Boosting the skills of incumbent workers: An interview with Walmart’s Kathleen McLaughlin (2024)

Few jobs in today’s economy are unaffected by the rapid pace of technological change.Employers are increasingly aware that workers need to continually upgrade their skills to keepup—and traditional forms of education alone won’t suffice.

In response, society has embarked on a period of “great experimentation,” with educators,employers, governments, and philanthropists reaching across sectors and national boundariesto develop new ways of sustaining a productive workforce. So says Kathleen McLaughlin, chiefsustainability officer for Walmart and president of the Walmart Foundation.

In a recent conversation with McLaughlin in her Bentonville, Arkansas, office, she describedhow technology has changed the very nature of work. She discussed both the importance oflifelong learning and how to execute it most effectively.

Interview transcript

McKinsey: From your perspective as a leader of a foundation for a global retail company, whatare key challenges and opportunities in workforce development?

Kathleen McLaughlin: I think the challenges are mostly driven by changes in technology.Certainly for a company like Walmart, we’re now a tech company as much as a retail company.So the diversity of skills required to advance in a place like Walmart and the opportunitiesavailable through many different career paths are unlike anything before.

Yes, it has to do with the availability and affordability of technology and what it can do, but,more important, it’s driven by customers and how they want to shop. The ability to ordergroceries on your mobile device and then pick up your order on the way home from work atfive o’clock—that’s a convenience that people really want. So we follow customer needsand then work them back into our retail operation to change the way that we order thegoods, transport them, and make them available for people. These trends in retail related toassortment, convenience, and affordability are universal, but they play out differently in onemarket versus another.

McKinsey: Given how the world has changed, it seems that even entry-level positions areexposed to technology in new and changing ways. Is this a global phenomenon?

Kathleen McLaughlin: The trend that we’re seeing around the need and the increasingengagement of training people already in the workforce is indeed a global phenomenon. Ittakes a slightly different form in, say, India, than it would in the US; it’s different in Canada thanit is in Mexico. The Chinese retail market, for example, may leapfrog what’s going on in NorthAmerica in terms of digital solutions for people to order and receive goods. In China, there arewhole flotillas of people on bikes delivering products that customers ordered online, which youdon’t really see in North American cities. While I think you’ll see things evolve a little differently indifferent markets around the world, nearly all will be using digital tools and data to help peopleto order and organize their shopping. But technological change is a constant around the world.As a global employer, we see these things happening everywhere.

This digital transformation creates new jobs, but, more important, it changes the nature ofjobs, even entry-level ones. Walmart has cashiers, but increasingly those cashiers are hostingself-checkout lanes, which help many of our customers to move out of the store more quickly.We need employees to support those customers, to coach them, to help them, to answerquestions. That’s a different form of cashier. What we find is that, at the heart of our roles,there is still a customer service need; it’s just the way that they serve the customer will be a lotdifferent going forward.

McKinsey: What is the right role of employers in making sure that the incumbent workforcecan both meet current expectations and thrive in the future?

Kathleen McLaughlin: I think that 10 or 15 years ago people might not even have understoodwhat it meant to develop the skills of incumbent workers, or why that would that be important.It’s really encouraging to me that it’s now just accepted that developing existing workers mustbe done. Most employers understand that skill development is critical to value creation, andthey believe and see that better skills do correlate with higher employee retention.

Last year, the Walmart Foundation funded a US National Skills Coalition study that showed that,in the nation’s service sector—not just retail but also hospitality and healthcare—two-thirds offrontline workers have basic literacy gaps and three-quarters have numeracy gaps. And thesepeople aren’t new to the sector; in many cases, they have been in the sector for quite sometime. A significant number of them are supervisors. But many can’t fully perform their jobsbecause of these basic deficiencies. So the question is: How do employers help these peopleacquire skills that will help them move up? Well, retail is a great place to do that.

There are so many skills that people can just learn on the job in retail: problem-solvingskills, customer service skills, and, to some extent, technology skills. For example, Walmart’sassociate training for entry-level workers called Pathways is completed within the first90 days and helps associates gain vital retail job skills such as communication, customerservice, merchandising, and teamwork.

So, to improve workforce development in our society, we need to rewire how it works. Whatis the role of employers? Educators? The workers themselves? What should the role ofgovernment and workforce boards be? All of us need to evolve and work in new ways, solifelong learning can be easy and effective.

McKinsey: What concrete steps have been taken toward developing new, successfulapproaches to workforce development?

Kathleen McLaughlin: We are at a time of great experimentation. I don’t think we’ve solved ityet, but there are many, many experiments and initiatives in which people are reaching acrosssectors in new and different ways. Community colleges are partnering with employers to say,“How do we change what we’re offering so that it’s more relevant to on-the-job success?” Cityand state governments are collaborating with employers and with education providers. Techcompanies are innovating and developing new approaches for learning what people can doremotely or with flexible schedules.

Employers themselves are attempting to solve both near-term problems and forward-lookingones with many successful in-house programs. There are 200 Walmart Academies acrossthe country, for example. We’ve trained 325,000 Walmart associates through them in the pastcouple of years in very job-relevant skills.

We recently announced a program to provide employees with an accessible and affordablepath to gaining an associate’s or bachelor’s degree. For about $1 a day, they can pursue adegree in supply chain or business management. In addition, employees gain college creditfor our work-based Academy training—a head start toward a degree. The Walmart Foundationalso recently announced a joint grant investment with Google that will funnel resources tomultiple organizations that are experimenting with solutions in reskilling the US workforce.We—a tech company and a retailer—are collaborating because we both have this vision of howwe need to accelerate into the future of helping people acquire skills on the job.

Whether they’re retailers, tech giants, education technology providers, government agencies,or nonprofits, the whole workforce development system is engaging in a way we’ve never seenbefore. What’s exciting for me is thinking about how we might transition from this time of greatexperimentation to more coordinated, collective action.

McKinsey: Many experts have pointed to skills credentialing as a game changer for careeradvancement. Do you agree?

Kathleen McLaughlin: Yes, that’s one of the biggest things that’s changed in the past tenyears. Educators, governments, retail employers, and workforce boards have collectivelyrecognized that we need to find effective ways not just to accelerate skill acquisition but alsoto give people something to show for it. They need a marketable proposition in theemployment market.

Not everybody can go back to school to earn an associate’s or bachelor’s degree, especiallyif they’re already working full time and have family obligations. We need to implement bestpractices for how people can acquire skills and create a more integrated system of credentials,so that we can recognize people for the skills they have as they earn them and reward themwith career advancement.

McKinsey: Does Walmart issue credentials as part of the Walmart Academy program?

Kathleen McLaughlin: Walmart is approaching the issue of credentialing by, first, figuring outthe relevant skills and most effective training for particular jobs. Those might be technical skills,so-called soft skills such as interpersonal skills, or even problem-solving skills, which are alsoreally important. Then we have to determine how we can certify that somebody has them. Weand many others are working on badges or certifications or some form of credential to signifythat our workers have acquired certain skills. Our philosophy is that ultimately it needs to be afree market, but, as a society, it would be ideal if we could all agree on the standards requiredfor certain kinds of roles and then start to issue certifications against those standards.

So, for example, we might say that to be an effective hourly supervisor, a person needs goodproblem-solving and leadership skills and a good technical understanding of retail operationswith digital skills. Then we decide, what are the markers of those skills? Well, a marker might bean associate’s or bachelor’s degree in retail management, but it might be that they graduatedfrom the Walmart Academy. Because that’s our program, that’s an effective marker for us. Ormaybe it’s some other retailer’s program that’s equivalent. Or maybe it’s that they have goneto a well-known online learning site and completed a suite of microcredentials and earned acertification. Ideally, we’d love to see such a free system that can drive people to innovate andcontinually improve what’s being offered. At base, we all need to come to recognize equivalentmarkers and what markers are needed for which jobs. Credentialing systems are a workin progress.

McKinsey: A reasonable person could argue that some of the skill-credential standards couldbe set at the government level. Broadly, how do you think about the right role of governments incredentialing and ensuring that a skills marketplace works?

Kathleen McLaughlin: I think that governments at the state and federal levels can play animportant role in encouraging experimentation, removing roadblocks to the kinds of innovationthat we’re going to need to support training programs, and, ideally, financing training programsthat work. Governments can also work to remove some of the logistical barriers that blockworking people from acquiring new skills and advancing their careers. At the municipallevel, it might be as simple as looking at bus routes and making sure people can get to theirworkplaces or training centers at the right times. Accessible and affordable childcare andeldercare are also key to supporting people and enabling them to learn, work, and move up.

Walmart Foundation research shows that stability is really a key success factor in helpingpeople build new skills and advance in their careers. In addition to childcare, things likeparental leave and access to healthcare are so important. For people to be able to acquire newskills, they need to stick to a job and be able to take on and learn more. This is why we need collaboration across sectors to make this all work. It needs to be the employers, as well asgovernment policy, as well as what education providers are doing, to make the whole systemwork for people.

McKinsey: As president of the Walmart Foundation, you have a unique perspective on therole of philanthropy. What part should philanthropy play in solving the problem of workforcedevelopment?

Kathleen McLaughlin: Philanthropy can play a number of critical roles in any system, whetherwe’re working on retail opportunity and advancement or something like disaster relief orseafood sustainability. First, it can be the catalyst for creative ideas and pilots of early-stageideas. These can be ideas that haven’t proved to have the commercial success necessary forbusinesses to invest in them but that should be part of the mix in terms of experimentation.

Second, philanthropic organizations can exert a lot of convening power and bring partiestogether in a system to help them collaborate in new ways. They can fund the research that’sneeded across a sector or across a system to identify best practices and things that peopleshould be taking on. These groups can also take risks on ideas that may not be beneficial toone party or another but that need to be tackled.

McKinsey: What steps has the Walmart Foundation taken to help incumbent workers getaccess to the learning opportunities they need?

Kathleen McLaughlin: We’ve been doing three things. First, as I mentioned earlier, we’vefunded research. This research will help us learn about the nature of the skills gap at differentstages in retail and the service sector and about the benefits to closing those gaps forindividuals, businesses, and society more broadly. Knowing the benefits is important to thedialogue because it helps to raise people’s aspirations about what can be accomplished.

Second, we’ve funded innovation and early-stage pilots of creative, effective approaches totraining incumbent workers, including things like English as a second language. We workedwith Miami-Dade County and the National Immigration Forum to experiment with differentapproaches to accelerating English-language acquisition—both in a retail context andmore generally.

Third, we’ve been working to bring together people across sectors and have them work increative and new ways to realize new approaches to incumbent worker development. Thiscollaboration will be critical to success.

Given the pace of change of industries and technology, we all need access to lifelong-learningopportunities. We all always need to extend and refresh our skills on the job, whether we’re afrontline person in retail, a construction worker, or a software engineer. We as a society needto provide opportunities and change the way we do things to meet the current reality so thateverybody has access to opportunity. Every life has equal value. This is something that weneed to do for each other.