Start with why

When the WHY Goes, WHAT Is All You’ll Have Left
On April 5, 1992, at approximately eight in the morning, Wal-Mart lost its
WHY. On that day, Sam Walton, Wal-Mart’s inspired leader, the man who
embodied the cause around which he built the world’s largest retailer, died in the
University of Arkansas Medical Science Hospital in Little Rock of bone marrow
cancer. Soon after, Walton’s oldest son, S. Robeson Walton, who succeeded his
father as chairman of the company, gave a public statement. “No changes are
expected in the corporate direction, control or policy,” he said. Sadly for Wal-
Mart employees, customers and shareholders, that is not what happened.
Sam Walton was the embodiment of the everyman. Though he was named the
richest man in America by 
Forbes
magazine in 1985, a title he held until he died,
he never understood the importance others placed on money. Certainly, Walton
was a competitor, and money was a good yardstick of success. But that’s not
what gave Walton or those who worked at Wal-Mart the feeling of success. It
was people Walton valued above all else. People.
Look after people and people will look after you was his belief, and
everything Walton and Wal-Mart did proved it. In the early days, for example,
Walton insisted on showing up for work on Saturdays out of fairness to his store
employees who had to work weekends. He remembered birthdays and
anniversaries and even that a cashier’s mother had just undergone gallbladder
surgery. He chastised his executives for driving expensive cars and resisted
using a corporate jet for many years. If the average American didn’t have those
things, then neither should those who are supposed to be their champions.
Wal-Mart never went through a split under Walton’s command, because
Walton never forgot where he came from. “I still can’t believe it was news that I
get my hair cut at the barbershop. Where else would I get it cut?” he said. “Why
do I drive a pickup truck? What am I supposed to haul my dogs around in, a
Rolls-Royce?” Often seen wearing his signature tweed jacket and a trucker’s
cap, Walton was the embodiment of those he aimed to serve—the average-Joe
American.
With a company so beloved by employees, customers and communities,
Walton made only one major blunder. He didn’t put his cause into clear enough
words so that others could continue to lead the cause after he died. It’s not
entirely his fault. The part of the brain that controls the WHY doesn’t control
language. So, like so many, the best Walton could articulate was HOW to bring

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his cause to life. He talked about making products cheap to make things more
affordable to the average working American. He talked about building stores in
rural communities so that the backbone of America’s workforce didn’t have to
travel to the urban centers. It all made sense. All his decisions passed the Celery
Test. It was the WHY upon which the company was built, however, that was left
unsaid.
Walton was involved in the company until just before his death, when his
ailing health prevented him from participating any longer. Like all organizations
with founder-leaders whose physical presence helps keep the WHY alive, his
continued involvement in the company had reminded everyone WHY they came
to work every day. He inspired everyone around him. Just as Apple ran on the
fumes of Steve Jobs for a few years after he left the company before significant
cracks started to show, so did Wal-Mart remember Sam Walton and his WHY
for a short time after he died. But as the WHY started to get fuzzier and fuzzier,
the company changed direction. From then on, there would be a new motivation
at the company, and it was something that Walton himself cautioned against:
chasing money.
Costco was cofounded in 1983 by WHY-type Jim Sinegal and HOW-type
Jeffrey Brotman. Sinegal learned about discount retailing from Sol Price, the
same person from whom Sam Walton admitted to “borrowing” much of what he
knew about the business. And, like Walton, Sinegal believes in people first.
“We’re going to be a company that’s on a first-name basis with everyone,” he
said in an interview on ABC’s newsmagazine show 
20/20.
Following the same
formula as other inspiring leaders, Costco believes in looking after its employees
first. Historically, they have paid their people about 40 percent more than those
who work at Sam’s Club, the Wal-Mart–owned discount warehouse. And Costco
offers above-average benefits, including health coverage for more than 90
percent of their employees. As a result, their turnover is consistently five times
lower than Sam’s Club.
Like all companies built around a cause, Costco has relied on their megaphone
to help them grow. They don’t have a PR department and they don’t spend
money on advertising. The Law of Diffusion is all that Costco needed to get the
word out. “Imagine that you have 120,000 loyal ambassadors out there who are
constantly saying good things about you,” quips Sinegal, recognizing the value
of trust and loyalty of his employees over advertising and PR.
For years, Wall Street analysts criticized Costco’s strategy of spending so
much on their people instead of on cutting costs to boost margins and help share
value. Wall Street would preferred the company to focus on WHAT they did at
the expense of WHY they did it. A Deutsche Bank analyst told 
FORTUNE

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magazine, “Costco continues to be a company that is better at serving the club
member and employee than the shareholder.”
Fortunately, Sinegal trusts his gut more than he trusts Wall Street analysts.
“Wall Street is in the business of making money between now and next
Tuesday,” he said in the 
20/20
interview. “We’re in the business of building an
organization, an institution that we hope will be here fifty years from now. And
paying good wages and keeping people working with you is very good
business.”
The amazing insight in all of this is not just how inspiring Sinegal is, but that
almost everything he says and does echoes Sam Walton. Wal-Mart got as big as
it did doing the exact same thing—focusing on WHY and ensuring that WHAT
they did proved it. Money is never a cause, it is always a result. But on that
fateful day in April 1992, Wal-Mart stopped believing in their WHY.
Since Sam Walton’s death, Wal-Mart has been battered by scandals of
mistreating employees and customers all in the name of shareholder value. Their
WHY has gone so fuzzy that even when they do things well, few are willing to
give them credit. The company, for example, was among the first major
corporations to develop an environmental policy aimed at reducing waste and
encouraging recycling. But Wal-Mart’s critics have grown so skeptical of the
company’s motives that the move was largely dismissed as posturing. “Wal-
Mart has been working to improve its image and lighten its environmental
impact for several years now,” a column published on the