. Part of this mis-processing occurs when executives must confront and effectively process information that is both threatening/embarrassing/insulting, and that deals with critical business issues. Every organization processes this information the same way: it is blocked, distorted, covered up, misrepresented, etc. This level is where we actually see the true “Code” of an organization, not the plaque on the wall. Our data shows that codes of behavior have, in practice, a… Read more »
Bill Nelson
Guest
Bill Nelson
15 years 5 months ago

Wal-Mart has it right. Product selection should be based on the potential of that product producing an acceptable sell through and return on investment, not on some “good old boy” relationship.

David Livingston
Guest
15 years 5 months ago

A code of ethics means nothing if some employees are given a pass. Every company I worked for had a code of ethics and it was constantly abused. I suspect that is the case with Wal-Mart as well. Strict policies do block business opportunities. For example, I worked for a company that had a policy of not requiring new employees to divulge trade secrets from their former employers. However the whole point in hiring them was to acquire this competitive intelligence. So obviously we had to bypass the code of ethics in this situation in order to gain a competitive advantage.

Dick Seesel
Guest
15 years 5 months ago

Whether or not the recently departed marketing execs violated Wal-Mart’s ethics policies appears to be a subject of dispute. What’s indisputable is Wal-Mart’s right to establish these policies and to expect adherence to them. The “lesson learned” might be broader: How to avoid a similar culture clash in the future.

It’s ingrained in the company ethos so firmly that other initiatives to pull Wal-Mart’s content, marketing and store design into the 21st century should not be misread as changes to the core culture. The tricky part is ensuring compliance with the policy at all levels of the organization, but the recent incidents should set an example for the rest of the company’s associates.

David Zahn
Guest
15 years 5 months ago

Much to the chagrin of manufacturers or other vendors who have been trained to “make friends” with the Buyer (because it is harder to “fire” a friend or disadvantage a friend) – Wal-Mart prevents that from occurring. It is perfectly appropriate and keeps the focus on the business.

I see no problem with their approach morally, ethically, legally, etc.

Mark Lilien
Guest
15 years 5 months ago

Wal-Mart’s code of ethics is one of the best things about the company. Who can argue with it? And dismissing those who break the code sends a clear signal to suppliers and the staff. Who can argue with that? As Nancy Reagan said, “Just say no.”

Carol Spieckerman
Guest
Carol Spieckerman
15 years 5 months ago

Wal-Mart’s policies may seem strict; however, they are the only way to mitigate impropriety and favoritism among thousands of associates and vendors. Many believe that such stringent policies began at Wal-Mart; yet, J.C. Penney’s landmark money-under-the-table scandal many years ago actually started the ball rolling.

Interesting who-can-you-trust times at Wal-Mart, policies and all. Looking the other way and hoping for the best from old-timers has not guaranteed compliance (Coughlin), nor has giving free-reign to new-schoolers (Ms. Roehm). Two unfortunate and high-profile examples.

George Andrews
Guest
George Andrews
15 years 5 months ago

Wal-Mart has it right.

Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 5 months ago

Does anyone, not team up with the best possible outside sources to move the business ahead! And, by the way, this reported information of breaking WM’s rules is a very typical scenario in the overall, marketing and advertising industries.

Might this have been an excuse for WM and all the direct reports of Mr. Scott to rid the top two marketers? The culture of WM and its management has little knowledge of the marketing and advertising world! The evidence is who is now in charge of the agency selection process.

And maybe, Wall Street pressure didn’t help. But, Rome was not built in a day. And nor will a new WM in years. Hmmmmmmmmmm

Pete Hisey
Guest
Pete Hisey
15 years 5 months ago

I’ve dealt with WM for decades, and they really carry things too far. On the surface, it looks noble, but it’s become an unhealthy corporate culture touchstone, an excuse to be abusive to other people. I sat in on some vendor negotiations, and the buyers made it out-and-out unpleasant and nasty.

There’s a lot to be said for civility and relationship-building. The us – vs.- them mentality permeates WM to an unhealthy degree, in my opinion. And much of it is done to impress each other with just how [tough] they can be.

Bill Akins
Guest
Bill Akins
15 years 5 months ago
Having worked for small and large companies calling on Wal-Mart for a number of years, I applaud the vendor/buyer relationship policy. How can a small supplier with niche merchandise (becoming ever so much more important as WMT moves to tailor assortment on a store-by-store basis) compete in an environment where all the shelf space is taken by companies who wine and dine buyers with gifts and ski trips? I loved that WMT never practiced this and that the selling environment was entirely fact-based. I am in the camp of building a company’s infrastructure with systems and people that can react quickly and responsibly to buyer request versus investing in the buyer relationship itself. Buyers WILL turn over repeatedly and if the relationship is built on a personal basis with each respective buyer, you have to start all over again each time a switch occurs. Wal-Mart is tough, but they are extremely fair and open to new ideas when the data is brought in to support a merchandising program…not when a supplier springs for a weekend… Read more »
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