Flooded Wal-Mart in suburban New Orleans © Digital Vision Ltd. / SuperStock

Extra4/2/2008 5:00 PM ET

Real Katrina hero? Wal-Mart, study says

Empowered to 'do the right thing,' employees gave away supplies and offered sleeping space after the 2005 hurricane. Local knowledge allowed big-box retailers to respond before FEMA could.

By ConsumerAffairs.com

Hurricane season is just around the corner, so Americans should know where to turn to if disaster strikes.

It's not the Federal Emergency Management Agency. A new study suggests Wal-Mart, Home Depot and Lowe's would be a lot more helpful.

The study, by Steven Horwitz, a professor of economics at St. Lawrence University in Canton, N.Y., stresses that successful disaster relief depends upon responders having detailed knowledge of a local area and the right incentives to act on that knowledge.

Examining federal and private responses to Hurricane Katrina, the study says why FEMA was destined to fail and why for-profit companies succeeded at disaster recovery.

It also looks at the Coast Guard -- the only federal agency lauded for its Katrina performance -- which rescued more than 24,000 people in the two weeks after the storm.

Local knowledge critical

The study says Wal-Mart, Home Depot and Lowe's made use of their local knowledge about supply chains, infrastructure, decision makers and other resources to provide emergency supplies and reopen stores well before FEMA began its response. Local knowledge enabled the big-box stores to make plans ahead of the storm and then put them into effect immediately.

"Profit-seeking firms beat most of the government to the scene and provided more effectively the supplies needed for the immediate survival of a population cut off from life's most basic necessities," Horwitz wrote in the study, which was published by the Mercatus Center at George Mason University in Fairfax, Va. "Though numerous private-sector firms played important roles in the relief operations, Wal-Mart stood out."

Also, Wal-Mart leadership gave tremendous discretion to store managers and employees to make decisions rather than waiting for instructions from upper-level management, allowing for more-agile disaster response. CEO Lee Scott passed down a guiding edict to regional, district and store managers: "A lot of you are going to have to make decisions above your level. Make the best decision that you can with the information that's available to you at the time, and, above all, do the right thing."

The report calls out several examples of that principle in action:

  • A Kenner, La., employee used a forklift to knock open a warehouse door to get water for a retirement home.
    Wal-Mart trucks © Nicholas Kamm/AFP/Getty Images

    A convoy of Wal-Mart trucks carrying supplies for victims of Hurricane Katrina waits to enter New Orleans three days after the storm hit.

  • In Marrero, La., employees allowed police officers to use the store as a headquarters and a sleeping place, as many had lost their homes.

  • In Waveland, Miss., assistant manager Jessica Lewis ran a bulldozer through her store to collect basics that were not water-damaged, which she then piled in the parking lot and gave away to residents. She also broke into the store's locked pharmacy to supply critical drugs to a hospital.

Freedom to act

Horwitz said the Coast Guard also places a strong emphasis on local knowledge. A flat organizational structure and unique agency culture allow for subordinate officers to alter the plans for a specific operation so long as they follow the commander's intent.

The Coast Guard's experience with search-and-rescue operations and marine work, and its division by geographic area, provide greater expertise for disaster response, Horwitz said.

He also examined the conventional wisdom that businesses take advantage of disasters through price-gouging and other unsavory business practices.

Though some price-gouging does occur during disasters, Horwitz's report details how Wal-Mart, Home Depot and Lowe's sent truckloads of free supplies to the hardest-hit areas in the aftermath of Hurricane Katrina. He noted that's good public relations, of course, to help build long-term customer loyalty.

"Disaster response happens at the local level," Horwitz said. "FEMA is not local to anyone except people who live in Washington, D.C."

This story was written and reported by Mark Huffman for ConsumerAffairs.com.

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