Doug McMillon’s Business School address
The CEO of Walmart delivered the Class Day address to graduates of the Harvard Business School.
Hello, everyone. I am deeply honored to be asked to speak with you today, the graduates of Harvard Business School. I'm really excited for you. Congratulations on what you've accomplished. You should be full of hope and aspirations. I'm personally very hopeful about what you'll do to make this world a better place. If you'll only hear one thing for me, I want you to know this. One person can still make a very big difference in the world. And particularly, when you work together with other capable well-intentioned people, the impact can be enormous. Today's world is full of opportunities and challenges. There are plenty of problems, large and small, to be solved. And we need you, each and every one of you, to get after them.
I grew up in Jonesboro, Arkansas in the '70s and '80s. It had about 50,000 people. The economy was mostly agricultural. My dad was a dentist and my mom was his assistant and took care of running the office. I think they earned a middle-class income, but they'd grown up without anything. Dad picked cotton to help pay for his schooling. And mom was one of four daughters of a Methodist Minister. Given their life experience, we didn't spend much. But my sister and I didn't want for anything except maybe some jeans that weren't from Sears and a pair of Nike shoes.
When Walmart came to town with low prices and broad assortment, we became loyal Walmart customers. It dawned on me many years later that my mom, when she left the house on Saturday to shop for groceries and things would ask, "I'm going to Walmart. Is there anything you need?" rather than "I'm going shopping. Is there anything you need?" Walmart was her first destination, and it raised the standard of living for our family. Of course, I didn't think much about that at the time. It was just the way things were. And I sure didn't plan to work at Walmart. That ended up happening because my dad sold his dental practice in Jonesboro to try his hand at something else because dentistry was proving pretty stressful. But he eventually decided to take it up again, which meant we had to move many miles away, given the non-compete he had signed when he sold his practice.
He was licensed in Arkansas. So he spent his weekends one summer driving around the state looking for the right place to start his new practice. He settled on the small town of Bentonville, population, 10,000, if you round it up, which was a six-hour drive away from our hometown. At that time, I didn't know where it was on the map, but it happened to be the hometown of Walmart. We land in the metropolis of Bentonville. And as I'm struggling through the experience of being a new kid, the next thing I hear from my dad is that I need to get a job. "College isn't free", he said.
In Bentonville, there was a McDonald's, a Kraft cheese plant, yard mowing and a Walmart Distribution Center. So I drove around town mowing yards with a push mower that stuck out the hatchback of my family's little brown two-door Honda civic and applied for jobs in those places. McDonald's paid 3.35 if I remember correctly, but Kraft and Walmart paid more. Kraft never called me back. But Walmart hired me at 6.50 an hour at warehouse number 2 in the summer of 1984. I was 17. A handful of us showed up for our first day, and our supervisor, again, named Benny says, "None of you know what you're doing here yet, and we need to decorate the high school gym for Walmart's Annual Shareholders Meeting. So jump in your car and follow me to the gym."
So I'm in that Honda Civic, which didn't have air conditioning or a radio. And so I had my massive cassette playing boombox in the passenger seat. It's cranked up as I follow Benny across town. He stops at a stop sign. I reach over to turn the volume down so he won't say something to me when we get there. I swear he led up on his brakes to move through the intersection. So as I'm looking down reaching for the volume, I accelerated. It turns out he had not moved, so I hit him. It was solid contact. He gets out of his car, shaking his head. I haven't been on the job an hour yet. He got out and looked at the back of his car, which was thankfully all right, looked at my front bumper and walked back to me. I hadn't moved. He said, "McMillon, you're not too smart, are you?" I said, "Apparently not, sir." Thankfully, he got back in his car and never said another word about it. Please remember to give people grace on the small stuff.
I worked for Walmart in distribution centers that summer and the next. Unloaded and loaded trailers and picked orders from the warehouse floor. It was hot and it was hard work, but people were happy. We stayed busy, but there was a lot of laughter. On breaks and in those trailers, people express their excitement about Walmart. The culture and tenure of people in those buildings surprise me. The way they talked about Sam Walton surprise me. From him to the people working in those hot trailers, strangely, felt like team. What I found is, culture matters, and leaders shape culture with everything they do and say.
After high school, I completed an Accounting degree at the University of Arkansas and then decide to pursue an MBA immediately because I knew that if I started earning a real paycheck, I'd never quit to go back to school. I applied to five or 10 schools including this one, and ended up with the University of Tulsa. Before I left Bentonville, Walmart had offered me a job as a buyer trainee. And I'd also fallen in love with a 2nd grade teacher in Bentonville. Now my wife of 30 years, Shelly. And so I called the guy who'd offered me the job to accept it. And he said, "Great. Show up next Saturday morning at store #894 in Tulsa. You'll be an assistant manager while you complete school." I said, "I can't do that. I'm carrying 17 hours and working for the university as a graduate assistant several hours a week to help pay for school." He said, "Sure, you can. I'll tell them to expect you on Saturday." and he hang up.
Being an assistant in that store carried a 52-hour work week schedule. So that was a challenge. But juggling all that taught me that people can do more than they think. You may be capable of more than you can imagine. So here's what I learned in that store. It wasn't the store manager or the management team that ran the store. It was the tenured hourly associates. I showed up on that sales floor wet behind the ears and these experienced merchants, the department managers looked at me like, "Are you going to be some college kid hot shot wants to pretend you know what to do? Or will you do what we tell you to do and let us teach you something?" I chose the latter. Just as with the distribution centers, I found good hardworking people that took ownership in their business and in their company. Successful companies create ownership at every level. Owners make better decisions. Owners act more like entrepreneurs.
Now, let's talk about the world we all find ourselves in today. There's so much going on you can almost feel the world vibrating. The pandemic disrupted all of our lives. We have stores in Wuhan. So our alarm bells started going off in January of 2020, but we didn't really start to grasp the magnitude of all of it until a month later in February. It was pretty chaotic at first. A few weeks in, a set of rank priorities became clear to us, and that helped. Our first priority was to keep our frontline associates as safe as possible. We needed to stay open, but they were our priority.
Some of our associates though, couldn't come to work. Pre-existing conditions, their age, or just were uncomfortable coming to work. So we created a three-tier leave policy. As thousands of them stayed home, we hired bartenders, waiters, waitresses, and others that needed work to help fill in the gaps. We ended up hiring well over half a million people in the US alone during this period. Now, many of them have gone back to their original careers, but many have stayed. We bought over 100 million masks and installed plexiglass. We closed early for cleaning. We limited how many people could come in our stores at one time. We paid more than $2.8 billion in cash bonuses.
Our second priority was to keep the supply chain moving. Families needed food. Our third priority was to help others so we forgave rents of small businesses who operate in the front of our stores and extended supplier terms and other things. As I've traveled across the country throughout this pandemic, it's been inspiring to experience the courage, caring, and can-do attitudes of our associates in our stores and distribution centers. They stepped up serving others and taking care of each other. And they're still doing that today around the world. Our pharmacists in the US have vaccinated millions. Our eCommerce team in India with the virus raging are getting necessary supplies to customers that need it. So many of our associates have distinguished themselves. It's been amazing to witness.
Of course, this year, hasn't all been about inspiration. There's been more than enough pain, loss of life, financial hardship, and the reality of racial inequity and injustice. The murder of George Floyd and to many others, the attack on our Capitol, attacks on Asian-Americans and Pacific Islanders, and state legislation that attempts to further divide us are all just some of what we face. We have some deep systemic problems. Trust in our systems and institutions is deteriorating, and the effects are becoming more pronounced.
So where do we go from here? I think Winston Churchill had it right when he said something like democracy's the worst form of government except for all the others that have been tried. I feel the same way about capitalism. For the first time in US history, it's a coin toss between the number of people who believe capitalism is working and those who don't. I'm told your class feels the same way. My understanding is that you were asked whether capitalism was broken or not, and the results were about 50-50. The way I see it, capitalism is imperfect because humans are imperfect. We designed it and we shape it. To me, it's clear that too many people are being left behind in today's economy. Where you're born or the color of your skin should not have such a dramatic impact on your opportunities, but they do.
So how do we improve these systems, democracy and capitalism, to create more equity, more economic freedom and more trust? These systems are overlapping. They're connected and they both need work. I think Dr. Michael Porter and Katherine Gehl have some intriguing ideas about our voting processes and our political system. So as for our democracy, I'll defer to them for now. But as for capitalism, I think more and more people are starting to understand the importance of balance and of systems designed thinking.
Making a profit's not only a necessity, it's the oxygen that enables investment. But stressing short-term profit maximization creates negative consequences over the longer term. When running a business, you get in trouble when you start thinking too much about this quarter or even this year. We once had an investor tell us they planned to hold Walmart for the longterm and later characterize that as six months. It was hard not to laugh. Life and business are about balance, but if you're going to lean, lean towards the longterm.
Investing for the longer term can be a very difficult decision for companies to make though. Last fiscal year, our pre-tax operating margin was 4.1%. So we're pretty sensitive to short term investments. In 2015, we announced we were investing $2.7 billion in associate wages. We made that announcement during our annual investor conference inside the New York Stock Exchange. We made the announcement around 9:45 AM. By close of trading that afternoon, we'd lost over $21 billion in market cap. In February of this year, we announced more wage investments along with an increase in capital investment for automation, the share price went down by 6.5% that day. But we're convinced that investing in our people is smart business just as we believe in our investments in communities and the planet. Our share price over the last five years has doubled. We think that's proof that a multi-stakeholder approach with a longer-term bias builds more valuable companies.
Getting to this point has been a process of maturation. As a younger company, we were relentlessly focused on customers and associates. We felt if we served them well, shareholders would benefit. But we weren't seeing our entire system and its connection to communities and the planet in the same way we do today. Getting here required some pain. We faced a lot of criticism in the '90s and early 2000s on a variety of issues. We responded by feeling offended and defending ourselves with facts and fast responses. That wasn't working, and it certainly didn't feel satisfying. Our CEO, Lee Scott, asked us to instead meet face to face with some of our most harsh critics. He asked us to let our guards down, listen, and learn, to look for ways we could improve. He asked us to focus on making the company a better company and suggested we can come back later to telling our story.
We met with and listened to people like Paul Hawken, Amory Lovins, Sister Barbara Aires, and Reverend Al Sharpton. We read books about sustainability and took field trips to places like landfills. Our mindset changed. Then came a decisive moment. In 2005, hurricane Katrina hit, and New Orleans flooded. People needed help and the government was slow. We saw it as an opportunity to set the P&L to the side and throw everything at it, our people, our products, and our money. It made a difference to the people of New Orleans and the country noticed it. The pride we felt in the days that followed opened a door to permanent change, and we seized it. We made very public commitments related to social and environmental sustainability. And we've been working on those ever since. We're now diverting 80% of our waste from landfills and incineration. And 30% of our energy comes from renewables globally. We've layered on other work like Project Gigaton, where we partnered with our suppliers and set a goal of avoiding a gigaton of emissions from our global value chain by 2030.
So far, we have over 3,100 suppliers participating that report they found ways to eliminate 400 million metric tons of greenhouse gases. Last September, we described a goal to become a regenerative company and to have net zero emissions without any offsets by 2040. We've committed to protect or renew 50 million acres of land and a million square miles of ocean by 2030. We're taking action on important social issues like racial equity and justice starting inside of the company. We've increased the frequency and transparency of associate data. We shared that around 20% of our US associates are black or African-American, but only about 8.5% of our officers are and what we're doing about that. In addition to changing inside of the company, we've set up teams led by some of our African-American leaders looking at how our core business can be designed to influence more equitable outcomes in our financial, educational, healthcare, and criminal justice systems in the country. We've announced $100 million investment in a center for racial equity to make targeted investments in programs that work when it comes to creating more equity.
I'm not saying we're perfect. Of course, we're not. But we're motivated and encouraged that we can put the size of Walmart to work to make a difference. Our hope is that we can play a role in bringing people together. We aspire to be part of the fabric that strengthens communities and the countries where we operate. It's been my experience that as we get closer to each other, when we interact with each other as people, the more we like each other, regardless of our race, where we were born or anything else. For example, our stores are very diverse. It's not unusual for a single store to have associates that are originally from dozens of nations, working in it with lots of languages and cultures and doing so while being effective and enjoying each other. But when we click up to a national or global level, it seems so much easier to magnify our differences.
The rhetoric also changes when we interact remotely through social media and other forms of news that express a narrow point of view. We need to get proximate to each other and to each other's problems. I believe that whatever solutions we create will be most effective if they begin at the personal level. No matter what field you enter, regardless of what job you end up doing, it will matter to people on a personal level. It's going to have an impact on families and the communities where they live. When you hear someone say, it's just business, it's not. Whatever you do, it's going to be personal and impact lives.
I'll close with a story about my dad, the dentist. Dad was diagnosed with a brain tumor in April of last year. He passed on the day before Thanksgiving. In the days in between, he showed our family how to die with faith and grace. He would repeatedly talk about three things, his faith in Christ, his love for his family, and that he felt he had helped a lot of people as a dentist. I thought a lot about the fact that he talked about his career as one of the most important things in his life. There's dignity in work. There's a reason why when something is difficult people will say it was like going for a root canal. Going to a dentist can result in anxiety and pain. But I can't tell you how many people I ran into over the years that would tell me how much my dad helped them. He was known for his effectiveness in gentleness. He made a difference.
Life here is short. When you're wrapping it up, what do you want to have accomplished? What will be on your short list? I hope you'll help others. Let's make things better. Let's build more inclusive systems and institutions that create opportunity, that inspire trust, and give people cause to be hopeful. You should be full of hope. You will make this world a better place.
Thank you again for inviting me to talk with you today. It's truly been an honor and I wish you all the very best.