Sam’s Club C.E.O. on the Company’s High Sales and Low Wages
As proposals to raise the federal minimum wage gain more bipartisan support, all eyes are on Walmart, the nation’s largest private employer. When Walmart acts, other companies follow. And for now at least, Walmart continues to resist calls to raise its minimum starting wage.
Other major retailers have taken a different tack. Target raised its minimum wage to $15 an hour last year. Amazon made that move in 2018, and has recently taken out advertisements calling for a $15 federal minimum wage, even as it is mired in a labor dispute. Walmart, however, remains a powerful holdout, with many of its workers starting at $11 an hour.
There are signs of change. Last month, Walmart said it would raise wages for some 425,000 employees, meaning that about half of its 1.5 million workers in the United States would make at least $15 an hour. Still, that means some 750,000 people on the company’s payroll will earn less than that. A recent study from the Government Accountability Office found that Walmart was among the companies with the most employees on food stamps.
As Walmart navigates this debate, one of the people with a meaningful seat at the table is Kathryn McLay, the chief executive of Sam’s Club, Walmart’s chain of warehouse club stores. Ms. McLay, who held a series of finance roles at major corporations in her native Australia before joining Walmart, took on the job just before the pandemic hit.
Like most retailers, Sam’s Club had to quickly adapt to the realities of shopping in the age of Covid. Then, as was the case for many big-box retailers, business started booming. Walmart reported a $5.1 billion profit during the third quarter of last year, and Sam’s Club is growing faster than the main brand. (The company does not break out the pay of Sam’s Club workers but suggested, without offering details, that it was higher than the pay for workers at Walmart stores.)
Ms. McLay said calls to raise the federal minimum wage often lacked important nuance, like the fact that the cost of living varied wildly from city to city. She added that Walmart offered other forms of compensation beyond hourly pay, and that the company supported raising the minimum wage, though she did not offer a target number.
Not long ago, Walmart executives were allergic to even discussing the prospect of broad-based pay raises for its poorest employees. But today, at the very least, the conversation has begun.
This interview was condensed and edited.
What was it like making the transition from the finance side to now running a brand?
It’s not the most glamorous career. You turn up at a barbecue and people ask you what you do, and when you say you’re the head of audit and president of the Institute of Internal Auditors of Australia, you can just see people be like, “Oh, this is going to be so interesting.”
But one of the benefits I got in being on the finance side was a really thorough understanding of the profit and loss and balance sheet and how that all hangs together. It enabled me to take strategy and pull it apart and say: “Well, what are the objectives? And what are the prices we’ve put in place to be able to achieve those objectives?”
What were the biggest changes you made in stores and in warehouses as a result of the pandemic?
There was a lot of tactical decisions we had to make very early on: metering people into the club, the request for associates to wear masks, health screening every day, plexiglass that we had to put in appropriate places, decals on the floor. There was just such an exhaustive list.
We also wanted to give members confidence that they could trust our standards. Like, “Let’s make sure that in the first 10 feet of walking into Sam’s Club, they see us wiping down a cart.” We’re spraying them outside, but that doesn’t necessarily mean the member knows that they’ve been sprayed down. So let’s make sure that we also wipe them down so that the member knows they can have confidence.
How are you dealing with the issue of masks at a moment when states are lifting restrictions?
When a member turns up at the club, we will ask them to wear one. We will have one there to offer to them. If somebody is adamant that they don’t want to wear one, then we will continue to offer it to them.
What we’ve been trying to do is protect the safety of our associates and make sure that we’re not putting them into a conflict point. We’ve tried to make sure that we de-escalate and contain issues rather than have them escalate. I would say a majority of members comply. Most of them, if you ask them once or twice, will put a mask on.
How have people’s shopping habits changed over the past year?
We have seen periods that we called “carbs and calories,” where people would just buy up pizza, ice cream, potato chips. It was almost like they were looking for indulgence in food that they couldn’t get through experiences outside of the home. We’ve certainly seen a resurgence in people nesting and home improvement, yard improvement, outdoor entertaining. People are like, “How do I make my home my castle?”
Help me understand why it’s hard for a company like Walmart to get to the point where it’s supporting a minimum wage of $15 an hour.
What I look at is, “How do I create great jobs and great careers?” The starting wage is one thing, but is very different in California than it is in Alabama, so having one amount across the nation can cause a little bit of a disparity. So really what I’ve been trying to focus on is how do we design the job so it’s something that people want to do? How do you make people feel a sense of team, so they feel known and valued?
There are a lot of elements that go into making sure that people feel like this is a great job for them, and that they can earn an income that enables them to look after themselves and their household. One of the things that Walmart and Sam’s Club have done really, really well is that growth in getting people from hourly through to management. I mean, Walmart C.E.O. Doug McMillon started out as an hourly associate.
But those are the exceptions.
Getting to the C.E.O. is the absolute exception, but like 75 percent of our managers started as hourly. So there is a pathway there, and that is true. So as much as the $15 compensation is important, I think you have to look more holistically. We’ve got meat cutters who earn $24 an hour. But as a company, I’m most interested in: “How do I create those career ladders? How do I create great jobs? How do I make sure people have a sense of fulfillment through the work that they do?”
Many employees at the company ultimately need food stamps. Do you believe a job when you qualify for food stamps is allowing someone to take great care of their families?
We’ve got certain kind of criteria for how we rank a job to determine how much we pay it. If I have an entry-level job, do I need to pay $15? Or am I creating opportunities for juniors to be able to apply?
When a company makes $5 billion a year in quarterly profit and you still have employees who are on food stamps, I just wonder how the company is thinking about the distribution of the wealth that’s being created. Does that feel right?
Yeah. And to be clear, too, Walmart has agreed that the federal wage should be raised, and we’ve advocated for that through the Business Roundtable, through government relations, etc. So it’s not that we’re saying that the federal wage shouldn’t be raised.
But nothing more on how a company thinks about how to allocate the distribution of the wealth that’s generated by this company. The overall balance — from the investors to the executives to the associates — you are comfortable with where it is?
I think we have been consistently increasing the amount that we pay as a start rate. We also look at all of these other elements that go into making it a great place to work. If you look at what we paid in bonuses last year, if you look at what we’ve done through education, there was a lot that was done to share back with associates. I think it’s really important that they know how valued they are.
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