Investing in People is Paying Off for Wal-Mart CEO Doug McMillon

As CEOs everywhere grapple with how to deal with digital disruption, one has risen to the challenge, at least in part, by going back to basics.

And it appears that investing in a large dose of good old-fashioned customer service is helping Wal-Mart Stores’ Doug McMillon combat rising competition from e-commerce players such as Amazon.

Shares in the company closed 3% higher yesterday after it beat analysts’ expectations with a modest rise in quarterly revenue that outshone the performance of other retailers such as Target and Macy’s. The encouraging numbers came after McMillon in 2015 announced a $2.6 billion investment in customer service that involved increasing staff pay and training.

Among more specific initiatives, Wal-Mart in November added “holiday helper” staff tasked with directing shoppers to the shortest lines, opening registers for them and even grabbing items they might have forgotten.

Embracing new technology was part of the strategy, too. Apps that provided real-time information to improve stock levels led to a 7% inventory reduction in the three months through December, the company said.

“These initiatives are paying off for our customers through cleaner stores, friendlier service and faster check-out times,” McMillon told analysts on a conference call.

McMillon has made investing in his staff a key plank of his plan for improving the retail giant’s performance. In December, he listed The Good Jobs Strategy as one of six books that taught and inspired him in 2016. Written by Zeynep Ton, it argues that even in low-cost settings, leaving employees with low wages is a choice, not a necessity.

Wal-Mart last month confirmed that it has sped up the time it takes new employees to finish a training course that allows them to increase their pay to $10 from $9 per hour to three months.

Of course, Wal-Mart has been investing heavily in its e-commerce offering, too, culminating in last year’s $3 billion acquisition of Jet.com. It’s also experimenting with customer service technology including “scan-and-go”, which allows shoppers to scan items on their smartphones as they place them in their trolleys.

Heavy investments, combined with price reductions, also drove a contraction in the company’s quarterly operating margin, though investors appear to be looking past that for now.