First, I’d like to give a big shout out to the Wal-Mart War Room! Sorry you folks picked such a difficult job. You might be very good at applying lipstick, but you still have to put it on a pig. The truth about Wal-Mart makes your job essentially impossible, as the now-infamous Susan Chambers Wal-Mart memo clearly reminds us.
By now everybody knows the basic appalling facts of the memo. In order to cut down healthcare costs, they want to discourage healthy people from applying and increase part time workers. We’ve also seen the damning statistics, like 46% of Wal-Mart workers’ children being on Medicaid or uninsured.
I want to get past that here. As Kevin Brancato puts it, this memo is full of “unadulterated Wal-Mart facts” and I think that means we can learn a lot more about the way Wal-Mart thinks by getting past our collective outrage at the proposed solutions to Wal-Mart’s healthcare problem and dealing with the subtle parts.
I’ll be going quote by quote, using the final version of the memo released by Wal-Mart. It’s available here.
p. 1 I, with the support of McKinsey & Company, recently led a 15-person team, drawn from across the company..
This memo was not the result of some Ollie North-style rogue executive. 15 people and an outside consulting firm worked on it. Later it says the executives who saw the preview loved the suggestions. Wal-Mart really thinks this way.
But at least one person at Wal-Mart doesn’t think this way. That would be the person who sent a copy of this memo to Wal-Mart Watch. To you, anonymous him or her: You are my new hero. Your bravery gives me hope that American corporations might have a future that doesn’t involve scrounging for every last dollar. And I congratulate you for making your bosses very, very nervous. Can you imagine how they must feel knowing that any old planning memo they write might end up in the New York Times?
p. 2 Moreover, our offering is vulnerable to at least some of their criticisms, especially with regard to the affordability of coverage and Associates’ reliance on Medicare.
First, we have to give recognition to Wake-Up Wal-Mart here. They’ve owned this issue since their formation earlier this year. While other groups have covered this, clearly their work is what Chambers has in mind.
Second, if you’ve followed what Wake-Up Wal-Mart has done, you know when criticized Wal-Mart almost always claims that their healthcare benefits are great. Liars. This memo is proof that Wal-Mart knows better.
Third, just days before the memo came out, Lee Scott announced changes to the Wal-Mart healthcare program. It still has a $1000 deductible. Way to go on actually solving problems, people!
pp. 4-5 – Our population tends to over utilize emergency room and hospital services and underutilize prescriptions and doctors visits.
Perhaps that’s because they can’t afford prescriptions and doctors visits since their pay is awful and the deductible too high?
p. 5 – [Continuing same quote] This pattern is most evident among our low-income Associates, and one hypothesis is that may result from prior experience with Medicaid programs.
First, isn’t the phrase “low-income associate” redundant? I believe high-income associates would be managers, and even some of them don’t make very much.
Second, Chambers just admitted that the people most likely to take their jobs are below the poverty line. What does that tell you about careers at Wal-Mart?
p. 5 We have allowed our full-time associates to average only 34 hours of work per week.
This is incredibly important. If you don’t work 40 hours/week, the hourly wage that a Wal-Mart associate makes is completely useless for determining what their standard of living will be. The proper point of comparison has got to be weekly or, even better, yearly earnings. Wal-Mart bragging about its hourly wage is just another way to make Wal-Mart jobs look better than they really are.
p. 7 For instance, only 22 percent of Americans find it very believable that Wal-Mart provides health insurance to over 900,000 people.
I find it very believable. Wal-Mart is the biggest employer in America, for Pete’s sake! But how many people work at Wal-Mart? More importantly, the health insurance Wal-Mart provides is terrible, just like Chambers admits in the quote I use above. Even the people who do have it, can’t afford the deductible. That’s why many Wal-Mart workers will opt out and go on Medicaid. It all comes back to out of pocket costs for workers. Chambers diagnoses the problem, but she deliberately avoids proposing solutions that would actually make it better. Indeed, I suspect Lee Scott’s surprise announcement of healthcare changes was a direct result of this memo. You might fool a few reporters, Lee, but your workers know better.
Wal-Mart supporters might say, “If Wal-Mart pays for a good healthcare plan, they’d have to pass the costs on to their customers.” That’s letting them off to easy. The company made $10 billion last year. It can afford to do better. “But wouldn’t that hurt shareholders?” Has anybody thought that a workforce with good healthcare coverage might be happier and more productive? After all, it works for Costco.
We’ll see how Wal-Mart measures worker productivity in a later installment of this series. I’m not sure whether this will be a 2 or 3 parter. It depends upon how much time I have to write and how much ranting I feel like doing.