Resources

Ideas to Read and Pass Along

Kevin & Jackie Freiberg

Whole Foods—A Disciplined Democracy

whole foodsOwnership is a powerful force that can inspire even the most productive workforces to surpass themselves. Whole Foods, the nation-wide chain of gourmet organic and natural-food stores, operating in an industry notorious for its workers’ indifference, is just one of many remarkable enterprises that is unparalleled regarding its empowered, motivated, and entrepreneurial employees.

The concepts of teamwork, autonomy, empowerment, and ownership have become shopworn clichés in much of the business world — overused and under-practiced to the point that they have lost all meaning. At Whole Foods, these ideas are the foundation of a business model that is blowing the competition out of the aisles.

Whole Foods Market began life in 1980 in Austin, Texas, and it hasn’t stopped growing since. In 2003, the company had 140 stores in 25 states stretching from the Atlantic to the Pacific. Its $2.7 billion in revenues in 2002 made it the world’s largest retailer of organic and natural products, and its net profits of $84 million were double the industry average. Meanwhile, with new stores and acquisitions, its employee count rose to 24,100, a 16 percent leap from the previous year.

So while the supermarket industry has been growing by at most 3 percent a year, Whole Foods sales and revenues have been rising by double digits for years, all through the recession. Over the last five years for example, its revenues have jumped by an average of 16.4 percent. Oh, yes, don’t forget the company’s stock price, thumbing its nose at the long bear market to end 2002 at $50.19 per share for a market capitalization of $32 billion.

Power to the People

Whole Foods is successful because its gutsy founder and chief executive, John Mackey has largely given over the operation to his employees. And they have rewarded him with a level of dedication and loyalty virtually unique in the industry. Whole Foods stores has something which you don’t find in abundance in most supermarkets—a pleasant, helpful workforce committed to a healthy environment, healthy foods, and serving the customer. That commitment grows out of a covenant between the organization and its employees: We will make you a fully informed partner in the business and, in return, you will take full responsibility for delivering stellar performance.

Walk into any Whole Foods store, and you will be greeted by people of every race, nationality, and ethnicity. This diversity is the future of our global economy — and it works. What’s more, the company supports and celebrates family and organic farming; it gives 5 percent of its profits to charity and is involved in good works in every community where it has a store. But if Whole Foods’ values may seem soft, don’t be fooled. A hard-core, competitive spirit pervades this place.

As Mackey has said: “I don’t see any conflict between wearing our hearts on our sleeves and running a company that is serious about profits. In fact, we feel there is a profound synergy between the two. Both are about responsibility. And our employees, in turn, have a responsibility to deliver the highest quality food and service to our customers.”

Freedom Inspires Responsibility

At Whole Foods, getting people to think and act like owners starts with leaving them alone. In fact, each store operates as a stand-alone business, catering to local tastes, buying from local sources, and responsible for its own profits. The structure within a store is based on an average of 10 autonomous teams — one each for produce, grocery, cheese, prepared foods, and so on. The team structure then extends upward: Each store’s team leaders are a team; each region’s store leaders are a team; and, at the top of the apple cart, the company’s six regional presidents are a team.

“We aren’t interested in hierarchy; we just don’t feel it’s effective in any way,” Mackey explained. “We like to think of ourselves as a democracy, a structured and disciplined democracy. Energy and ideas work their way up, rather than the other way around. When it comes to rules, I believe that less is more.”

On small teams, peer pressure is a powerful force. People feel loyal to a team and responsible to their teammates in ways they rarely do to a large organization. “We have found that the more freedom and autonomy we give our people, the more we let them know about how the company works, the more committed and responsible they become,” Mackey told Fast Company.

Whole Foods has been on Fortune’s list of the 100 best companies to work for in the United States for six straight years. Though only 30 percent of employees at grocery retailers nationwide are full-time workers, 87 percent of Whole Foods’ employees work full-time, making them eligible for full health benefits, a 20-percent discount on merchandise, and a gain-sharing program that distributes departmental savings to employees. Stock options are available to full-time employees. And Mackey recently decreed a custom called “appreciations”: At the end of every meeting, the participants tell what they like about each other and thank each other for help. This enables employees to act on and embrace their philosophy that generosity and caring should be acknowledged.