Monday, February 03, 2003

Sam's 10 Rules for running a Business

“To fulfil a dream, to be allowed to sweat over lonely labour, to be given a
chance to create, is the meat and potatoes of life. The money is the gravy.”

Bette Davis
The Lonely Life

We will look at Sam’s 10 rules for running and businees. After every Rule I have tried to provide examples from his book Made in America and my opinions on these.

One of today’s most talked about success stories, is Wal-Mart. If Sam Walton (1918-1992) can do it, why not you? Here are Sam’s rules for building a business.

Rule 1: Commit to your business. Believe in it more that anybody else. I think I overcame every single one of my personal shortcomings by the sheer passion I brought to my work. I don’t know if you’re born with this kind of passion, or if you can learn it. But I do know you need it. If you love your work, you’ll be there every day trying to do it the best you possible can, and pretty soon everybody around
will catch the passion from you like a fever.

Sam would always try to check out the competitors (small or big) and learn any new ideas he can from them. On his own account he has flown thousands of miles every year to visit as many stores as possible.


Rule 2. Share your profits with all your associates, and treat them as partners. In turn, they will treat you as a partner, and together you will all perform beyond your wildest expectations. Remain a corporation if you like, but behave as a servant leader in a partnership. Encourage your associates to hold a stake in the company. Offer discount stock and grant them stock for their retirement. It’s the single best
thing we ever did.

This was something Sam learned from this wife. She questioned him anout why the wealth should not be created for everybody. The best part about Sam is that once he is stuck onto an idea then he is bent upon giving it his best shot. He provides sn example of a truck driver who after working for Wal mart for more than 14 years has more than $400,000 with him. Sam has created a very fair compensation system.

Rule 3. Motivate your partners. Money and ownership alone aren’t enough. Constantly, day by day, think of new and more interesting ways to motivate and
challenge your partners. Set high goals, encourage competition, and then keep score. Make bets with outrageous payoffs. If things get stale, cross-pollinate; have
managers switch jobs with one another to stay challenged. Keep everybody guessing as to what your next trick is going to be. Don’t become too predictable.

Sam was one of the most shrewd motivators. He was tough yes, but he also knew that only when people are put into the the toughest kind of roles they would give their best. Also, he is great believer of competition – internal and external. And one of the best things he has used is the ability to keep people guessing sbout his views, dislikes and likes. He never committed himself easily.

Rule 4. Communicate everything you possibly can to your partners. The more they know, the more they’ll understand. The more they understand the more they’ll
care. Once they care, there’s no stopping them. If you don’t trust your associates to know what’s going on, they’ll know you don’t really consider them partners.
Information is power, and the gain you get from empowering your associates more than offsets the risk of informing your competition.

He is a master communicator. I mean in terms of verbal communication with his employees – like investing millions of dollars in satellite technology and whenever necessary communicating with all his stores directly. But communication in terms of Information – performance information – sales, revenue, profits, inventory, successful plans etc, to the minutest level of detail and also being very open in sharing information with this employees. He ackowledges that this would provide a avenue for his competitors to know more about his company but the empowrement would more or less offset for this.

Rule 5: Appreciate everything your associates do for the business. A paycheque and a stock option will buy one kind of loyalty. But all of us like to be told how much somebody appreciates what we do for him or her. We like to hear it often, and
especially when we have done something we’re really proud of. Nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise. They’re
absolutely free – and worth a fortune.


Rule 6. Celebrate your successes. Find some humour in your failures. Don’t take yourself so seriously. Loosen up, and everybody around you will loosen up. Have fun. Show enthusiasmalways. When all else fails, put on a costume and sing a silly
song. Then make everybody else sing with you. Don’t do a hula on Wall Street. It's been done. Think up your own stunt. All of this is more important, and more fun, than you think, and it really fools the competition. “Why should we take those cornballs at Wal-Mart seriously?”

Sam would appreciate everything he would get a chance to appreciate. Not only this he has institutionalized this in the company. The store managers, the department heads, the hourly employees all are encouraged to cheer – say by announcing in the public address system in the store about a new record, a milestone etc – but in having departmental and store competitions etc.


Rule 7. Listen to everyone in your company. And figure out ways to get them talking. The folks on the front lines-the ones who actually talk to the customers-are the only ones who really know what’s going on out there. You’d better find out what
they know. This really is what total quality is all about. To push responsibility down in your organization, and to force good ideas to bubble up within it, you
MUST listen to what your associates (and customers) are telling you.

This ability to Listen for me would be the single most important character of Sam. He was always ready to listen to everything. In fact he had the ability to listen so well that he would change his own opinion if he liked what he heard. In fact the famed Walmart distribution system was not Sam’s idea but it was implemented and successful because sam listened.


Rule 8. Exceed your customer’s expectations. If you do, they’ll come back over and over. Give them what they want-and a little more. Let them know you appreciate them. Make good on all your mistakes, and don’t make excuses-apologize. Stand
behind everything you do. The two most important words I ever wrote on that first Wal-Mart sign: “ Satisfaction Guaranteed.” They’re still up there, and they have made all the difference.

From driving his pick up every week 10s of miles to get that extra penny saving which he can pass on to his customers in the early days of his retails life, Sam has always wanted to provide the best to the customer and in fact exceed his expectations.

Rule 9. Control your expenses better than your competition. This is where you can always find the competitive advantage. For twenty-five years running, long
before Wal-Mart was known as the nation’s largest retailer-we ranked number one in our industry for the lowest ration of expenses to sales. You can make a lot of different mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient.

Thrift. Thrift and Thrift. This was one of the most important competitive advantage. Sam worked hard and also made everybody else work hard to cut down costs – like cutting down on pilfretion, having a computerised inventory system, matching sales and projected sales to distribution, operating on less or zero debt.

Rule 10. Swim upstream. Go the other way. Ignore the conventional wisdom. If everybody else is doing one way, there a good chance you can find your niche by going in exactly the opposite direction. But be prepared for a lot of folks to wave you down and tell you you’re headed the wrong way. I guess in all my years, what I heard more often than anything was: a town of less than 50,000 population cannot support a discount store for very long.” SAM WALTON.

Yes, he went against the conventional wisdon but I believe this is because he knew that he was mostly right. He took his chances but the conventinal wisdom was wrong than he was against it.








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