Fortune Interview: Walmart CEO Doug McMillon on Automation, Training 2.2 Million Workers, and the Tragedy in El Paso
Spend a few minutes talking with Walmart CEO Doug McMillon about his company, and it’s a good bet that he’ll touch on the importance of learning. Walmart, he will tell you, is a “learning organization.” He believes it is crucial that his employees—or associates, as Walmart calls them—be lifelong learners to adapt to a fast-changing retail landscape. And McMillon himself is focused on the continual learning he must tackle to lead his massive company successfully through the process of digital transformation.
But even as McMillon, 52, keeps his focus on the future, his company’s day-to-day operations continue to build momentum. In fact, Walmart is reaping the benefits now of a plan McMillon put in place five and half years ago when he stepped into the CEO job, becoming just the fourth executive to run the company after iconic founder Sam Walton. At the time, the world’s biggest retailer was struggling in its core U.S. stores business. So McMillon decided he needed to invest significantly in higher wages and benefits for his workforce, confident that it would lead to better-run stores and boost results. The investment has paid off. Last week, Walmart reported its 20th straight quarter of U.S. same-store sales growth and a 37% gain in U.S. e-commerce sales.
McMillon has managed this growth streak while continuing to invest in training for the company’s 2.2 million employees globally. The latest manifestation of that commitment is Live Better U, a program that Walmart launched last year in partnership with Guild Education that allows associates to pursue a range of college degrees and skills certificates for $1 per day. So far, some 10,000 associates from all 50 U.S. states have been accepted into the program. The initiative helped land Walmart on Fortune’s Change the World list for a fifth straight time—the only company to make it in each of the list’s five years. (For more, see the featured entry on Walmart.)
Now McMillon is facing a new challenge—one that has emerged in the wake of tragedy. On Saturday, Aug. 3, a gunman entered a Walmart in El Paso, Texas, with an assault weapon, killing 22 people and injuring another two dozen. The mass murder helped spark a new national debate about gun violence, with calls for McMillon and Walmart to use the company’s leverage to push for change. When announcing Walmart’s second quarter earnings last week, McMillon reminded investors of the company’s firearm policies and said the company believed the reauthorization of the expired federal Assault Weapons Ban should be debated—but didn’t take an explicit position either way.
Fortune spoke with McMillon by phone a few days after the mass murder in El Paso. He shared what it was like to learn about the shooting in real time and how Walmart is responding on the ground to help victims and associates affected by the events. He also spoke about how automation will change jobs, why he’s changed the way he works, and why he’s not worried about his workers using Walmart to get a college degree. Edited excerpts of the conversation are below.
Let’s start with the tragic shooting in El Paso. I'm curious how you got the news, and what the company’s process is for reacting to a situation like that in real time?
Yeah, El Paso specifically happened on a Saturday, as you know, and we have an emergency operations center here in Bentonville that is connected to the stores in a number of different ways, and so I made my way to EOC very quickly while the event was still underway. And there we have the security team, our operations team, our people team, and a number of other groups that are working to gather information, and help us with real-time decision-making. So I spent Saturday involved in that process.
Does that allow you to be directly in contact with people on the ground, in the store?
Yes, we're in contact with our own people and in contact with law enforcement. So you can imagine in an event like that, that's underway, there's all kinds of information flowing. Some of it is accurate, some of it's not. As it unfolds, you can start to piece it together.
So you were at home when you got the call, and drove into the office?
Yeah, I was. My wife and I were going out to get lunch and diverted to the home office, and she dropped me off.
What is your first thought about how to move forward in that moment?
What's going through our minds first and foremost is the safety of our associates and our customers. So the process starts out with being able to locate and confirm the safety of every one of our associates. There's kind of a real-time roll call that happens. And we stick with that until it's complete. So similar actually to other crises like storms, hurricanes, and things like that. We first find everybody. "Are you okay, what do you need?" We're taking care of things related to compensation and benefits—the focus is on people.
Safety, security, people. Then we start to think about issues operationally: securing the store, supporting law enforcement with information. All that kind of stuff flows as well.
One thing that came through in the coverage of the shooting is that the associates and the store managers in El Paso had training that they could draw on, to react in the moment, which probably saved lives and helped to mitigate the circumstances a little bit. Has that been a focus for a while at Walmart, to prepare people for those kinds of situations?
Yeah, it has been, as part of our overall Academy training experience. There are a number of different modules. And one of them is related to active-shooter training. And I would be remiss if I didn't mention that on the Tuesday before the Saturday, we had a shooting in Southaven, Miss., where one of our associates shot and killed the store manager and a department manager. And in that instance, in Southaven as well as the instance in El Paso, the active shooter training was really helpful.
I've been to Southaven, and I went to El Paso on Tuesday [Aug. 6], and I spoke with our associates and our management team there, and heard from all of them. And I can tell you, from conversations with them, they all appreciate and recognize how much that training helped. It's a virtual reality experience. I've done it myself. And there's something about doing that through VR that helps you, in some ways, live the experience and understand the steps that you need to take in an active shooter situation.
Because the management team [in El Paso] acted so fast and engaged other associates and executed the plan, we all feel very confident that lives were saved and seconds were gained. So, we're appreciative of that fact, and the decision that the leadership team had made here to make the training happen quarterly, I think helped as well.
What was the experience like when you went to El Paso after the shooting?
Yeah, it's a day I'll never forget. The purpose in going was to just hug the people and listen to them. And we had set up a resource center at a nearby hotel and invited our associates to come in if they wished to talk about things, and to answer their questions, and our management team was all there on Tuesday. Our store manager and our assistant managers, and we sat around and just listened to their stories and asked them questions.
Looking for things that we can do to improve the safety and security of our stores; taking advantage of the experience that they had; and basically just supporting them as they grieved and as they worked through the emotional aspects of the experience.
In El Paso, we have a lot of tenure. They're the associates that were in that room, Brian. Many of them had been with us for 15, 20 years—some of them 30 years. And they know each other really well, and they're a tightknit group, and a family in their own right. So that's part of the experience, too. And then store associates came in, not just the management team, but others. Many of them came in with their families, their spouses, their moms and dads in some cases. And we'd sit with them and listened to their stories and let them ask questions.
And we also take care of compensation. We take care of anything related to benefits so that they don't have to worry about any of that. Some of them want to work in surrounding stores because they want to get back into a routine. Sitting at home for some people is more difficult than being active. So we let them go into surrounding stores and do the exact same job they did in their original store.
There's a way to help them have a routine. And we also provide counseling [with a third-party organization called] Resources for Living. We've had a relationship with them for a long time. So I went over and spent some time listening to the counselors and asking them what more we could do to support our associates and just making sure everybody is getting what they need.
How long will the store be closed, do you know?
We don't, that's completely up to law enforcement. They've got an investigation to do. So they'll turn it back over to us at some point, but it might be interesting to you to know that we won't open that store again until our associates tell us they're ready. Both in Southaven and in El Paso, we were really clear with everybody that, "Hey, you tell us when you want to go back in."
So as you're going through all of this, you've been thrust into a national debate on gun violence. You're being pressured to take a policy stand. That's one aspect of it. And then another aspect of it is the question of whether there need to be changes in how you run stores safely because of the threat of violent incidents. How are you feeling about the need to make policy changes or participate in the debate in a different way?
I can appreciate why you'd want to talk about that. I think for now, what you can hopefully understand is, things need to be handled a bit sequentially. We've given $400,000 so far to two different foundations for the victims' families in El Paso. Safety and security procedures, obviously we think about that every day. But in the light of these two events, stepping back, getting input from the associates involved, and our leadership team to think through what more we can do with technology and process and other things to make the store safe, that becomes a priority.
So, we've been focused on that in particular. No doubt, there's a spotlight on the company related to the other issues that you've raised. But I'm not ready to talk about that today.
You have a lot of positive momentum in your core business right now. When I profiled you in Fortune back in 2015, the company had just had a run of six straight quarters of negative or flat same-store sales in the U.S. Now you’ve got a long streak of positive gains going. As you look back, what’s been the key to turning things around?
I think it's, you know, all due to our associates. When you go back to that moment in time, our thought and process was we want to make sure that our associates are engaged and excited about the future and prepared to help us navigate a period of change that was upcoming. So the wage investment, which we've done in several steps, and continue to focus on, was a way to get people excited and let them know that they were our first priority. [Editor’s note: In its 2019 Environmental, Social, & Governance report, released in the spring, Walmart said that today all of its U.S. associates make more than the federal minimum wage of $7.25, that new hires now earn a minimum of $11 per hour, and that the average wage of full-time field associates is now $14.26.]
As you do that, and make a few other changes like focusing on every day low price and pulling down our inventory levels so the stores are easier to manage, you can make progress making the stores cleaner, neater, more presentable, and improve the store environment. So we saw our customer scores start to improve. As that happens and the store experience is stronger, then we leaned into price investments and we've had our multiple-year plan to reduce price so that customers not only have a better experience but they see an increased value.
And Walmart uses this term called the productivity loop, which relates to the fact that if you grow sales, it's easier to manage expenses, which helps you grow, reduce prices, and continue that loop. We've seen that start to take hold, and as the supercenters got stronger because of those investments, that gave us some more competence and freedom to be more aggressive in e-commerce.
So we did that, made the Jet investment. [Editor’s note: In 2016, Walmart spent $3.3 billion to acquire e-commerce startup Jet.com and put Jet founder Marc Lore in charge of its U.S. e-commerce business.] See the opportunities that relates to online grocery, which is something that our customers love, whether it's pickup or delivery. And so, we've been able to make some investments in that area. And putting those pieces together is what's created the momentum.
Back when I was reporting the last story, you talked about trying to get the company to move faster. I'm sure you're always trying to get the company to move faster. But how do you measure that?
Yeah, I think a number of things have happened there. If I go back and look at how I've spent my time, it changed quite a bit from five years ago, and I'm much more focused on the future. The team's done a great job. I've got an awesome leadership team that's running the day-to-day business and helping innovate and drive change as well. They're certainly thinking about the future, too. But it's freed me up in particular to be out and be learning about what it means to lead a digital transformation, and how we can put tech and data to work in a different way.
And the teams have started to not only change their cadence and the natural speed of decision-making, but we're also learning new ways to work. Parts of our business have really moved to an Agile approach to the business, where design thinking and product management is deployed against customer experiences, or in the case of Sam's Club, member experiences. And that way of working is a faster cycle way of working. It's more of a technology approach and consistent with how today's start-ups work.
So there actually is a way-of-working change happening within the company, not just kind of a cultural behavior change. And I'm really excited about both of those and seeing them continue inside the company so that we can get faster.
What's an example of how you have reoriented your time or reallocated your time to be more future-oriented, that's different from four or five years ago?
Yeah, there are probably several, but the first one that comes to mind is this role used to spend a lot of time on real estate, and new store opening, and investments, kind of at a level that's fairly low. An investment of $50 million is a big investment, but in Walmart's world, it's not that important. And so just delegating out decisions on things like that is one of the things that I've done.
When you talk about having an Agile process and design-thinking process, is that a capability that you've developed within the company, or do you partner with outside consultants to help you run that? How far down does that get? Do you get associates in stores participating in design thinking?
Not yet. Right now it's really at leadership levels, and it's at the home office level. And we've done that by bringing in some additional talent—product managers and people that are used to working that way. But we've also done it through education and organizational structure changes. A few weeks ago, we made some additional structure changes to support a Chief Customer Officer role that's more robust in the United States.
And the positions that report to that include a product manager opening that we're now recruiting for, to bring a leader in to help us accelerate our move to Agile within Walmart U.S.
I've noticed that you use the word “learning” a lot, and describe Walmart as a “learning organization.” That seems like a very conscious choice to communicate that idea not only to the outside world but also to your own associates and leadership team. Are you trying to create that mindset throughout the company?
100%. The role of innovation inside the company is so important. That's how we get growth, and there's no way to drive innovation without learning and change. And whether you think about a leader in the company that's maybe already got a big role or you think about a store associate, all of us are in a world where technology is changing so many things. [We] must be lifelong learners. We've got to redesign how work happens in our stores and our store associates are experiencing role changes where, if you think of a job as a bundle of tasks, some of those tasks are being replaced by automation, and should be. And some of those tasks that are remaining can be bundled with others to create a new job role.
Well, to work through that as a store associate, you've got to be able to manage change. You've got to be able to learn new tasks. And what we're trying to do is to position Walmart to be a futuristic retailer, and to serve customers in an omni-channel way that saves them time, saves them money, creates these delightful experiences. And to deliver that, we have to change a lot within.
So we have this blessing that Sam Walton was the world's best change-agent. He was an aggressive maverick and tried things and tested them. So I get the opportunity to tap back into that part of our culture and while there's no way to know what Sam Walton would do if he were still here, based on how he lived his life, I can be confident in saying that he would be driving change, he'd be learning new things, he'd be trying different experiments, and he'd be aggressive. And he'd be really good to people while he was doing it.
And that's kind of how I think about it, and by communicating that broadly inside and outside the company, I'm trying to foster that kind of mindset, and that kind of environment.
Let's talk about the Live Better U program for a minute. How did the program evolve and why did you give it the green light?
Sure. I think it's important to note that there's been a progression there. If you go back to the beginning, where you and I started this conversation, when we made the choice to invest in wages, that was a $4.5 billion incremental investment; it set the right tone, and then we built on top of that. So, in addition to the wage investment, we made benefit changes, like the expanded parental leave decision and adoption benefit. We built the Academies, which we've had experience with from the U.K.
So it starts with our own retail training modules, which led to teaching things like empathy, and how to be a good coach, and some of the softer skills, not just retail math and some of the harder skills. So that continuum builds out to the team identifying this opportunity to work with Guild Education to create the dollar-a-day college educational program, or Live Better U.
When they came up with the idea and developed a plan, I was excited but also not surprised because it's part of that same continuum, this plan or the strategy that we have to help our associates to prepare for the future. So, I had these universities involved through Guild, in such a way that people can learn about technology. The degrees are really applicable to today's world. And at the shareholder's meeting, we announced I think 14 different additional degrees that associates can experience related to specific coding, or other technologies, that will make them relevant in today's workforce.
Some of them will stay with the company. Some people will go outside the company after receiving that training, and that's okay with us. Our retention rates have gone up. The strategy seems to be working, according to metrics we can see.
So, I think of Live Better U as being the next extension, but I don't think it's the last thing we'll do either. I think we'll come up with even more ideas as it relates to strengthening our educational programs.
You’ve made significant investments in wages, benefits, and training, including now Live Better U. What have you seen in terms of specific gains in retention and how that translates to better performance, to the extent that you can quantify that?
Yeah, we have seen retention improve, and we've also interestingly seen new jobs get created. I think we're now well over 50,000 people [who] are personal shoppers in stores that are picking orders, for grocery pickup and now delivery. We're scaling delivery around the country, which is exciting.
There will be checkout hosts. We've got other roles that are being created as we go through this change, and having the ability to train people and then pick the best of the best for these new roles that provide such good customer service, I think is good business.
I just acknowledge that there's retail turnover, and that not everybody is going to stay with Walmart, and that we feel good about the fact that we've helped prepare those that might want to leave. But more people are staying and more new jobs are being created.
When you look at the future of work—and factors like robots, automation, and algorithms reshaping jobs—how far out can you see in terms of the kinds of jobs you're going to be creating or reimagining in your workforce?
Yeah, maybe the way to think about that is you can see pieces of the puzzle emerging now. You can go into many of our stores and you see various [examples] of automation being used. We have something in the backroom called a FAST Unloader that uses a camera to sort out which merchandise needs to go straight to the floor and what merchandise might need to be held for a seasonal event upcoming.
We have a shelf-scanning device that roams the aisles looking at modular accuracy and pricing accuracy. Doing many of the mundane things that our associates frankly don't enjoy doing. And that's kind of a theme here as I talk to our associates in stores and [distribution centers], and automation starts to become more prevalent.
We're really happy with the fact that they're not having to do some of those things that are so routine and that they're getting some help with automation. It frees them up to provide customer service to do what we, as people, are best at doing, to be merchants and to do some more of the fun part of the work.
You may have read that we've got this test that we're going to expand to three markets in October, where we deliver all the way into a customer's garage or kitchen. And we call that Walmart InHome. And we're going to Vero Beach, Fla., Kansas City, and Pittsburgh in October, which gives us a potential to reach as many as a million homes. And try to just keep people in stock eventually on the things that they buy routinely.
Well, our associates are going to be providing that service. So we're going to have new jobs that help customers save time, and the customers will decide how popular that is, and how many people that we need. But if we can free some people up from doing more mundane things to provide services like that, I think that's good for the associate; helps us compensate them appropriately for those value-add jobs. And we're excited about all the pieces coming together. But you can see the future if you just step back and look at the pieces and imagine how they all add up.
With Walmart InHome, you said different people have different comfort levels about such a service. What is your early data indicating about what percentage of people would actually want Walmart to deliver groceries all the way into their refrigerator?
Yeah, our tests so far indicate that people accept it pretty easily, and probably even surprise themselves at how fast they adapt to it. But to be clear, we'll do whatever you want us to do. We're happy for you to come shop in the store. If you want to order it on your mobile app and pick up, that's great. If you want to have it delivered to your doorstep, we'll do that. The homes that have refrigerators in their garages, we're happy to do that as well.
So the customer can toggle back and forth. We just try to create an experience by live-streaming the visit and by making it so easy that we provide that continuum of services, and then they'll pick what they want. Early indications are people love saving time so much, and they love convenience so much, that there's going to be a meaningful number of people that will adopt this new service.
I think the point is, what do we know for sure? We know for sure that customers want to save money. Everybody wants a value. And we also know people want to save time. And with today's technology, there are new ways to help them accomplish both, and that's what we're innovating to deliver.
Offering customers value, the best value that you can, is part of your core mission. And the U.S. is in a brewing trade battle with China. The National Retail Federation, which Walmart is a member of, has come out against increased tariffs and pointed out that the trade war is going to lead to higher prices for consumers if it continues to escalate. How are you adapting to deal with that challenge strategically?
You know so far, we've been able to manage through what's happened through mix. We've got a lot of different levers to pull within the company and are trying to find ways to save customers money, and I think that'll be the constant theme that you'll see from us and hear from us is we do everything we can to help the customers get a value on quality merchandise. And so, we as you would expect are paying attention to the news, thinking about contingency planning. We have seen some of the supply chain react in terms of country of origin already. We will do all we can to try and keep prices from going up.
Walmart was already on a journey to operate in a more sustainable way before you become CEO and it’s a process you’ve continued to push. Do you see, in the five-plus years since you've been in your current role, a bigger change in the corporate world and corporate leadership, and CEOs feeling like the pendulum is swinging back, maybe from the purely profit-motive to a more holistic role of corporate leadership—trying to be good corporate citizens and take care of employees and not just serve the public good by maximizing profitability?
I sure do. I would be hard-pressed to give you an example of somebody that I talk to and know and work with that isn't approaching this holistically. What Dr. Michael Porter calls shared value comes to mind. We're all thinking about this multi-stakeholder benefit and trying to design our system. If you want to think of a company as a system, design the system to benefit all. So how can you raise wages, increase training, and reduce carbon, and provide low-prices? We believe that it's possible to deliver, and I find a lot of other likeminded CEOs, as it relates to thinking that way. And I do think it's more prevalent than it was five years ago.
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—Meet the Change the World Sustainability All Stars
—Change the World 2019: Companies to watch
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