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Culture Clashes At Wal-Mart

In Perishables, the big news at Wal-Mart has been the departure of first Bob DiPiazza at Sam’s Club and, more recently, the departure of Bruce Peterson. Every departure of an individual has its own story behind it, as Dick Spezzano pointed out in the letter he sent us regarding DiPiazza’s departure.

Yet no man is an island, and so each individual’s story also plays out within a broader context. And in the consumer media, the departure of Julie Roehm made big news:

It isn’t often that the dismissal of a mid-level executive makes national news. But Julie Roehm is no ordinary executive. Before joining Wal-Mart, Roehm, 36, earned an edgy reputation as director of marketing communications at Chrysler Group (DCX). There she famously agreed to sponsor an alternative half-time Super Bowl show. It was jokingly called the Lingerie Bowl and featured scantily clad models. After protests, Chrysler backed away. Given her colorful career, Roehm’s hiring by one of America’s most colorless companies always struck friends and industry insiders as odd. And few were surprised when Roehm and Wal-Mart parted ways.

Roehm was dismissed; she didn’t retire or resign. It looks like there will be litigation over various allegations of impropriety on her part. But there is a subtext to everything that is going on:

As Roehm tells it, hers is a cautionary tale of what happens when a self-described change agent goes to work for a company that needs to reinvent itself but can’t. In Wal-Mart’s case, she says, the concept of “Everyday Low Prices” was so deeply embedded that the retailer’s ambition of getting upscale shoppers to buy more was a nonstarter. Roehm acknowledges mistakes, among them moving too quickly and not adapting to her new workplace. But she also paints a picture of warring fiefdoms and a passive-aggressive culture that was hostile to outsiders. Wal-Mart, she says “would rather have had a painkiller [than] taken the vitamin of change.” What has she learned? “The importance of culture. It can’t be underestimated.”

I think she actually means that the importance of culture can’t be overestimated. Which is both true and an odd thing for a marketing executive to have to “learn” by being fired.

Wal-Mart invested substantially to woo Ms. Roehm:

Roehm and her husband, Michael, who looks after their two boys, age 5 and 8, wondered about moving from suburban Detroit to Bentonville. The pace was going to be a lot slower in Arkansas. In the end, opportunity nixed the negatives. Wal-Mart was promising to continue paying the mortgage on the Detroit home until she sold it, and Roehm’s compensation wasn’t half bad: a base salary of $325,000, a signing bonus of $250,000, plus restricted stock of about $300,000, stock options valued at approximately $500,000, and an annual performance bonus of up to $400,000.

Yet she seemed to go out of her way to denigrate the Wal-Mart culture and the people who believe in it:

Wal-Mart headquarters, with its windowless offices and gray walls, was hardly inspiring for a woman unafraid of a little color. One of the first things Roehm did was paint her office chartreuse with chocolate-brown trim. That may have been her first mistake — and it’s revealing that Wal-Mart, in its response to Roehm’s suit, says she is free to collect “a step ladder and paint supplies” left behind after she was dismissed.

Being a “change agent” is always a sticky wicket. To effectuate change in a large organization, you need to persuade, and it is difficult to persuade if you are perceived as an outsider.

One temptation is to be quiet and listen for a while, blend in. Yet there is always the possibility that one will get co-opted, blinded by the group-think common in large organizations. This argues for speaking out fast and hitting the ground running.

Yet “change agents” have various situations to deal with. If one is brought in to turn around a company hemorrhaging money, sliding toward imminent bankruptcy, the mandate for change is likely to be strong. But Wal-Mart is growing, profitable and prosperous — just not as successful as some would like. This means there is a lot to lose.

So Julie Roehm’s dismissal of the culture at Wal-Mart is a kind of arrogance. How is she so certain that when the culture is destroyed, the new culture will produce better results?

Yet, Ms. Roehm’s chartreuse walls and the news reports of her riding in Ferraris aren’t really the point. The real point is that no “change agent” can operate effectively from a mid-level marketing postion. Only the CEO can make that kind of cultural shift happen.

If Lee Scott believes that a cultural shift is needed, then he has to buy the Ferrari, and if he doesn’t, no executive shift will make the cultural shift happen.

It is unclear what Lee Scott wants. He seemed to be pushing for substantive change, then backtracked. Yet the people making the key personnel decisions are the people whose policies he is backtracking from.

A lot of good merchants are leaving Wal-Mart. Each has his own reasons. But on some level, there is also the question of what the CEO really wants and what is really valued by the company.

One executive still at Wal-Mart told the Pundit he wasn’t certain how long he would stay. He said: “I only know how to sell stuff and make money doing it. I’m not sure anyone cares about that anymore around here.”

That is a cultural shift of epochal proportions.

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