Better-paid employees = more profit

Walmart’s decision in 2015 to give its employees “the biggest pay raise in history” ignited a decade of growth, the Wall Street Journal reported:

Because supercenters blanketed much of America, many Walmart executives had been asking, “are we too big to grow?,” said Chief Executive Doug McMillon in an interview, looking back on discussions he had before taking the top job in 2014. “Some people developed a feeling that it was just too hard,” he said. As a result, the company had been focusing on improving profits by keeping down costs–including wages–while sales stagnated.

But as McMillon started his new job and talked to workers he heard that they needed higher wages, steady schedules, less inventory clutter in backrooms, consistent low prices and more middle managers in the stores, he said.

He crafted a plan to raise wages. He brought in a new crop of Walmart leaders including new U.S. chief executive and chief operating officers. Their proposal would reduce employee turnover, which would improve operations in the stores and warehouses. They could invest in more training to get workers to stick around with promotions. Stores would be more organized. Sales would increase, and Walmart would be better positioned for e-commerce, the argument went.

Walmart’s sales have grown each year since 2015 and its stock price has more than doubled over the past five years, the WSJ reported.

This will now be a Harvard Business School case study.