Principles of Management
Task: Select a successful entrepreneur and outline his/her managementstyles and leadership characteristics.
Consider how these may have contributed to success, and how they may have contributed to failure.
Table of Content:
Table of Content ... 1
Sam Walton: leading to success? ... 2
Bibliography ... 8
Sam Walton: leading to success?
“Outstanding leaders go out of their way to boost the self-esteem of their personnel. If people believe in themselves, it′s amazing what they can accomplish.” (www.motiration.com).
Reading this quote one could certainly think that it originates from a famous expert of leadership or a motivational coach, but it is not. It originates from Sam Walton, famous founder of Wal-Mart Inc., the world’s largest retail company, and is a good example to show one of the factors that created the incredible success of Sam Walton’s business. To examine these factors, and to analyse how they were influenced by Walton’s personality, his management styles and leadership skills, is the aim of the following text, which will be introduced by a short outline of Sam Walton’s biography.
Samuel Moore Walton was born on 29 March 1918 in Kingfish, Oklahoma, United States of America (USA). His drive towards achieving goals and his natural ability to lead people was already apparent in the early years of his life, for example in school or later at university, where Sam Walton led several student committees. Graduated from the University of Missouri, and having been a trainee with J.C. Penney’s, a famous retail company in the USA, Walton opened up his first store as a franchisee of Ben Franklin Stores in 1945. But being a franchisee and therefore having low entrepreneurial freedom, Walton was not satisfied for long and went to open up his own store, the first “real” Wal-Mart, in Rogers, Arkansas, USA in 1962. His business concept, combining low prices and great service, created immediate, but enduring success. Having started with only four employees and a single shop, Wal-Mart today employs over 1.1 million people in more than 4,200 shops worldwide, generating a turnover of more than 170 billion US Dollars. In March 1992, Walton received the highest civil award of the USA, the “Presidential Medal of Freedom”. It was his last public appearance, as he died on 5April 1992, aged 74, from bone cancer.
Nevertheless, Sam Walton’s managerial approaches and the Wal-Mart corporate culture created by him are still key points in the company’s ongoing success in the last decade.
Management is widely known as the structural framework of how goals are achieved, including planning, organising, directing and controlling (Schwartz, 1984 p.4). Those key points will be adopted to analyse Sam Walton’s management styles.
Walton always believed in the importance of staying involved and controlling the daily business, and therefore initiated several traditions, as it was for example the introduction of the so-called “Saturday-morning-meetings”, a meeting where all executives come together once a week to discuss all problems arising in their departments. This allowed Walton, even in a fast-growing company, to control the every-day-business on a regular basis, to identify the core problems and to make plans of how to solve them. It has to be clear that he did not intend to solve all problems on his own, but rather to delegate the solution to his associates, as all employees are referred to at Wal-Mart, in order to show his confidence and to encourage them. Walton therefore also put emphasis on the fact that he never wanted his word to be sacred, as he was conscious of having some weaknesses, and therefore relied on others where he thought they would do better than him (Walton, 1992 p.147).
Another way of controlling and directing within the organisation were Sam’s regular visits in the stores where he intended to both motivate and check on his associates at the same time. He loved the opportunity to learn about the problems “on the frontline”, and to discuss potential solutions with the personnel. A former Wal-Mart Vice-President once called it “management by looking over your shoulder” (Walton, 1992 p.151).
On the other hand it has to be clear that Walton did not intend to over-control his employees, but rather make them contribute towards one of his highest goals: “constant change” (Walton, 1992 p.259). He was absolutely aware of the necessity of change for the survival, the thrive and the growth (Hutchinson, 2002) of Wal-Mart, and also that change is not a thing to be looked at once a year or so, but far more, that change is a dynamic, ongoing never-ending process.
One example of how important change was for Sam Walton is that he never stopped looking at competitors, looking at what they did, how they did it and what could have been adopted to improve Wal-Mart.
When we talk about management, planning is another important point to look at. While planning and therefore goal setting is, in the context of Wal-Mart, also relating to directing work in other words the motivation of employees towards achieving goals (Schwartz, 1984 p.33) these two management functions will be analysed together. Sam Walton was, when planning, always setting high goals. He thought that “high expectations are the key to everything” (www.motirator.com), and so goals set by Sam were high, but achievable when people committed themselves to work on them. Walton did not see it as a problem when goals were not achieved, if people had just tried hard enough. Moreover, he was more than ready to help reach goals and reward the achievement. This is also the reason why Wal-Mart, as one of the first organisations which offered their associates stock bonus programmes to enable them to participate in the company’s success in 1971 (Walton, 1992 p.169).
To sum this up, Sam Walton had no single management style. Far more, he always tried to adopt the most suitable style in different situations, whether it was when delegating work (“Management by delegation”, Mullins, 2002 pp.582-593), in giving his employees space for creativity, only intervening if problems arose (“Management by Exception”, Schwartz, 1984 p.224), or by setting high objectives and measuring the outcome (“Management by Objectives”, Berke, 1999 p.91).
Having discussed Sam Walton’s most important management styles, the following part focuses on his leadership characteristics and how they have influenced Wal-Mart’s culture and led to its impressive success.
First of all one has to differentiate between management and leadership, as for example the “7S organisational framework” approach by Watson does, which refers to structure, systems and strategy as managers’ tools and the so-called soft Ss, staff, skills, shared goals and style as leadership characteristics (Mullins, 2002 p.255). To summarise this, management is more about getting things done (at a low emotional level), whereas leading is more concerned about interpersonal behaviour, such as communication or motivation.
Even though Sam Walton was a good manager, his real strength was to lead people effectively. This will be shown using the approach of French and Raven, which differs between five sources of power. Sam Walton’s power and influence on his associates can mainly be identified with “referent power” (Mullins, 2002 pp.257-259), resulting from the identification of Wal-Mart employees with their leader. Walton was so committed to his business and so hard-working that he affected most of his staff with his enthusiasm. One reason for Wal-Mart’s success therefore surely was Sam’s finding that “…if you love your work, you’ll be […] trying to do it the best you […] can” (Walton, 1992, p.314). It was not only this finding but also his ability to create this commitment for his associates, using “reward power” (Mullins, 2002 p.257) by showing his appreciation of and rewarding people’s efforts in one way or another, for example, in economic terms by sharing profits with the staff, or even only by using “well-chosen […] sincere words of praise” which he saw as “absolutely free – and worth a fortune” (Walton, 1992, p.316). Although these rules sound simple and obvious, there are still many leaders all around the world who do not use them at all.
Despite the strong identification of his associates with him, Sam Walton emphasised the importance of team-work. He encouraged people to help each other where they can, as often as possible, as long it is for the benefit of their personality or of the company. This is reflected both in the open-door-policy of Wal-Mart, where all staff have the right to speak to their manager at any time, and by the “Sundown-rule” (Danner, 2000 http://www.fh-landshut.de), where all internal enquiries, whether by phone or in person, have to be answered on the day they came in. By implementing these policies Walton achieved one of the most important points of his company’s success: the Wal-Mart family feeling, which assures both the staff’s commitment and their loyalty.
A frequent question in the literature is whether leaders are born or made. The qualities approach states that leadership “cannot be learned” (Mullins, 2002 p.261). Even though this is still heavily debated (Holdsworth, 2002, p.16), Sam Walton is surely an example of a leader that was born. He led people before he has ever had the chance to learn about leading, for example, as mentioned before, during his time at school or university. As leading includes followers, Walton was - by nature - a person people liked to follow, as it is described in one quote from an early business partner: “…you couldn’t help but believe in the man”
(Walton, 1992 p.47). So Sam’s natural leadership skills and the “high follower readiness” (Mullins, 2002 p.277) which resulted from them were another key to Wal-Mart’s success.
One of the more recent ideas about leadership analysis was the “transformational leadership” approach, describing how the behaviour to achieve goals is influenced (transformed) by the leader’s personality. It states that by combining the factors, leader’s charisma, his motivation skills, intellectual challenge for the associates and consideration for the individual will create a work atmosphere that enables outstanding results
(Hall & Johnson, 2002 http://edis.ifas.ufl.edu).
Sam Walton definitely was such a leader, having those outstanding skills which allowed him to “transform” his associates in the way mentioned. He always gave his partners high goals, but motivated them and gave them the feeling that they really count for him, and therefore his staff were much more willing to work hard. A way of doing that was, as stated earlier, to visit his stores, what he continued until the end of his career. He just entered stores, looked around, talked to his staff, discussed their problems and proposed improvements. Most of the associates felt both honoured and appreciated after they had been visited, that it really pushed their motivation to help their company growing. Although Sam was finally not able to visit all his stores, he tried to find other ways to create this special feeling, one of which is the famous “Wal-Mart-Cheer”, a cheer that is performed every day by every staff member in every shop worldwide before the store opens.
Regarding all of Sam Walton’s management and leadership one really has to say that he was a successful leader and motivator. Anyhow, there were also some elements in his style which have or could have caused problems during his career, which are discussed in the following.
For example, when considering ethical issues, Walton showed some tendencies towards inequality in his business policies. But when it comes to management skills today, business ethics is one of them, and one way of behaving ethically in a business environment is by assuring equal opportunities (Schwartz, 1984 p.65), for example for women in management positions. Walton ignored this, as during his time as CEO or Chairman of Wal-Mart there were almost no women in executive positions. Not to take women into consideration as managers would nowadays be much less tolerated, neither by the workforce nor by the public.
Another potential problem of Sam Walton’s leadership characteristics was the personal touch involved in his style. This could possibly work in a small company, but the bigger Wal-Mart grew the more difficult it was to maintain the high level of personal commitment by the staff, which resulted in the high identification with, as Walton was called by his associates, “Mr Sam”. Having virtually no chance, or, after his death, having no chance to meet their admired leader personally could result in frustration and, as a consequence, a decrease in the commitment of the employees. And there are some developments which seem to prove this, for example, Wal-Mart’s difficulties in internationalisation (why follow somebody who no longer exists?).
But even if there are some potential problems where one could say that those points could have contributed to failure, they actually never did; so all in all it has to be pointed out that Sam Walton was an outstanding entrepreneur, combining a wide range of both management and leadership skills. The combination of his great ability to motivate as well as his never-ending drive for improvements were – and still are – key factors of Wal-Mart’s incredible success.
Berke, B. (1999) Business Leadership and Culture Edward Elgar Publishing, Glos
Mullins, L.J. (2002) Management and Organisational Behaviour, sixth edition, Pearson Education, Essex
Schwartz, D. (1984) Introduction to Management, second edition, HBJ Media Systems, New York
Walton, S. & Huey, J. (1992) Sam Walton – Made in America – My Story Doubleday/Bantam, New York
Websites (accessed 29/11/02)
http://www.motiration.co m/quotations.phtml? LastName=Walto n&FirstName=Sam
Hall, J.& Johnson, S. (2002)Transformational Leadership: The Transformation of Managers and Associates [online]
Danner, M. Die (2000) Wal-Mart Unternehmensstrategie [German] [online]
Available: http://www.fh-landshut.de/ ~alumni/KnowledgeBase/Hausarbeiten _Data/Wal%20Mart.doc
Hutchinson, D. (2002) Principles of Management, Lecture notes
Holdsworth, R. (2002, December) Entrepreneurs: are they born or made?, Cambridge Agenda, Cambridge
Information also based on author’s knowledge about retail business