Internal Memo about Walmart Benefits

Copyright 2005 Houston Chronicle
By LOREN STEFFY

In an old store on the town square in Bentonville, Ark., sits a wooden desk that changed the world.

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It once belonged to Sam Walton, humble furniture from which he gave birth to what is now a retailing empire with $285 billion a year in sales.

The trip from Walton's original store to Wal-Mart's world headquarters is a few minutes. The journey from Walton's desk to the internal memo about Wal-Mart benefits that surfaced last week is far longer.

Somewhere along that road, the company lost its soul.

Limiting tenure
The memo, written by Susan Chambers, the executive vice president for benefits, outlines ways Wal-Mart can reduce employee benefits expenses, which cost the company $4.2 billion between 2002 and 2005 and are growing at 15 percent a year.

The problem, it seems, is that the employees are sticking around too long. Tenure drives costs. The more years workers have with the company, the more paid time off, the bigger the 401(k) contributions and profit-sharing.

As Chambers notes, an associate with seven years experience is almost 55 percent more expensive than someone with one year on the job, "yet there is no difference in his or her performance."

The solution? Shift more work to part-time employees, who don't get benefits. Chambers proposes lowering life insurance benefits and cutting 401(k) contributions to 3 percent of wages from 4 percent.

In other words, do everything possible to discourage long-term employment.

She also suggests raising health care premiums for employees' spouses because they are "by far the most expensive plan members."

Pushing out the unhealthy
Chambers' memo says Wal-Mart can encourage a healthier work force by adding physical activity to most jobs. Cashiers, for example, could be required to gather shopping carts.

The idea isn't that the exercise would make employees healthier, it's that it would weed out the unhealthy, overweight and infirm, groups that have higher medical bills.

"These moves would also dissuade unhealthy people from coming to work at Wal-Mart," Chambers wrote.

Think of the savings if each Wal-Mart simply posted a sign that said "fatsos need not apply."

In fairness, Chambers' memo outlines some possible improvements as well. It proposes shortening the time employees have to wait to be eligible for health benefits and discusses opening in-store clinics for employees to reduce costly trips to the emergency room for routine care.

But she also acknowledges long-standing criticism of Wal-Mart. Its health care plan is expensive for low-income families, which make up a big chunk of its work force.

Under a new plan unveiled last week, Wal-Mart employees, who earn an average of $17,500 a year, could face out-of-pocket expenses of up to $2,500, according to the New York Times.

Only 48 percent of the company's workers enroll in its benefits plans, compared with the national average of 68 percent, Chambers said in the memo. Forty-six percent of Wal-Mart employees' children are either on Medicaid or uninsured.

Executive benefits
Wal-Mart is far less stingy with its executives. Chief Executive Lee Scott nabbed $12.5 million last year, not counting stock options. That includes contributions to a 401(k) plan and term life insurance, two benefits Chambers would slash for employees.

There's no mention of whether Scott keeps his health up by gathering shopping carts in the parking lot.

He also gets more than $100,000 a year for personal use of a corporate jet, a far cry from Walton's famed pickup truck.

A different Wal-Mart
A few years ago, I toured Walton's original store, which is now a museum. Looking at that wooden desk, it's hard to reconcile the image of Wal-Mart then and now.

Wal-Mart, of course, is no longer a small business in a small town. It has 1.7 million employees worldwide, and health care is a significant and rising expense.

Wal-Mart is not alone in struggling with these costs. But its proposed solutions reveal the company's dark heart. It's extracting the cost from those who can least afford it.

Business doesn't look back. Wal-Mart led the charge from the town square to the edge of town. It trained us to believe that the cost of our purchases was all that mattered. Somewhere along the road, the company started believing that, too.

It taught us to expect low prices — always. Chambers' memo shows a company that believes in the low price at any cost.