Monday, September 11, 2006

The Penney Idea and Wal-Mart

One area of history I have neglected on this blog is business history. Clearly, the evolution of businesses and business ideas has directly impacted the history of the world. I have been reading up on Sam Walton (the founder of Wal-Mart) recently and I learned of one such connection.

The Penney Idea was adopted in 1913 by the J.C. Penney Company. It reads as follows:

1. "To serve the public, as nearly as we can, to its complete satisfaction."
2. "To expect for the service we render a fair remuneration and not all the profit the traffic will bear."
3."To do all in our power to pack the customer's dollar full of value, quality, and satisfaction."
4. "To continue to train ourselves and our associates so that the service we give will be more and more intelligently performed."
5. "To improve constantly the human factor in our business."
6. "To reward men and women in our organization though participation in what the business produces."
7. "To test our every policy, method, and act in this wise: Does it square with what is right and just?"

I am sure that J. C Penney did not invent any of these ideas. Many look familiar from other sources such as Luke 10:7 "for the labourer is worthy of his hire" (Penney Idea #6). Others look familiar today. What business does not claim to serve the public (Penney Idea #1)? Penney Idea #7 may well be the inspiration of the Google ideal of "Do no evil."

Sam Walton was a management trainee for J.C. Penney in 1940 is Des Moines, Iowa. While there, he was exposed to the Penney Idea. It directly impacted his view of business and to this day has shaped how Wal-Mart has developed.

It was Penney Idea #2 nd #3 which had the biggest impact on Walton. Both relate to giving the public the most for their dollar. This may mean deep discounting which might not always generate the highest profit per item. However, a lower profit margin per item can lead to a larger overall profit margin if customers buy more items from the business.

Sam Walton purchased a Ben Franklin store in 1945 after serving in World War Two. The store was a big success. Wikipedia notes, " It was here that Walton pioneered many concepts that would prove to be crucial to his success. Walton made sure the shelves were consistently stocked with a wide range of goods at low prices. His store also stayed open later than most other stores, especially during the Easter season. He also pioneered the practice of discount merchandizing by buying wholesale goods from the lowest priced supplier. This allowed him to pass on savings to his customers, which drove up his sales volume. Higher volumes allowed him to negotiate even lower purchase prices with the wholesaler on subsequent purchases."

Maybe Sam Walton would have been successful without his exposure to the Penney Idea. Still, I wonder if this early influence did not plant the ideas that would eventually lead to the success of Wal-Mart today. I am sure that many J.C. Penney managers felt that the meetings in 1913 that generated the Penney Idea were busy work of no real importance. Clearly they were not. Those meetings in 1913 may have changed the history of business and as a consequence the history of the world. Remember that next time you sit through what seems to be a pointless "mission statement" business or departmental meeting!

1 comment:

Ahistoricality said...

Ironic, isn't it, that Sam Walton's driving J.C.Penney into retreat, then. I think you need to be careful what kind of credos you teach your trainees: they can come back to haunt you!