Scott, H. Lee Jr. 1950–
H. Lee Scott Jr.
Chief executive officer and president, Wal-Mart
Born: 1950, in Joplin, Missouri.
Education: Pittsburg State University, BA, 1971.
Family: Married Linda (maiden name unknown); children: two.
Career: Yellow Freight Systems, 1977–1979, terminal manager, Springdale, Arkansas; Wal-Mart, 1979–1995, assistant director of transportation, director of transportation, vice president of transportation, vice president of distribution, and senior vice president of logistics; 1995–1998, executive vice president of merchandising; Wal-Mart Stores division, 1998, president and chief executive officer; Wal-Mart, 1999, vice chairman and chief operating officer; 2000–, chief executive officer and president.
Awards: Named by BusinessWeek as one of the "Top 25 Managers of 2002" and one of the "Best Managers of 2003."
Address: Wal-Mart Stores Inc., 702 Southwest Eighth Street, Bentonville, Arkansas 72716; http://www.walmart.com.
■ As only the third CEO of the retail giant Wal-Mart, H. Lee Scott Jr. maintained a low profile while steering the company to increased good fortune. Scott joined Wal-Mart in 1979, overseeing the company's trucking fleet. He gained a reputation as a master of logistics, moved into sales and merchandise, and became CEO in 2000. An aggressive businessman and a risk-taker, Scott managed to increase company profits at a time when many retailers were forced to scale down and cut back. Engineering an ambitious expansion program both in North America and abroad, Scott maintained the legacy and culture of the company's founder, Sam Walton.
Born in Joplin, Missouri, Scott was the second of three sons. During Scott's boyhood, his family moved to the small town of Baxter Springs, located in southeastern Kansas, where his father ran a gas station and his mother taught music at the local elementary school. Scott's early working life was spent helping at his father's Phillips 66 station. After graduating from high school, Scott attended college at the nearby Pittsburg State University. To pay for his tuition, he began working full-time at a local company, making tire molds and earning $1.95 an hour. By the time he was 21, Scott was married, had a child, and was trying to finish school. He lived with his wife and son in a small trailer. To get to work and school, Scott drove a broken-down Ford Falcon with no heater. In 1971 Scott completed his studies, graduating with a degree in business administration.
With a wife and a son to support, Scott applied for a management training position at Yellow Freight System—a large, Kansas-based trucking company. He was turned down, but thanks to a family friend's intervention, Scott was eventually hired on. By 1977 Scott and his family were in Springdale, Arkansas, where he worked as a terminal manager for Yellow Freight. During his time there, Scott had his first encounter with Wal-Mart, a fledging Arkansas company founded by Sam Walton in Bentonville, Arkansas, in 1962. In trying to collect a disputed $7,000 bill owed to the trucking company by WalMart, Scott met with David Glass, head of distribution and finance and future CEO of the company. Glass refused to pay the bill, but he was impressed with Scott and offered him a job at one of the company's new distribution centers. Scott recalled that he turned Glass down flat, stating, "I'm not going to leave the fastest-growing trucking company in America to go to work for a company that can't pay a $7,000 bill" (BusinessWeek, November 15, 1999).
AN IMPORTANT CAREER MOVE
Despite his initial rocky encounter with Wal-Mart, by 1979 Scott had left Yellow Freight to take a job with Wal-Mart as head of the transportation department. But again, Scott's first day at the company offices was anything but smooth. Upon arriving to start his new job, he learned that Glass still had not moved out Scott's predecessor. Instead, Scott would have to take on the number two position in the transportation department until other arrangements could be made. Instead of walking out, Scott agreed to the temporary arrangement, impressing Glass with his willingness to be flexible and his notable lack of ego, qualities that helped Scott immensely throughout his career. Scott also earned Walton's stamp of approval. When Scott was hired, Walton looked him over and asked, "Do you think you can do this job?" Scott said yes, at which point Walton looked at him, and after a long pause Walton agreed, telling Scott, "Yes, I think you can" (London Sunday Times, June 10, 2001).
Yet Scott found working at Wal-Mart anything but easy. He became known as a stickler for the rules. Whenever a driver was late delivering a load or was caught drinking on the job, Scott fired off a letter to all drivers, threatening to terminate anyone who broke company rules. His heavy-handed tactics earned him few friends among the drivers, many of whom believed they were being unfairly singled out because of the inappropriate actions of a few. Finally, several went to Walton, complaining of Scott's actions and asking that he be fired. Walton talked to Scott and ordered him to listen to the drivers' complaints. Walton advised Scott to ask the drivers what he could do to fix the problem instead of simply complaining about the infractions. Then Walton told Scott that he was to shake the hands of all the drivers who came to see him and thank them for using the company's "open-door" policy to talk to management. It was a lesson that Scott never forgot.
Over the years Scott was promoted to positions of greater responsibility within Wal-Mart. He was pivotal in developing the automated distribution system that linked suppliers and stores by computer. He served as director of transportation, making him possibly the only Wal-Mart executive ever to have driven a Wal-Mart delivery truck and to have spent time in a distribution center. Scott demonstrated to higher management that he not only understood his job but also understood what made Wal-Mart work: respecting customers and employees alike and keeping prices as low as possible.
In October 1995 Scott was in Europe for the company looking at distribution centers and logistics technologies. One evening he returned from making a presentation to find a fax from Wal-Mart's CEO, Don Soderquist, asking Scott to call the Bentonville office. When Scott reached Soderquist the next day, Soderquist asked Scott if he would be interested in taking over the merchandising branch of the company. Scott agreed and was promoted to vice president of merchandising shortly thereafter.
Despite having virtually no experience in merchandising, Scott took the same kinds of risks he had taken while working in distribution. In his first two years, sales within the division increased. Scott also showed how greater profits could be realized by cutting back on inventory. To make Wal-Mart buyers savvier in choosing products for the company, Scott implemented better training programs. He also pushed for improved store design and packaging to make working areas more manageable for store employees. In addition, he studied ways to carry even more merchandise in the stores and to increase customer traffic to the stores during the week. He also stepped up customer service in all stores, making them more accessible. Scott opened four "concept" discount stores throughout the country. The stores featured different fixtures and carried a mix of Wal-Mart products and other merchandise. While the products and setup were nothing out of the ordinary, the experiment again demonstrated Scott's willingness to take chances on new things. In monitoring the concept stores' performance, Scott applied those ideas that worked in new WalMart stores.
A SPOKESMAN EMERGES
The year 1996 proved to be important for Scott. That spring the company faced allegations over the use of sweatshop labor in the production of one of Wal-Mart's more popular lines of clothing endorsed by the celebrity Kathie Lee Gifford. As a result, the company came under intense media scrutiny. Executives met in Bentonville to discuss what to do to reverse the bad publicity. The company had by now cultivated a group of young but experienced senior executives, including Scott. It was decided that Scott would handle the media and act as the company's spokesman. Scott suggested that the company ask the Clinton administration to create a government panel, consisting of industry and government officials, to be chaired by Clinton's secretary of labor, Robert Reich. Before the television cameras, Scott pledged that Wal-Mart would begin policing its suppliers' factories more closely. Although the issue remained a touchy topic for the company, Scott successfully defused what might have been a public relations and economic disaster for Wal-Mart.
In the meantime, Scott continued to work diligently to improve Wal-Mart's apparel sales. Almost from the beginning, Wal-Mart had floundered within the clothing market, controlling only about 12 percent of the national clothing market, making it a far less important player than other store chains. Under Scott, Wal-Mart overhauled its apparel-buying policy to emphasize quality, durability, and fashion. In time Wal-Mart's volume of apparel sales grew to between 20 and 25 percent of the company's total sales volume, almost double what it had been when Scott took over.
By 1998 Scott had been named president and CEO of the Wal-Mart Stores division, overseeing the merchandising and operations of the more than 2,300 Wal-Mart stores. That same year, as the company posted a drop in profits, there were those who wondered whether Wal-Mart was in for some hard times ahead. Scott took immediate and vigorous action to counter the trend, cutting costs by $2 billion and thereby saving the company $150 million in interest costs. The following year, Scott was promoted again, this time to vice chairman and COO of Wal-Mart. Falling under Scott's purview were the company's stores, supercenters, Sam's Club outlets, and international operations. To keep in touch with the company, Scott visited stores at least once a week, observing everything from displays to cleanliness to interactions between customers and Wal-Mart employees. He spoke with employees and managers and, in many cases, made suggestions about how the store could be run more efficiently.
Scott proved himself invaluable in other ways as well. A team player, he encouraged the general managers to do their jobs, take risks, and stay focused on the company's goals. In an environment in which retailers and suppliers were often at odds, Scott labored to remove the barriers and work as a team rather than as adversaries. He also created "supplier councils," high-level discussion groups that provided a forum for new ideas and approaches as well as a place where concerns could be heard.
TAKING THE REINS
In 1999 David Glass, then CEO of Wal-Mart, announced that he was stepping down in 2000. To insiders it was not surprising when in late 1999 Scott was tapped as Glass's success–or and the first chief executive not to have been appointed to the top job by Walton himself. In early 2000 the announcement was made that Scott was to become the new CEO and president of Wal-Mart. He was only 50 years old.
As a leader, Scott was very similar to his predecessors. A workaholic and a networker, Scott maintained relationships with people throughout the company. He watched over the company from Walton's old office, a room little larger than a child's bedroom, sparsely furnished and crowded with papers and reports. Initially Scott drove a BMW to work every day, until he noticed that there was an increasing number of BMWs parked in the Bentonville headquarters parking lot. Scott then traded in his car for a 1999 Volkswagen bug. For Scott, driving the car was about more than appearances; he felt that it was his responsibility to set a tone for the employees, discouraging them from indulging in status symbols or other signs of ostentatious wealth. Compared to many other CEOs, Scott's annual salary was paltry. In 2002 he earned $1.8 million, which was well within the range of Wal-Mart's salary structure for upper management.
Like his predecessors, Scott maintained a deliberately low profile. He did not seek out the press but did not shy away from the media when asked to comment on company policies or events. He admitted when the company blundered, but he also defended the company against accusations of low pay, poor morale, and other problems. Still, Scott must have been doing something right, as Wal-Mart was named one of the best places to work in the United States during 2002 and 2003. Scott also believed in encouraging his workers to take risks and stressed that failures provide an opportunity to learn. On his store visits, he actively sought input from employees. Known for his quick jokes and sarcastic wit, Scott learned to make his point without being heavy handed.
Many industry watchers believed that Wal-Mart's success or failure was to be decided in three areas: people, supplier relations, and globalization. Further, many believed that for the company to succeed, Scott had to lead effectively. Many observers pointed out that Scott was responsible for building the systems that cut costs so dramatically during the 1980s and 1990s. Given Scott's history with the company, he was uniquely qualified to supervise a more integrated approach to training the millions of new employees whom the company needed as it undertook massive expansion.
In an address to the U.S. Department of Labor colloquium in 2002, Scott pointed out that Wal-Mart watched carefully the changing demographic trends in gauging the future needs of the company, including older workers not ready to retire and the growing Hispanic and African American populations as sources of new employees. Scott also planned to build a better benefits package, using the offer of health-care coverage for both full- and part-time workers as a major recruiting tool. Scott hoped to continue the company's program of rapid ad vancement designed to attract younger workers as well as touting Wal-Mart's flexible scheduling for women with children.
Although not as pressing an issue, drawing talented executives to the company was also a priority for Scott. Traditionally Wal-Mart had chosen its leadership from its own ranks. However, with the company's rapid national and international growth, it needed to find qualified people to oversee operations in the United States and abroad. In recruiting executives, Scott showed a real flair and was able to lure away top employees from such competitors as Best Buy, Target, and Kohl's as well as from department stores and specialty retailers.
Scott faced other challenges. As of 2004 Wal-Mart was the world's most-sued entity, after the U.S. government. The company's lawyers faced an astonishing array of legal challenges from tort cases—often referred to as "slip-and-fall" suits—to large, class-action suits filed by employees. In many of these situations, Scott demonstrated the ability to compromise, even when it was clear that Wal-Mart was in the right.
Scott positioned Wal-Mart to grow internationally. The company was already well established in western Europe when he became CEO and had developed plans to expand into Asia. But Scott also continued with expansion throughout North America, particularly in the United States, despite criticism from those who believed that the company had saturated the American market.
See also entry on Wal-Mart Stores, Inc. in International Directory of Company Histories.
sources for further information
Hisey, Pete, "Leading from the Trenches: With a Comprehensive Knowledge of the Inner Workings, Scott Keeps a Steady Hand on Wal-Mart's Helm," Retail Merchandiser, February 2003, p. 27+.
"Lee Scott, Jr." BusinessWeek, January 14, 2002, p. 71.
Longo, Don, "Mastering the Art of Passing the Torch," Retail Merchandiser, May 2001, p. 23.
Moin, David, "Wal-Mart's New CEO Seen Pivotal in Apparel Strategies," WWD, January 18, 2000, p. 2.
"Mr. Sam: The Folksy Tycoon with a Killer Instinct," Sunday Times (London), June 6, 2001.
"New CEO Doesn't Mean New Style for Wal-Mart," Arkansas Business, January 24, 2000, p. 10.
Rushe, Dominic, "Wal-Martians," Sunday Times (London), June 10, 2001.
Saporito, Bill, "Lee Scott: Walking in Mr. Sam's Footsteps," Time, April 26, 2004, p. 74.
"Scott Takes Helm at Wal-Mart," MMR, June 26, 2000, p. 165.
Troy, Mike, "Lee Scott's Leadership Legacy," DSN Retailing Today, June 5, 2000, p. 19.
——, "Mega-merchant with Grass Roots," Discount Store News, December 8, 1997, pp. 25–26.
Zellner, Wendy, "Retailers: Someday, Lee, This May Be All Yours," BusinessWeek, November 15, 1999, http://elibrary.bigchalk.com/libweb/elib/do/results?firsttime=y&set=search&referer=.