The following interview with Coleman Peterson is a condensed version of HR.com's live, one-hour webcast.
Coleman Peterson is President/CEO of Hollis Enterprises, formed in May 2004, following his retirement as the Executive Vice President of People for Wal-Mart Stores, Inc. At Wal-Mart, Cole had the distinction of being Chief Human Resource Officer of the world´s largest private workforce - 1.5 million "associates" worldwide. Wal-Mart is a $256 billion a year retailer, and was named as the 2003 and 2004 "America´s #1 Most Admired Company" by Fortune magazine.
During Cole's 10 years with Wal-Mart, the People Division flourished, becoming a strategic partner within the company. In addition to focusing on three basic "People Needs" of getting, keeping, and growing great associates, he helped diversify a workforce to represent the communities it serves. Wal-Mart is the country's number one employer of African-Americans and Hispanics.
Prior to joining Wal-Mart in 1994, Cole spent 16 years with Venture Stores of St. Louis, with his last role being the Senior Vice President of HR. His background includes a total of 30 years of experience in HR.
Please Note: Coleman Peterson will be speaking at HR.com´s annual conference taking place in Phoenix, September 25-27th. Coleman will be joined by Jim Collins, Marcy McGinnis, Ann Rhoades, David Whyte and a host of other Thought Leaders. For further information, visit www.hr.com/events.
Topic: How to Get, Keep and Grow Your People - the success story from the world´s largest private employer.
KE: I´d like to begin our conversation by having you tell us what kept you up at night when you where heading up the People function for 1.5 million associates worldwide.
CP: In 1994, when I joined Wal-Mart, we were a $1.5 billion business and we had slightly fewer than 500,000 associates. As I settled into the business, I began to ask myself, ´what was the single most dramatic impact HR could make in the business at that point?´ As we did our future people projection, I could not believe our numbers because they suggested that we were going to be in excess of one million associates worldwide over the next 10 years. Recognizing that and recognizing that turnover was one of the greatest challenges within the retail industry, I decided to attack the understanding that turnover in retail was a necessary evil. As I began to investigate the impact of turnover, I could see that it negatively impacted a number of different areas including the product knowledge that our associates had in our Sam´s clubs and Wal-Mart stores. The level of customer service and productivity were affected; even things like safety performance is impacted by the tenure and experience that people have. Also, the ability to promote people internally is a function of how long they have been around and their ability to perform at a level that allows them to be promoted to the next level. So, this subject was certainly one that could keep me awake at night.
KE: In articles I´ve read that you´ve written, you speak of Sam Walton with great respect and admiration. What is it about him that you most admire?
CP: I think that Sam Walton was a unique individual who had great balance in three very important skill sets. In my 30 years in human resources, I´ve found that there are very few people who have the capacity to have the skills of being a true entrepreneur; who understand how to drive sales and earnings; who have the capacity to begin with the end in mind; and who have a strong set of values. I admired him so much for his ability to drive sales and earnings while recognizing the importance of expenses. Wal-Mart has a very smart expense culture. He was motivational and he always placed the importance of people first and foremost. He created three basic values at Wal-Mart; they are: respect for the individual, service to the customer, and commitment to excellence. These three basic values were not in this order by accident. Sam´s point of view was that we had to begin with ourselves and with the team. If we respected each other, then all of the good HR practices would naturally flow from there. Respect and a healthy working environment would translate into serving our customer well. And of course, the way we serve the customer would translate into doing the best job that we possibly could.
KE: You introduced the "Get, Keep, Grow" HR strategy to Wal-Mart. Tell us about that strategy from 50,000 feet, and then we can look at each of its components further...
CP: The Wal-Mart team gives me credit for changing our HR mindset around ´Get, Keep, and Grow.´ Sometimes in HR we become so sophisticated with our human resource language; words like recruitment, retention, development, etc. Somehow the words ´Get, Keep, and Grow´ seemed to resonate with our Wal-Mart stores associates because it is basic and it is exactly what we were trying to do. The first thing we need to do is get people to join our organization. Then, we try to keep them. If we are successful in keeping them, we grow them. It all begins with whom we hire and that is why the ´get´ part of this strategy is so important. Sometimes we forget that the most important human resource activity of the three is whom we bring through the front door.
Many years ago, Sam Walton was being interviewed by a reporter who was being very complementary of Wal-Mart and our customer service. We were a relatively small organization at that time. The reporter was asking Sam some technical human resource questions about the selection techniques and he asked Sam, ´what is the process you use to develop such upbeat, highly customer service oriented cashiers. Sam said, "We just hire happy people." When we are not focused on the fit in the hiring process we end up spending thousands of dollars to mold people into the kind of behavior that we would like them to demonstrate. Our ´Get, Keep, and Grow´ strategy was really about being critical about who comes through the front door. I would challenge our human resource department all the time, encouraging them to understand that they really are the gatekeepers of the organization. Once we own people, we have an obligation to make them as successful as we possibly can. If there are candidates who we think aren´t going to ascribe to the Wal-Mart culture, who can´t be as productive as we want them to be, then let´s make that decision at the point of hire.
KE: I´m assuming that Wal-Mart´s compensation and benefits are on par with other retail organizations. How is it that you were so successful recruiting for your rapidly expanding enterprise?
CP: We were always pretty successful in attracting people to Wal-Mart; I think principally because of our values, our culture, our strong balance sheet and terrific growth opportunities for our people. If we think about Maslow´s Hierarchy of Need, we all join organizations for many different reasons. We are somewhere on the Hierarchy of Need. For some people it is just give me a job, any job. For other people it´s responding to their own personal social needs, and for others it is their self-esteem. My challenge to HR in the recruitment process is let´s understand what and who Wal-Mart is, what is our culture and what kinds of people do we believe will thrive within our organization best. Once we have clarity on that, then let´s go out and engage the public and begin our recruiting and interviewing and screening process based on that. The more that we grew and the more that we expanded from that less than 500,000 associates to more than a million and as we expanded to countries around the world, what we were looking for was always the same kind of associate that would ascribe to our values. I don´t think that having difficulty recruiting was ever really a challenge for us.
KE: How much of the recruitment efforts were centralized versus at the store level and what types of processes were used to hire individuals who would represent the Wal-Mart service philosophy?
CP: We had our Wal-Mart stores and as we began to grow, we had our Sam´s Club operations and we also had distribution centers and our new neighborhood market-type operations. We were very decentralized, with 3,500 locations and counting right now around the country. Our most important recruiting station was actually at the store location. In Boston, where we have opened a new super center, there have been thousands of people wrapped two and three times around the building looking for employment. It was a very powerful opportunity for us to hire the best people that we could at the hourly level. At the same time, we were also on college campuses. We recruited in as many as 80 different colleges in a given semester. The college recruiting was directed out of our home office. The candidates went to our stores and club locations to begin their initial management training and then would be promoted through the organization. Finally, we had centralized hiring for home office specialties like CPAs and Attorneys, etc. Really, we have three different kinds of recruiting initiatives.
KE: Diversity was one of your priorities at Wal-Mart. How did you accomplish this goal and what were the biggest challenges?
CP: Wal-Mart´s diversity initiatives really grew dramatically over the years to the point that it is at today. We had some real learning experiences and in retrospect, like all businesses, there are some things we´ll give ourselves a grade A in and there are some things we will give ourselves a grade C in. Today, we feel very good about having integrated all of what we believe to be the critical aspects of diversity.
The first one is that we are all on a fool´s errand unless there is top down leadership commitment. Diversity is an initiative within a company that middle management believes and will pursue it because the top leaders say it´s important.
A second area is dedicating resources within the organization to the whole issue of diversity initiative. We believe that keeping the numbers straight in an organization is important and that is why we have CFOs and accountants. We believe that safety in an organization is really important and that is why we have a Director of Safety, and so on. If there is really a commitment to diversity initiatives, then there will be a highly placed executive that is focused on pursuing and helping the organization develop their strategies for diversity achievement.
Just as people are evaluated and rated and compensated on how they are driving sales and earnings, the same is true in the area of diversity. People can and should be evaluated and if we really wanted to get wind on our back we need to tie compensation systems to how people are performing in this area.
As the fourth point, we assume that people really understand the issue of diversity. It is the year 2005 and most of us are reasonably enlightened. HR professionals don´t assume that your organizations understand the concept of diversity and what it is that you as HR professionals and your leadership are really trying to accomplish. Companies are really well served before they begin ratcheting down on programs to be sure that they´ve taken the time to educate their leaders and their organization about the concept of diversity. People need to understand what it is that the business is trying to accomplish. It´s not about taking a job away from white males to give to women or people of color; you need to take the time to educate the organization.
The last point, I believe at the end of the day, the true staying power of diversity occurs when people of all backgrounds are recruited successfully at the entry level so they can move through the organization and have the experiences and the opportunity to compete along with all others in the organization. I think that takes away a number of the barriers and the objections.
KE: Wal-Mart is a global organization. What were the biggest difficulties in expanding into countries including: Mexico, Canada, Germany, the U.K., Asia and South America?
CP: The most frequent challenge that we were faced with was whether the Wal-Mart culture would or could translate to other countries. I think people look forward to and enjoy the opportunity to come to a business where they have the opportunity for growth. For example, our business in China ... one of the interesting developments there is that we are having the opportunity to attract some of the best and brightest women. I think it is because of our culture of respect for the individual. We say to the talent, come one and come all.
In contrast to that, here´s an interesting challenge. There are aspects of our culture that we have had to adjust. Our Wal-Mart greeters are mostly seniors in the United States. We like the greeter concept and we took it to other countries as well, including Korea. In Korea, we had some interesting cultural learning. Because seniors are so well respected and revered, to have a senior greeting at the door was counter cultural. As a result, we have maintained our greeter concept, but the greeter in many of our Korean locations is a young woman.
KE: What type of process was used for orientation to help new hires learn the "Wal-Mart" way?
CP: It all begins with what we do with people when they first come through the front door. When we first began to attack the issue of turnover within our Wal-Mart stores about 10 years ago, we did some interesting analysis. We learned that 60% of the people who left in their first year with us, left within the first 90 days. We brought in some of the best and brightest personnel managers from around the country and we had brainstorming sessions. One of my training people set up an exercise where they gave each of the personnel managers a stack of yellow sticky notes. They were asked to write down each orientation function that they have. They were asked to put their sticky note within a time chart where the function took place. What was amazing was that the majority of the stickies were all in the first week. We were trying to force feed brand new associates in a very short time frame. We had to take a step back and see what came first, what came second and spread out our orientation over 90 days. That produced a very positive result for us. We also learned the importance of having the location manager always present at the initial orientation to ensure that new associates had the opportunity to meet this person right from the start. I think what we learn in human resources processes is that looking at them from the associates´ point of view makes all the difference.
KE: Wal-Mart has one of the lowest turnover rates in the retail industry. Why is that?
CP: There are three basic areas to which we gave attention. It all begins with whom we hire. For example, we hire a person and then six months later they come to us and say they don´t want to work Wednesday and Friday, they´d like to work Thursday and Sunday. We say it won´t work within our operating requirements and they say they quit. There goes another statistic in turnover. Then we ask ourselves if we had probed that person´s expectations around the schedule at the time that we hired them. The answer was no. So much of our success really does come from the attention to hiring.
The second thing is the issue of onboarding. It´s paying attention to the orientation process in terms of what a person needs to know today, next week, and in the third month.
Last, but not least is the area of pay, supervision and growth opportunities. We talk a lot about pay, but one of the issues around pay that we don´t necessarily probe is what a person´s expectations are around pay. For example, you and I can be satisfied that we have done a great job in our compensation analysis and we´ve got our jobs banded and a minimum, a mid-point and our maximum. But, that is only okay so long as an individual doesn´t have different expectations. I can´t make you feel okay about how much you are being paid. What I can do is help you understand how it is that you are paid the way that you are by explaining how our compensation system works.
How often have HR people had people sit in their office and say they are underpaid because they have worked for other businesses and believe that as a result of that they want you to pay them more. Sometimes people have an expectation that they want your company to make up for all that they didn´t get at the other businesses. So, setting up expectation around pay is very important.
The issue about supervision, I can´t say enough about. It is the simple fact that often times, people don´t leave good companies, they leave bad bosses. Without fail, when we do our exit interviews, at the top of the rational for why a person left has something to do with poor supervision.
The last one is for people who are performing well; they want to figure out how they can get ahead. Sometimes, managers are so busy directing people on getting their job done; they don´t spend enough time with employees envisioning what they want. What are their individual hopes and dreams? What do they want to become?
KE: Two weeks ago, I interviewed Bruce Tulgan from RainMakerThinking on this program. He is a strong advocate for hands-on management in which managers set high standards and meet daily with each employee to review performance. His position is that far too many managers are hands-off and that is a large reason for poor performance. What is your position on this topic?
CP: I agree with him around his philosophy on hands-on. At Wal-Mart, we had no specific guidelines for managers other than MBWA - Management by Walking Around. You have to be engaged in what it is your associates are doing. In our schools, we become so enamored with the concept of strategic management that the bosses become removed from the nature of the work. It makes sense to encourage your leadership and your middle management to understand that the right way to lead is to be in and about with your associates. You must understand what it is that they are working on, what it is that they want to achieve and have the opportunity to give you feedback on things that they have concerns about. Upward and downward communication is critical to success, as is ensuring associates have the tools they need to accomplish the job that we are expecting them to get done.
KE: One of the hot topics in HR and management circles right now is "employee engagement." Based on your experience, what role does the employer need to play in facilitating high levels of engagement?
CP: At Wal-Mart one of our cultural aspects is something we call the Open Door. The Open Door is a philosophy and a policy that says, a Wal-Mart associate, no matter what level, is empowered to go anywhere in the organization that they choose to, to have a discussion with a person about things they like about the company and things they don´t like about the company. They can share the ideas that they have to improve the business. The Open Door creates so much energy around opportunities to run a better business, and it gives associates a true feeling that they have control over their own environment. Some of the outcomes are amazing.
Within my first 3-4 months at Wal-Mart, I arrived at my office early one day. In the lobby, I met a Wal-Mart truck driver. He approached me and said that he had driven all night from Texas to talk with me. From his perspective, as a leader of the company and given the Open Door, he believed I was there to serve him. We went to my office and he shared with me concerns he had about the organization in which he was working in Texas. Once he took me through his concerns, he said to me, ´Mr. Peterson, if you look at this situation and you are satisfied that it is fair. I´ll be okay with it.´ He got up and left. It was at that moment that I realized the role and responsibility that senior managers in the organization had. People entrusted the leaders of the company to do the right thing.
KE: The third component of your people strategy was "growing" people. What sorts of initiatives did Wal-Mart take to develop its associates - at the front-line level and at the management level?
CP: We have leadership development programs for all levels of management. It is all about the leaders. We begin with a supervisory school where we teach them the basics about motivation and leadership processes and philosophies. As the individual moves through the organization they go through a more expansive type of training. We have two segments of leadership foundations. The Walton Institute is the cornerstone of leadership training for our store managers. As we move up, we move into those who are running decentralized operations like districts and regions up to our executive development center. They are some of the key officers in our company, as well as country managers. That goes up to the Executives, VPs and Senior VPs of the company.
KE: Now, on to the topics of leadership development and succession planning. How did Wal-Mart identify its future leaders and by what means were they developed to step into executive roles? How actively was succession managed?
CP: This is another area that the organization gives me credit for. The People Asset Review (PAR) process takes place twice a year when we go through succession planning. It is an extensive process, and not one I can thoroughly explain here, given our limited time. The bottom line is that in this PAR process, there is a high correlation between what was said in the planning meeting and the decisions that are made, and people are held accountable for that. The other thing that is critical to success is Top Down leadership involvement. The division leader, the top of the organization and the top HR person must be involved in the whole discussion around succession.
What often happens in many organizations is that succession planning takes place once a year. The results are put in a three-ringed binder and set on the shelf. Then, when it comes time for succession planning, the decision makers get out the darts and throw them against the wall. There is no correlation between the work that was done to plan for succession and the actual decisions that are made.
KE: I subscribe to the theory that some of our greatest learning comes from our failures. As you reflect on your career with Wal-Mart, what are the things that you would do differently, if given the chance?
CP: One word sums it up.... Faster. As HR people, we see the glass half full. We are optimistic that if we give people time, they will come around. The answer is that they won´t come around unless we are insistent on the right behavior, right policy or procedures. As HR people, we have to ask ourselves not only what needs improving, but also what is a reasonable period of time to expect a result from the initiative. If we´re not seeing improvements fast, we need to increase our volume level.
KE: From a philosophical perspective, what did you learn at Wal-Mart about people and about work that you didn´t know before?
CP: The founder of Federal Express, Fred Smith, had three great questions. He said that a good supervisor could answer these questions in a positive way. The first question is, do you care about me? This is another way of saying, I don´t care what you know until I know what it is that you care about. It´s a trust issue. The second is what can I do to get ahead? People don´t come to work because of philanthropy, but because they are looking to provide for the needs of their families. The last one is, if I don´t believe that I am being treated fairly, where can I go to get justice? In positive work environments, associates can answer those questions.
KE: Coleman, we have an audience today of HR professionals that are working hard to help build great companies. What final words of advice would you like to give to them that they can begin to apply as soon as they get off this webcast?
CP: At the end of the day, it´s all about leadership. It´s up to the leader to create the environment. The HR person can work to keep it simple. We have a responsibility to walk a mile in the other person´s shoes, and to give good and wise counsel. Organizations cannot be fixed from the middle up. It must be fixed from the top down. HR people should concentrate on the leaders. If we pick good leaders, the rest of the job will be considerably less challenging.