WAL-MART’S SATURDAY MORNING MEETING

Fifty years ago Wal-Mart was nothing more than a single store outside Bentonville, Ark. One day founder Sam Walton made a decision that changed the destiny of his company: He started gathering his employees early Saturday mornings in the store’s office and had them go over the previous week’s numbers. What was selling? What wasn’t selling? How did sales compare with the previous week? The Saturday morning meeting became a mainstay as Wal-Mart grew into the world’s largest retailer, and still exists to this day. The meeting put Wal-Mart days ahead of the competition—and you can argue that it’s been days ahead ever since. The retailer perfected the art of learning fast and acting fast, and in the process discovered that you don’t have to be years ahead, just days ahead. Here’s how Sam came to this momentous decision and why.
—V.H.

SOMETIMES A PRETTY GOOD DECISION ends up being a pretty great decision. You just might not know it at the time.

That’s the story of Wal-Mart’s legendary Saturday morning meeting held at the company’s Bentonville headquarters. Part pep rally, part merchandising seminar, part town-hall forum, the Saturday morning meeting was for years the engine that drove the Wal-Mart machine. It helped Wal-Mart become the world’s largest company—depending on the year—with 10,000-plus stores (including Sam’s Club) producing sales of about $447 billion annually. It worked its magic when the company was a small collection of discount stores. It worked when it became the world’s largest and most dominant retailer. You could argue it’s the most famous management meeting ever.

It all started in 1962. Founder Sam Walton, a 24/7 executive before they called it 24/7, thought it wasn’t fair that the clerks were working Saturdays while the company’s executives were, say, watching their kids’ Little League games or playing golf. Sam’s wife, Helen, felt differently, according to Fortune’s Brent Schlender in his 2005 story on the meeting. She believed that the company’s managers worked hard enough, and that it was important for them to spend time with their families.

No matter. Sam believed that you couldn’t even think of a career in retail without working weekends. That’s when a large part of the business was being done. And that’s why Walton would spend early Saturday morning in the store’s office going over the previous week’s numbers. What was selling? What wasn’t selling? How did sales compare with the previous week’s?
The store’s workers had to arrive early. As Schlender wrote: “He’d hold a meeting before the open sign was hung out and share his observations with the whole crew, ask their opinions, and decide what items to put on sale and display more prominently.”

That accomplished a number of things. For one, it made his employees feel a lot better about working for Walton. It showed that he trusted them. It showed they were part of the business. It also showed he was willing to be in the trenches with them. That was no small thing. I covered the company in the 1980s and was convinced that Walton and his executives had figured out the holy grail of retail: Keep your minimum-wage employees happy, and your customers will be happy—and then your investors will be happy.

It’s one thing to have a small weekly meeting when you run one or two stores. It’s another game altogether when you’re growing and adding employees. But the tradition continued: Every Saturday, Walton would require his salaried employees to show up, share the weekly sales results, and make plans for the following week.

The meeting also provided his employees a weekly lesson in merchandising. Again, this was at the core of Wal-Mart’s success over the years, even as the store became a multibillion-dollar chain. A few years back I interviewed Sam Walton’s friend and successor, David Glass. One of the big results of the Saturday morning meeting, he explained, was that it was a way to distribute information about the business to everyone in the company. It helped make its employees, well, shopkeepers. “Sam shared total information with everyone in every store, in every community,” said Glass. “He felt we were all partners. He was absolutely right. He believed everyone should be an entrepreneur. If you ran the toy department in a store in Harrison, Ark., you’d have all your financial information. So you’re just like the toy entrepreneur of Harrison.”

Though it may not have been obvious at the time, the Saturday morning meeting let Wal-Mart compete with Kmart, which was much stronger in those days. In the mid-1970s, Wal-Mart was only a fraction of the size of Kmart, which was considered state-of-the-art when it came to discount retailing. One way Walton figured he could compete was speed. If the battery display wasn’t generating enough sales from its spot at the local Wal-Mart, every store would move the display to another part of the store on Monday morning.

“The idea of [the Saturday morning meeting] is very simple,” David Glass said. “Nothing very constructive happens in the office. Everybody else had gone to a regional offices system—Sears, Kmart, everybody—but we decided to send everybody from Bentonville out to the stores Monday through Thursday and bring them back Thursday night. On Friday morning we’d have our merchandising meetings. But on Saturday morning we’d have our sales meeting for the week. And we’d have all the information from the people who had been out in the field. They’re telling us what the competitors are doing, and we’d get reports from people in the regions who had been traveling throughout the week.”

With that in hand, Wal-Mart could move fast, said Glass. “So we decide then what corrective action we want to take. And before noon on Saturday, the regional manager was required to call all his district managers, giving them directions as to what we were going to do or change. By noon on Saturday, we had all our corrections in place. Our competitors, for the most part, got their sales results on Monday for the prior week. Now they’re 10 days behind, and we’ve already made corrections.”

Sam Walton

That was no small thing. You can argue that the Saturday morning meeting not only led to the decline of Kmart and Sears in the rural markets, and eventually all markets, but also was the beginning of the end of a lot of stodgy independent merchants. (That’s good—and bad!)

First, the big guys. As Glass would tell you, Kmart was so strong and so smart in the 1970s that it refused to mess with its formula of uniformity in its operations.

In other words, what was good enough for Springfield, Mass., was good enough for Beaufort, S.C. Big mistake. Wal-Mart, meanwhile, was taking the best of what Kmart was doing, made it better, and implemented those changes rapidly. Wal-Mart executives would then make additional changes on a weekly basis, based on the information they gleaned from the Friday and Saturday meetings. If a lot of high-margin dog food was selling well, executives in Bentonville would make sure the stores had more and didn’t run out of it. Simply put, Wal-Mart was a lot better than everybody else.

Its speed and ability to be entrepreneurial also spelled doom for many small-town retailers. A lot of the blame, even to this day, goes to Wal-Mart’s power to extract low prices from its suppliers. (Another great decision: Wal-Mart was one of the first chains to buy directly from manufacturers instead of wholesalers.) But the ability of store managers to run their own show and have big-city products all in one place—and at the right price—was what really did in mom-and-pop stores.

The strategy had its roots in the Saturday morning meeting, of course, and the entrepreneurial spirit that the meeting generated.

So what is the Saturday morning meeting like? In the early days it was one giant share-a-thon: Employees touted their best ideas—the famous Wal-Mart “greeter” was a concept developed by a store employee. Some executives would show best-practices videos and use the occasion to reiterate company rules, among other things. Remember, only a few years ago the company was often under siege from unions and the media for its employment practices.

Over the years the meetings became a little stale, and executives worried that headquarters employees would lose focus. To freshen things up, the company started bringing in guest stars, from Adam Sandler to Oprah Winfrey to Peyton Manning. I had the chance to see Gov. Bill Clinton in action. (He answered questions ranging from foreign-policy trade issues to the Arkansas Razorbacks. You could tell you’d be hearing from him again—that’s for sure.)

“The point was to make it interesting enough to where everybody wants to be there, even though it’s a Saturday morning,” David Glass told Fortune. “But you had to be careful how you did that, because it becomes more fun to do that than to fix the problems.”

The meeting also became a great way for vendors to strut their stuff. Even Steve Jobs, co-founder of Apple as well as the animation company Pixar, showed up wearing his company baseball cap to peddle Finding Nemo in 2003. “I love going to the Saturday morning meeting not only because it’s such a great show, but because they’re really smart and we learn a lot about retailing and merchandising,” Jobs told Fortune’s Schlender. Other executives, like former General Electric CEO Jack Welch, would come to pick up tips from the Wal-Mart way.

Today the Saturday morning meeting at the Bentonville headquarters may not be the way it was back in the day. You could say it’s now more strategic and broad. The more detailed issues are handled in a myriad of other meetings during the course of the week. And today it takes place only monthly.

But it still helps to keep the company in touch with what’s going on in the field and, perhaps more important, making the headquarters and others in the empire feel involved. Meanwhile, the original meeting, or the spirit of it, is duplicated on various days of the week everywhere in every store: Numbers are doled out to staff, and employees have the chance to present their best ideas, some of which may be uploaded to the weekly merchandise meetings.

Or even to the Saturday morning meeting itself.

Written by Hank Gilman in " The Greatest Business Decisions of All Time", Fortune Books, New York, USA, 2012, editors Verne Harnish and Brian Dumaine, excerpts chapter 15. Digitized, adapted and illustrated to be posted by Leopoldo Costa.