Why a Maxed-Out Consistency Quotient Is the Foundation for Success: Sam Walton (Walmart)

We have found that the traditional focus on IQ and EQ fails to find the people we want on our team, the ones who will push through good enough to greatness. So, this year, Ajax is applying its?4Qs Framework ?to 25 of the world’s most influential business leaders to optimize the framework for elite talent recruitment and retention.

How do you build one of the world’s most profitable businesses and become the richest person in America? Sam Walton’s answer is simple: “We just got after it and stayed after it.” Walton had what we call an exceptional CONSISTENCY QUOTIENT (CQ), which permeated his entire company. Though it may appear obvious now that a person so enthusiastic about retail and determined to win would transform the industry, one of his first supervisors questioned whether he was cut out for retail because of his poor handwriting and lack of patience for filling out sales slips. Common hiring practices often do the same thing—focusing on superficialities and missing the deeper capabilities essential for success.

How Walton Built Walmart

The traits that made Walton rich were learned growing up poor during the depression, which taught him the value of a hard-earned dollar. But Walton was not driven by money—he craved greatness. “I have always pursued everything I was interested in with a true passion—some would say obsession—to win,” he wrote. “I’ve always held the bar pretty high for myself: I’ve set extremely high personal goals.”

Driven by the goal to make his first store the best, most profitable variety store in Arkansas in only five years, he “swam upstream,” constantly questioning how things were done. After a full day at his store, he would drive for hours on winding roads pulling a homemade trailer to find deals on merchandise. He rethought pricing. He experimented with new ways to attract customers. Then, when an overlooked clause in the lease led him to lose that store after he achieved his goal, he simply responded: “I had to pick myself up and get on with it, do it all over again, only even better this time.”

Walton didn’t open his first Walmart until he was 44, but the company’s overnight success resulted from 20 years of swimming upstream. Starting out underfinanced, undercapitalized, and independent forced Walmart into small towns, where the available business exceeded Walton’s dreams, while driving down costs. The approach went back to that childhood lesson about the value of a dollar:

“Every time Wal-Mart spends one dollar foolishly, it comes right out of our customers’ pockets. Every time we save them a dollar, that puts us one more step ahead of the competition—which is where we always plan to be.”

Walton’s drive to win came first and his business strategy followed. He constantly searched for advantages, visiting stores all over the world—even on family vacations, interrogating everyone he could, and taking notes on his yellow legal pad. As Walmart grew, he chose to meet larger companies like Sears and K-Mart head-on. Honed by competition, Walmart soon dominated the industry, racking up $50 billion in sales in 1992, when Walton died, $166 billion in 2000, blowing past his ambitious $100 billion prediction, and earning $638 billion last year.

The Consistency Quotient (CQ)

Walton looked for people who shared his ambition, love for retail, and “bias toward action.” His role was “to pick good people and give them the maximum authority and responsibility.” Hiring people with Walton-like CQ isn’t enough; you have to give them the opportunity to exercise it. That “pride of proprietorship” will ignite their ambition and launch them through the ranks while reducing management costs. To avoid missing potential Sam Waltons, we look for the traits of the high CQ that he embodied.

An ENTHUSIASM to start the hard things and the COMMITMENT to finish them.

Walton woke every day determined to improve something. Though Walmart wasn’t the first to discount retail, it blew by its competitors on the strength of Walton’s bias to action and determination not to quit. Walton pitied the discounters who had been ahead of him, but “stopped short of setting the goals and paying the price that needed to be paid,” and soon were out of business.

A maxed-out ACTIVITY-IMPACT ratio that is unsatisfied with “good enough.”

High CQ leaders squeeze all the impact they can out of their activity. When Walton started expanding Walmart, he drove all over, checking on the efficient operation of his stores. But all that time on the road became an obstacle to running the company. Instead of reducing his visits, however, Walton bought a small plane and learned how to fly it himself, so he could visit MORE stores.

As Walton said, “I have always had the soul of an operator, somebody who wants to make things work well, then better, then the best they possibly can.” For 25 straight years, Walton led Walmart to the lowest ratio of expenses to sales in his industry because he believed,

“You can make a lot of different mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient.”

The willingness to put in extra hours, to start over again, to do WHATEVER IT TAKES because there is NO WAY OUT.

To save those dollars for his customers, Walton slashed front-office expenses by more than 50% compared to his competitors, expecting his people to do more, come to work earlier, and stay later. He led the way, beginning his day at 4:30 a.m., except on Saturday mornings, when he required executives and managers to show up for a weekly review. Then, he would arrive at 2 or 3 a.m. to look over all the numbers himself first. Those Saturday morning meetings were vital to Walmart’s success, allowing the company to discover problems and fix them over the weekend “while most everybody else in the retail business is off.”

Walton was willing to work longer and harder at retail than anyone else not only because he was hell-bent on winning, but also because he loved it. His fondest memories were not of Walmart passing $1 billion or $10 billion in sales but of “plain old everyday items that we sold a ton of by presenting [them] nicely on endcaps.” He admitted, “There hasn’t been a day in my adult life when I haven’t spent some time thinking about merchandising.”

Conclusion

There’s much more we can learn from Walton—about leveraging vertical integration and relationships with vendors to cut costs and increase profits (IQ) or motivating employees by making them genuine partners (EQ) or the insatiable hunger for new ideas and approaches that “buck the system” (IQ2 )—but his story makes clear those were all downstream from a maxed out CQ. Before summarizing his rules for success, Walton writes, “One I don’t even have on my list is ‘work hard.’ If you don’t know that already, or you’re not willing to do it, you probably won’t be going far enough to need my list anyway.”

Though Walton’s success flowed from his high CQ, it depended on developing the other Qs too. In the next article, we’ll look to deepen our understanding of IQ by studying?Moneyball, the story of how Billy Beane’s outside-the-box thinking with the Oakland A’s revolutionized baseball.

Who are the high CQ leaders who inspire you?