Walmart, once a byword for low pay, becomes a case study in how to treat workers

The largest private employer in the U.S. increased wages to jump-start sales. Investors needed to be convinced.

- Sarah Nassauer

This fall, Walmart's experience will be published as a Harvard Business School case study, as a success.

(REUTERS)

A decade ago, the largest private employer in the U.S., Walmart, increased its starting wage to $9 an hour. Raising the salaries of nearly half of its more than a million U.S. hourly workers made it the biggest pay raise in history. Investors reacted by sending Walmart shares down 10%, destroying $21.5 billion in market value in hours.

This fall, Walmart’s experience will be published as a Harvard Business School case study—as a success. Hundreds of executives from Blackstone, Bank of America and other firms traveled to Bentonville, Ark., recently to learn about Walmart’s future workforce management and hear the story of the 2015 wage increase from Walmart’s chief executive. The move, he says, launched its current sales tear and online advance.

When Walmart decided to raise pay for the hourly workers in its stores and warehouses, who now number 1.5 million, it wasn’t trying to be benevolent. Walmart was in the crosshairs of labor activists. Turnover was high, many workers were miserable and shopping at Walmart was often a bad customer experience.

On top of all that, the world’s largest retailer was facing a dire business situation: it had grown so big that its own executives doubted that it could keep growing, and it faced a rival who wouldn't stop growing, Amazon.

Because supercenters blanketed much of America, many Walmart executives had been asking, “are we too big to grow?,” said Chief Executive Doug McMillon in an interview, looking back on discussions he had before taking the top job in 2014. “Some people developed a feeling that it was just too hard,’ he said. As a result, the company had been focusing on improving profits by keeping down costs—including wages—while sales stagnated.