The HBR Interview with Outgoing Walmart CEO Doug McMillon

Before stepping down as CEO in January, Doug McMillon led Walmart, the world’s biggest company in revenue terms, for 12 years. He delivered substantial growth in sales and earnings and transformed the brick-and-mortar retail giant into a digital powerhouse as well. He spoke with HBR editor at large Adi Ignatius at HBR’s most recent Future of Business event shortly before announcing his departure. This edited version of the interview includes several follow-up questions about McMillon’s decision and his legacy. HBR: You surprised many of us when you announced that you would be stepping down as Walmart’s CEO. What prompted that decision? McMillon: John Furner was ready to take over as chief executive. He has the vision, experience, and emotional connection to take us to the next level. More waves of change are coming, and he can see many of those through. When you see someone who can run the laps ahead better and faster, the right thing to do is to hand them the baton, step aside, and cheer them on. What skills and perspectives does John bring that are different from your own? We have a similar passion for our people and our business, and we both grew up doing lots of different jobs in the company. But John has a unique ability to learn about emerging technologies and apply them quickly in our business. At Walmart we say that we’re people-led and tech-powered, and John is wired to execute against both dimensions better than I ever could. With AI disrupting business models and with endless geopolitical uncertainty, what does it take these days to lead consistently? It’s important to remember who you are but also to be open to change. When generative AI first captured everyone’s attention, our mindset was balanced between offense and defense. That shifted over time to being more offense- and growth-oriented. We’re excited about AI: There’s a great opportunity for us to change how people shop and to save them time. As for geopolitical issues, there’s been turbulence for quite a few years, and I think we’ve learned how to operate in this environment. Talk more about Walmart’s view of AI. The e-commerce experience hasn’t changed that much since it started back in the 1990s with a search bar and a laundry list. Now we have an opportunity to create a multimedia experience that’s more personalized and contextual. One can imagine that AI will offer tremendous efficiencies but at the expense of jobs. I think that every job we’ve got is going to change in some way—getting the shopping carts off the parking lot, how our technologists work, at the leadership level. AI will change those jobs. And it will create new jobs. We want to equip everybody so they can make the most of the new tools available—to learn, add value, drive growth. We’ve given our associates access to ChatGPT and other tools so that they can learn and go through this process with us as a company. We want to still be a really large employer years from now. Since its founding by the Walton family, Walmart has always been purpose-driven. How did the sense of purpose shift during your time as CEO? When Sam Walton accepted the Presidential Medal of Freedom, in 1992, he articulated a purpose for the company that basically said, “We’ll show people around the world what it’s like to save money and have a better life.” Those words have been distilled to “Save money. Live better.” We wake up every day trying to create value for our customers, but the “live better” part of the equation, to your point, has changed over time. In the mid-2000s CEO Lee Scott made us a more sustainable company. These days we think not only about saving people money but also about saving them time, strengthening communities, strengthening the planet, playing a role in healthcare. We now have a more specific view of what “live better” means. How difficult is it to keep purpose front and center when you have both short-term and long-term profit pressures? A little over 10 years ago, we made a number of sizable investments. We invested billions of dollars in our people: in higher wages, free education, and other benefits. We invested billions in lowering prices. We invested billions in e-commerce. And we invested to modernize our tech stack. As we did those things, we took the profitability of the company down. Sam Walton once famously danced the hula on Wall Street because the management team had hit a target of 8% on operating margin. When I moved into this role, we were at about 6%, and with all those investments, we went down to just a little north of 4%. Those were dramatic investments that our shareholders paid for so that we could change the company. It was cool to watch the Walton family and our board work with the management team to make those choices—to reduce profitability so that we could position Walmart for the future and fulfill our purpose. Our business model has changed, e-commerce has created membership and advertising opportunities, and we’ve been able to move that operating margin back up while keeping prices low and continuing to invest in wages. We were able to live our purpose and, at the same time, transform the company. If anything in this conversation inspires you to do the hula, feel free. That won’t happen. John Furner and Doug McMillon Courtesy of Walmart Walmart gets praised for pursuing environmental and social goals, and it gets criticized for it, depending on who’s commenting. How have you navigated the evolving expectations for how companies think about their engagement in those areas? It hasn’t been difficult because it’s all super practical. The work we were doing before was good for the P&L, and it still is. When this whole conversation started, back in the early 2000s, Lee Scott and Rob Walton got us to start thinking about our big footprint and the things we could do to make our business better while also strengthening the planet and strengthening communities. I was leading Sam’s Club at the time, and I’m embarrassed to tell you that we were paying people to haul off the corrugated cardboard behind our stores. But we went through a learning journey, visiting landfills and getting more informed, and we realized how much value there was in that material. We went from paying somebody to take it to charging them because it was worth so much. My P&L benefited by $50 million in one year because we had learned something. So if we’re getting criticized, I just get practical. Wouldn’t you expect Walmart to be eliminating its waste? It helps us save money so that we can lower prices. It’s a good business choice. You had to navigate through a number of shocks, including the pandemic and its effect on your supply chain. These days Walmart faces significant tariff pressures. What did you learn from the Covid era that’s relevant now? The pandemic showed how capable our associates, including our leaders, are. I was impressed with their judgment and how fast they could make decisions. During the pandemic, everything sped up. There were so many decisions to make about how to keep people safe, how to manage the supply chain, how to help with Covid testing, how to help with immunizations. Operating on Zoom, the leadership team moved from a weekly cadence to a daily one. We were together every morning, surfacing choices that needed to be made. With tariffs, the team is showing again that they can make good decisions quickly: managing quantity decisions, changing the country of origin, moving production as needed, making good choices about timing and flow. Our inventory has been well-managed during the past year, which is so important for a retailer. How do you handle the uncertainty around tariffs when it’s often unclear whether the countries you buy from will face U.S. tariffs of 10%, 50%, or more? Take yourself back to last spring and pretend that you’re the Halloween costume buyer for Walmart. How many do you buy? Where do they come from? At what price points? By the time you receive them, the tariff number could have changed. So, we run what-ifs. “If the tariff is this amount, here’s what would happen with pricing.” Then, “How many units would we sell if we had that price? Where else could we source from? What will people buy if they’re under inflationary pressure?” We’ve learned over the years, for example, that families prioritize the children and pets over the parents. A mom usually puts herself last. So we were confident there would be trick-or-treating and that children’s costumes would sell, but we knew we might not sell as many adult costumes. We talk through these independent decisions and hold hands, pick a number, and make a decision. So far, everyone’s done a good job of generally getting things right. What advice would you give to CEOs trying to lead major transformations? Listen to your gut. The thing that most of us regret is not going faster. I was initially focused on how to build an e-commerce business and turn it into an omnibusiness leveraging the assets we had, including the stores. What I didn’t understand was that it was going to lead to big changes in the way the company worked. I had to figure that out with our team and take steps to get faster and more digital. I was sometimes slow to act because I was worried about what someone thought or whether the organization could handle that much change. I’ve learned that people can handle it. You need to go hard. You need to go fast. And when you know in your bones that something’s right, you need to act on it without much delay. How do leaders drive continual innovation without just lurching from project to project as new technologies and opportunities arise? You have to set yourself up to change all the time, not just once. That means constant learning, constant mindset shifts, changes to structure, and new capabilities, along with a faster pace of organizational change so that you don’t fall behind again. When I moved into the CEO role, our Supercenter business in the United States was seeing a drop in same-store sales. We didn’t have much of an e-commerce business. We had international challenges. And there were questions about strategy and transformation. The list of things that needed to change was long, and if we started talking about it all, it would feel overwhelming. So the leadership team decided early on to explain to everyone what wouldn’t change. We said, “We believe in the timeless purpose that our founder Sam Walton gave us. We will stay committed to helping people save money and live a better life. The Walmart that you joined is going to stay consistent in terms of how people are treated and how we want you to lead.” Everything else, though, was open for change. If customers didn’t want stores in the future, we wouldn’t have stores. As we started playing catch-up in e-commerce, we literally had to change the way we worked. We needed design as a capability. We needed product management. We needed roles that technology companies had that we didn’t. We’d grown up with most big decisions being made by operations, by our store leadership team, by our merchants. Now we needed to put the customer in charge and work backward to build the right tech. That caused more organizational change than I had anticipated. McMillon meets with Ved Patel, an assistant manager, and Venessa Yates, the president and CEO of Walmart Canada. Courtesy of Walmart When you were first trying to become a digital powerhouse, you hosted an event at the World Economic Forum at Davos where you said, “We’re good at brick-and-mortar. We’re not good at digital. Help us out.” It was refreshing. Nobody goes to Davos and says, “We’re not good at something.” Are you happy with where you are now in terms of digital commerce? No, but remember, I’m compensated to be dissatisfied. That’s the nature of the work. We’ve made progress, and our customers are having a better experience. But we can be so much better. What threw you for a loop when you first became CEO? On my second day as CEO I showed up early to the CEO’s office, which used to be Sam Walton’s. I’d been going in there for years, when I reported to Lee Scott and then Mike Duke, but I was so intimidated that I couldn’t sit behind the desk. After some encouragement from Mike, I was able to sit there on day three. The responsibility for Walmart meant so much that it was a bit breathtaking. What advice would you give new CEOs? Job one is to surround yourself with the very best leaders. Don’t rest until you have the strongest possible direct reports. I was blessed to have amazing people as teammates on the leadership team. They deserve a ton of credit for the good things that happened. Job two is to listen very carefully and ask the right questions. Job three, where I had room to improve—especially in the early years—is to make decisions, take risks, and make sure everyone knows those decisions are made so you can resource the priorities and get on with it. Speed is a big deal. What is it that people don’t seem to fully appreciate about Walmart? There’s no way for people outside Walmart to fully appreciate how our long-term associates feel about one another and our company. When we bring people together who have been part of the company for 25, 30, or 45-plus years and hand them a microphone, they never fail to inspire and encourage. We say that our people make the difference, and that’s actually true. Sometimes we get busy working and miss opportunities to have a conversation with our customers. But if they all knew the company that I know, they would feel even better about shopping with us. Let’s talk about your legacy. What accomplishment are you most proud of? I’ll pick two. First, creating opportunity for our people, starting with an initial investment in wages and training in 2015 and building on those in the years since with additional investments in wages, the launch of Live Better U [Walmart’s education program], enhanced parental leave benefits, and more. Second, preparing the company to be financially stronger through investments in e-commerce and technology. Investing in people and technology helped us grow over the past decade, and we wouldn’t have been able to do it at the scale we needed without the support and push from our board and the Walton family. You’ve achieved a lot, and you’re only 59 years old. What’s next? I’ve described my priorities for a long time as “faith, family, and Walmart.” I’m grateful to remain an associate for this coming year, to help John in any way he wants, and to serve on the board for a bit longer. It would be even harder to leave cold turkey. My wife, Shelley, and I are going to take a break for a few months, and then I’ll explore some opportunities to help others through a combination of business and philanthropic activities to fill in the space left by all the time I’ve been giving to Walmart.

The HBR Interview with Outgoing Walmart CEO Doug McMillon

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