In our book The Secret of Culture Change, we show that in order to change an organization’s culture, business leaders must engage in activities that build stories consistent with a new culture and that replace old stories consistent with an old culture. Sometimes business leaders create the circumstances needed to build these culture-changing stories, and sometimes they take advantage of events beyond their control to build these stories.

In her book The 360 Corporation, Sarah Kaplan tells how Walmart used the disaster of Hurricane Katrina to build stories that have had an impact on how Walmart values its employees and the communities within which they operate—in short, stories that have changed Walmart’s culture (Kaplan, 2019).        

Of course, in many ways, Walmart has been an incredibly successful company. Founded in Rogers, Arkansas in 1962, Walmart was a relatively late entrant in the discount retail market in the US.  Despite its late start, Walmart has come to dominate much of this market, especially in the US.  Discount retail firms that used to be much larger and more profitable than Walmart—including Kmart—have fallen behind, and then fallen into bankruptcy.

Most observers agree that Walmart’s success is largely attributable to its aggressive pricing strategy—“everyday low prices”—made possible by its supply chain management.  In short, Walmart uses its huge purchasing power to negotiate low prices and high quality from even its largest suppliers and passes much of this cost savings on to customers in the form of lower prices (Ghemawat, 1986).

Historically, Walmart has applied much of this tough supply chain mentality to its employees and to the communities within which it operates.  For example, while Walmart can be a great employment opportunity for some people, many of Walmart’s employees are paid very low wages.  Indeed, one study showed that Walmart’s lowest-paid employees in the US were eligible for various state welfare benefits, including Medicaid and food stamps.  Employees at Walmart were treated as interchangeable parts—employees that quit or who were fired were quickly replaced by new employees, and so the system continued.

Walmart has also not had a strong record for respecting the communities within which they operate. For example, the building of a Walmart store can have a devastating effect on many local businesses and has decimated previously thriving downtown shopping communities in small towns around the US—impacts that Walmart has largely ignored in making its decisions about locating new stores. The look and feel of Walmart stores—along with the crowds they can attract—can also have adverse consequences for a community (Taylor and Smalling Archer 1994).

For many years, Walmart seemed focused only on providing customers “everyday low prices” in ways that generated significant wealth for its owners.  In this culture, employees and communities were a means to the end of delivering value to customers, but rarely an end in and of themselves.

And then, Hurricane Katrina happened.  In 2005, Hurricane Katrina devastated New Orleans and much of southern Louisiana. Hundreds of thousands of people were suddenly homeless, without food, or water.

From previous experience, Walmart knew what products would be in demand just before a hurricane makes landfall—flashlights, tarps, generators, bottled water, and strawberry pop tarts. And Walmart had already shipped extra supplies of these and related products to its stores in the area that was likely to be affected by the storm. They also knew that they had to secure the cash at these stores—and dispatched armored cars to take care of this liability.

But, the destruction and distress caused by Katrina were beyond what anyone could have anticipated. In the face of this tragedy, Walmart began using its stores and warehouses to distribute food, water, clothing, and other essential materials to emergency workers and to local residents—for free. Walmart headquarters directed its warehouses throughout the south to send canned food, peanut butter, bottled water, and other supplies to the disaster zone, where they were then distributed freely to those in need.

In addition to these supplies, Walmart donated $17 million in cash to disaster relief efforts, provided over 100,000 meals, and shipped hundreds of trucks full of merchandise to be distributed among those affected by the storm.

Walmart also guaranteed that its employees who had been thrown out of work by Katrina would have their jobs back as soon as the company was able to reopen its stores. In fact, over 95% of the people working at Walmart before Katrina, continued working for the company after Walmart stores were reopened in the devasted region.

Walmart was widely praised for its efforts—which were seen as being much more effective and efficient than relief efforts of the federal government, state government, and even the Red Cross. 

Of course, these actions were not purely altruistic. Walmart’s historical policies with regard to its employees and the communities within which it operated had come under increasing criticism. Its actions post-Katrina helped blunt some of these criticisms.

But, Walmart’s actions seem to do more. Using language from The Secret of Culture Change, Walmart’s management team—both at headquarters and in the field—had begun engaging in activities that built stories that were consistent with a new culture—a culture where employees were not treated as interchangeable parts, a culture where the community within which Walmart operated was respected and supported. According to Kathleen McLaughlin, a senior Walmart manager quoted in Kaplan’s book (Kaplan, 2019:  159 – 160):

[Katrina] was so cataclysmic that it literally changed the way our leadership team thought.  In the weeks that followed, they sat back and asked themselves, “What if we could be this kind of company every single day?”  [The CEO] had an epiphany:  “We  are the largest retail[er] in the world—we are truly driving consumption on a global basis; maybe we should figure out a way to make this all circular.”

A short time later, Walmart established three broad goals:  To be supplied with 100% renewable energy, to create zero waste, and to sell sustainable products. Over the succeeding 10 years, Walmart has progressed in reaching these goals, even though this has required them to rethink their entire business model—from how they interact with suppliers, employees, and customers, to the communities within which they operate.

The Secret of Culture Change suggests that if Walmart’s CEO had simply announced these goals—without the culture-changing experiences that Walmart had during Katrina—that they would probably have been dismissed as just more “pie in the sky” initiatives from headquarters.  But Walmart’s experiences during Katrina, and the stories that these experiences built, helped create a new culture where it was possible to think of employees and communities as partners in delivering value to customers.

References:

Kaplan, Sarah. 2019. The 360 Corporation: From Stakeholder Tradeoffs to Transformation. Stanford University Press.

Ghemawat, Pankaj. Wal-Mart Stores’ Discount Operations. Boston: Harvard Business School, 1986. https://store.hbr.org/product/wal-mart-stores-discount-operations/387018

Taylor, Don, and Jeanne Smalling Archer. 1994. Up Against the Wal-Marts: How Your Business Can Prosper in the Shadow of the Retail Giants. AMACOM.

Author: Jay Barney is one of the top three most cited scholars in the field of strategic management, who has published over 125 articles and book chapters, along with seven books. He is a full-time professor at Eccles School of Management at the University of Utah. Connect with Jay at JayBarney.org