Wal-Mart CEO Doug McMillon made surprise visits to stores and didn’t like what he saw: long checkout lines, empty shelves and problems with produce. “How a customer gets treated matters,” he said.

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Wal-Mart Stores Chief Executive Doug McMillon helped set the stage for this week’s $1 billion pay increase almost a year ago in Orlando, Fla., when he rallied managers to reverse a slide in customer service.

It was only a few weeks after he took the top job, and he made it clear that improving service would be a key piece of his agenda, even if it meant higher labor costs.

At the company’s annual Year Beginning Meeting last March, he and other executives laid out a plan to add employees hours in a bid to boost “in-store execution.” Store shelves needed to be better stocked with merchandise, and resolving that matter was called a $3 billion opportunity.

McMillon made surprise visits to stores and didn’t like what he saw: long checkout lines, empty shelves and problems with produce.

Over the past 11 months, Wal-Mart has increasingly linked worker pay with improving the customer’s experience.

By October, McMillon made the strongest indication that wage hikes were coming. He vowed to stop paying any of his workers minimum wage.

“Retail has been a people business and retail will be a people business,” he said at the time. “How a customer gets treated matters.”

The push culminated in Wal-Mart’s announcement Thursday that it was raising wages for 500,000 of its workers, with the goal of retaining better employees and making them more productive.

The retail giant, which has been criticized for continuing to pay some employees the bare legal minimum, said all its U.S. workers would earn at least $9 an hour by April and $10 by next February.

That would mean a raise for about 40 percent of its workforce, to at least $1.75 above the federal minimum wage, the retailer said.

Competitive and political pressure for higher wages has been building, with other major businesses, several states and cities raising the minimum wage far beyond the federal minimum of $7.25 an hour.

Wal-Mart’s move follows in the footsteps of retailers like Gap and Ikea, which both took steps last year to keep pay above federal minimum-wage level, in an effort to lessen turnover and attract more lower-wage workers.

But even their higher pay falls short of compensation offered by the likes of Issaquah-based Costco, known to offer wages closer to $20 an hour.

At the same time, Wal-Mart faced mounting criticism for not paying workers enough and was grappling with brief strikes at its stores.

A few years ago, a walkout at Wal-Mart was uncommon. But by last holiday season, activists had begun holding such events regularly — including one on Black Friday.

Wal-Mart also drew flak in October for cutting medical benefits to about 30,000 workers, a response to rising health-care costs and the growth of alternatives available under Obamacare. The retailer no longer provides health coverage to employees who work less than 30 hours a week.

Labor activists also seized on the appointment of Yahoo CEO Marissa Mayer to Wal-Mart’s board in 2012. She was seen as a potential pressure point for the labor issue, and groups urged her to promote higher wages at Wal-Mart.

After Thursday’s announcement, Mayer said she was proud of Wal-Mart’s management and that the board had been “very supportive” of the idea.

“I’m particularly proud of Doug, obviously now about a year into his tenure there,” she said at a Yahoo conference in San Francisco. “It was a very bold move.”

McMillon, who became CEO in February 2014 after a three-decade career at the company, took an egalitarian tone in announcing the pay raises to employees on Thursday morning.

McMillon, 48, began his own Wal-Mart career as a summer worker in 1984 at a distribution center.

“We’re all associates,” he said in an memo posted online. “Today’s cashiers will be tomorrow’s store or club managers. Today’s managers are tomorrow’s vice presidents. Tomorrow’s CEO will almost definitely come from inside our company.”

Department managers are also getting a bump, with starting wages for some of the positions going to $13 an hour this summer and $15 next year.

While the pay raises were seen as a victory by labor groups, investors were less enthusiastic.

The extra labor costs, coupled with currency headwinds, will weigh on Wal-Mart’s profit this year. The announcement sent the shares down 3.2 percent to $83.52, the biggest one-day decline in four months.

Ultimately, the higher compensation will yield benefits for McMillon and Wal-Mart, said Brian Yarbrough, an analyst at Edward Jones in St. Louis.

“There will be less turnover, better morale, lower future training costs,” Yarbrough said. “It’s the right thing to do to reinvest in labor to drive better customer service. But that takes time.”