The Wal-Mart mess: Everybody does it (and we don’t mean bribery)

By Jack and Suzy Welch
May 1, 2012

“Ignore him, he’s a whack job.”

“She’s just bitter she didn’t get promoted.”

“He’s been shooting his mouth off for years – and it’s always nothing.”

Those lines sound familiar? If you work in business, they probably do – it’s how people talk about whistleblowers. Shocking? It’s just the truth. Even though whistleblowers may have a noble reputation in the media, gracing magazine covers and prime-time TV spots, when they surface within a company, management almost always brushes them off with a discrediting back story or a little piece of history that explains away all their annoying accusations. And here’s why that happens: In the vast majority of cases, whistleblowers are, to some degree, crazy or vengeful or both.

Until, one terrible, awful day when, speaking out of vengefulness or ethical earnestness, the whistleblower also happens to be telling the truth. And then, well, you get a crisis like the one Wal-Mart finds itself tangled in today.

Now, make no mistake. We think Wal-Mart is a great company. It’s created upward mobility for thousands of people and a million-plus jobs around the world, and it remains the American consumer’s greatest ally in the war against inflation. Furthermore, the recent accusations against Wal-Mart are just that – accusations.

But those allegations, proven true or not, still offer an important lesson to everyone in business, and we don’t mean the one that’s being widely bandied about right now – that big companies like Wal-Mart, because of their size and power, engage in corruption because they can. We don’t think that’s generally true. Nor do we think the biggest take-away from the Wal-Mart story is how hard it is for American companies to do business abroad without bribery. Actually, it’s perfectly possible to operate globally – and win – while playing by good old American rules and regulations.

No, to us, the Wal-Mart story is most importantly a reminder of the pervasive, even understandable, impulse within companies to ignore whistleblowers because they’re so often time-wasters. And it’s a reminder of why you can’t turn your back on them.

Ever.

In fact, the only way to deal with a whistleblower’s accusations – again, every single time and often against your own instincts – is with a hyper-bias toward believing that the informant is onto something big. Such a bias must impel you to investigate every claim ferociously. You may think it’s a waste of time and money, and will go nowhere; you should be so lucky. And for goodness’ sake, don’t let the investigation be conducted by the boss who’s been accused of wrongdoing! Bring in an outside agency to do the sleuthing, or at the very least, executives outside the scope of the alleged problem, with no relationship to the people involved. Yes, you may hate the whole mishegaas and so might everyone it touches. But it’s the only way to overcompensate for the propensity to wish whistleblowers away with the perfunctory spot check or the “Everything O.K.?” kind of look-see that usually occurs.

Now, in the months ahead, Wal-Mart will very likely experience the five steps that characterize virtually every organizational crisis. First, the company will quickly come to see that its problem is actually much worse than it originally appeared. That’s the nature of these kinds of things; the first report of wrongdoing is usually just the tip of the iceberg. Second, Wal-Mart will find there are no secrets in this world. Every last detail of the Mexico situation – and of the corporate cover-up, if there was one – will eventually seep out. Third, Wal-Mart’s handling of the crisis will be depicted in the press in the worst possible light. Being vilified goes with the territory. And fourth, there will be “changes.” That is, someone at Wal-Mart will be fired for what’s happened, and maybe many more “someones” will share the fall.

Finally, though, Wal-Mart will become a better company for it. That’s the good news about every ugly crisis. It teaches you something your organization desperately needed to know and usually ensures the same mistake will never happen again.

It’s too bad, though, that this crisis had to happen in the first place. And it wouldn’t have, if Wal-Mart had done a very hard, very necessary thing.

Taken every whistleblower at his word.

Jack Welch was the CEO of General Electric for 21 years and is the founder of the Jack Welch Management Institute at Strayer University. Suzy Welch is an author, speaker and the former Editor of the Harvard Business Review.

PHOTO: A general view of a Wal-Mart store in Mexico City, April 24, 2012. REUTERS/Edgard Garrido

 

5 comments

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WAlmart is good. THey pay crappy wages use Part time workers with variable shifts to screw them out of paying benefits. Most of the stuff is junk from China. Are you kidding Me! They wipe out mom and pop stores and ruin the profitability of all the other nearby competition. So how much do they Donate to Congress and who else do they bribe?

Posted by IDONTGETIT | Report as abusive

Great piece, Jack!

One further point that I may add is to make the whistle-blower accountable for the “wasted, false alarms.”

Let them know that you take their input serious. But when these situations amount to nothing, or much smaller than advertised, it takes you away from MORE SERIOUS and PRESSING issues.

Hopefully, that will help keep the SITUATIONS from becoming grasps for attention.

Posted by BobAbeel | Report as abusive

The key defect in the whole analysis is that Walmart’s internal compliance process worked well, a complaint triggering an investigation and concerns being raised. No one ignored the allegations.

Where they should be ripped apart is the fact that the internal audit was ignored (Jack, would you have ignored CAS recommendations?), and then the investigation was handed to the principal accused, a sure way to bury it.

If they had ignored a simple complaint.. no issue, it happens, but in this case they ignored a semi independent investigation. For this, they should be fined, heads roll and an independent monitor put in place, if found guilty.

Posted by GA_Chris | Report as abusive

Jack Welch knows about being crummy to people, he is king in that department. I was granted , by law , QDRO, to be able to stay on GE employee benefits until retirement. GE did not pay the premiums, I paid and never missed a payment..
AT the time there were about 20 older women in the whole US on this plan. For some reason Jack Welch decided to throw us off of the insurance plan a few years later, by this time only about 7 women were left alive. 7 in the whole county !
I contacted Jack directly and was told “He knew it was not right and against the law , but his company had more lawyers and more money than I did and he would wear me down.” And he did..
I wrote to him personally since I grew up with him, knew his family in Salem MA and thought he might reconsider when he knew how few older women were left….
A big resounding NO…..
It made my life very difficult for years and I am still bearing some of the financial repercussions to this day.
So yes, Jack can spot sleaze and underhandedness in businesses,,he knows it first hand….so GO Jack, hope you choke on your money !

Posted by Salemwitch | Report as abusive

Why does Reuters continue to provide a pulpit for these 20th century sophists?

Posted by tmc | Report as abusive