Whole Foods business case & hospitality management

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The following Business Case Study “Walk the Talk”. It deals works with these innovative management premises. It is also a good example of an organization that follows its sense of purpose, transmitting it to all stakeholders. As a result, the company vision is shared first by all team members; producing then more passion and affecting all working activities. This radical management practice breaks with the conventional thought while still achieving spectacular results! Above all, what matters most in this shift in the management paradigm, is that this radical model of management is happening in a very commoditized and mature industry. Whole Foods has clearly shown us that, by focussing on workers and their contribution to constant company improvements, core values and customers, it is possible to get a real Competitive Advantage.

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Whole Foods business case & hospitality management

  1. 1.        Whole  Foods-­‐  Case  Study    A  benchmark  model  of  management  for  hospitality  Arturo  Cuenllas  Soler        The 65-year-old supermarket industry is the last place to look for radical ideasabout work and management. Its a stumbling giant with shrinking sales, razor-thin margins, and chronic labour troubles. Too often, the shopping experience issynonymous with bruised produce, bad lighting, long lines, and surly cashiers.Supermarkets are about brawn not brains -- its a business where every pennycounts and double coupons qualify as a profound strategic innovation. -Charles Fishman at Fast Company   1    
  2. 2. Imagine yourself working in any company surrounded by these working habits: passion,innovation, transparency, trust, self-management, teamwork, cooperation, federalism,community, strong sense of belonging, sincerity, integrative leadership, empowerment,knowledge, flexibility, dialogues, open-book-management, consensus, power ofdecision, initiative, pro-activity, commitment, organizational learning and pride inbelonging, “We” instead of “I”…All these post tayloristic management concepts areusually treated in business schools, management forums, magazines or conferences heldby gurus. These are strong post-bureaucratic working ideals, which are normally seen asutopian practises of management and seldom put into action. Of course, managers willrecognize the importance of many of these management concepts; they would evenassure that they are committed to some of them. But the reality is a very differentpicture, since managers never transform their words into actions. However, WholeFoods did it. They proved to all that a shift in the paradigm of management is possible,and, at the same time very profitable. Whole Foods has turned up side down all thesemanagement concepts, often treated with scepticisms, and made from them a newbusiness model, no longer an utopia dream. A competitive business can be in perfectbalance with stakeholders. Shareholders and profits are certainly important, but no moreimportant than customers and employees. Whole Foods founder and CEO, JohnMackey, goes even further with his commitment and vision of a Conscious Businessand Conscious Capitalism.Whole Foods has inspired the Collective Management thesis, and practice, inhospitality. Today most businesses focus on shareholders and profits. These are MiltonFriedman and the Washington Consensus prescriptions; the main concern of anybusiness must be to shareholders and its maximization of profits –they will say. Thiseconomic theory says that any other stakeholders such as workers or guests shouldn’t beput in the same balance. This is the reason why management and managers have rootedmind-sets and professional bias against such innovative working practices. Continuousinnovation happens if companies are managing with the appropriated leadership,empowering people and thus unleashing workers potential. This is the good path to getany Competitive Advantage in hyper-competitive markets.The following Business Case Study “Walk the Talk”. It deals works with theseinnovative management premises. It is also a good example of an organization thatfollows its sense of purpose, transmitting it to all stakeholders. As a result, the companyvision is shared first by all team members; producing then more passion and affectingall working activities. This radical management practice breaks with the conventionalthought while still achieving spectacular results! Above all, what matters most in thisshift in the management paradigm, is that this radical model of management ishappening in a very commoditized and mature industry. Whole Foods has clearlyshown us that, by focussing on workers and their contribution to constant companyimprovements, core values and customers, it is possible to get a real CompetitiveAdvantage.What is Whole Foods?In 1978, twenty-five year old college dropout John Mackey and twenty-one year oldRene Lawson Hardy borrowed $45,000 from family and friends to open the doors of asmall natural foods store called SaferWay, in Austin, Texas. When the couple got
  3. 3. Whole  Foods  Case  Study.  A  benchmark  model  of  management  for  hospitality   3    booted out of their apartment for storing food products there, they decided to simplylive at the store. Since it was zoned commercial, there was no shower stall. Instead, theybathed in the Hobart dishwasher, which had an attached water hose.Two years later, John and Rene partnered with Craig Weller and Mark Skiles to mergeSaferWay with their Clarksville Natural Grocery, resulting in the opening of the originalWhole Foods Market on September 20, 1980. At 10,500 square feet and a staff of 19,this store was quite large in comparison with the standard health food store of the time.Today, Whole Foods Market, Inc. is the largest natural-foods grocer in the United Stateswith more than 300 stores in the U. S., Canada and the United Kingdom. WFs 2012annual sales are $11 billion, and net profit of $465,5 million. But what does JohnMackey think about money? As he said in an interview: “I still grow in financial successbecause I have a numbers of investments that continue to flourish…but WF is trying tofulfil a deeper purpose, and I have to embody that deeper purpose. The money thing is adistraction, it´s so easy for people to judge you, saying that you did that, or got a lot ofmoney…but if you are able to take the money out of the equation then you are doing itfor the "service" to fulfil that mission for the organization, so that it creates a certainpurity in your motive. One thing I know is what the right move is because of how theteam members are responding. Team members are so excited. Why? Because these guysthey really believe in their mission” Like he also said: “purpose inspires people, andpurpose releases creativity”.Their motto states — Whole Foods, Whole People, and Whole Planet —and emphasizesthat on their vision that reaches far beyond just being a food retailer. Their success infulfilling their vision is measured by customer satisfaction, Team Member excellenceand happiness, return on capital investment, improvement in the state of theenvironment, and local and larger community support.Whole Foods stores dont stock products with artificial colours, flavours, orpreservatives; offers as much organic produce as possible; only sell meat and seafoodthat are free of chemicals and hormones. WF prides itself on selling the highest quality,freshest, and most environmentally sound produce. No one could argue that theirselection of organic food and take-away meals are whole, hearty, and totally delicious.“Whole Foods Market is passionate about helping people to eat well, improve thequality of their lives, and increase their lifespan. Their purpose is to teach people thatwhat they put into their bodies makes a difference, not only to their health and to that ofthe people who supply the food, but also to the health of the planet as a whole”, Mackeysaid. WF is a company very committed to its values, these core values are sharedthroughout the organization; (a) Quality Standards: they are very serious about qualitycarrying natural and organic products. (b) Organic farming: farming without thestandard array of modern toxic and persistent chemicals commonly used in conventionalfood production. They support local farms. (c) Seafood sustainability: they believe thatsustainable seafood comes from responsibly managed fish farms and marine fisheriesthat maintain healthy fish populations and ecosystems. (d) Animal welfare ratingstandards: It is a tiered rating system developed to rank animal welfare practices andconditions within farm-animal production systems. (e) Caring for Communities: Each oftheir stores has a lot of latitude in deciding the best way to operate that individual storeto meet the needs of the local community. (f) Whole trade guarantee: At Whole FoodsMarket, they’re not just about selling groceries; they believe they have a responsibility
  4. 4. toward all people involved in their business. This includes shoppers, shareholders, teammembers and suppliers as well as producer communities in developing countries.The Whole Foods strategy combines democracy with discipline in working andmanagement. The Whole Foods culture braids a strong sense of community with afierce commitment to productivity. Its a virtuous circle: rank-and-file participationreinforces individual attention to performance and profits; solid financial results givepeople more freedom to innovate. Mackey imagined the impact if every single personworking for a company were able to be a creator and innovator. A working place, inwhich Team members could be enable, capable, empowered and challenged to unleashtheir entrepreneurial energy and their creativity to help improve their team, store andcompany. He always thought about innovation as a constant business objective alsoenhanced from bottom-up. As he mentioned once: “Any organization that depends on afew geniuses at the top and outside consultants, regardless of how brilliant they are, is ata competitive disadvantage to businesses that more fully utilize all of their intellectualcapital and decentralized knowledge”.Whole Foods business model and management operates under these principles:Self directed teams: competition -and collaboration.The fundamental work unit of the company is the self-directed Team. Teams meetregularly to discuss issues, solve problems and appreciate each other’s contributions.Every Team Member belongs to a Team, being very committed to business objectives,values and performance.Whole Foods recognizes the importance of smaller tribal groupings to maximizefamiliarity and trust. Trust is the glue that holds everything together throughout thecompany. They organize their stores –and company- into a variety of interlockingteams. Most teams have between 6 and 100 team members, and the larger teams aresubdivided further into a variety of sub-teams. The leaders of each team are alsomembers of the Store Leadership Team and the Store Team Leaders are members of theRegional Leadership Team. This interlocking team structure continues all the wayupward to the Executive Team at the highest level of the company.Teams -- and only teams -- have the power to approve new hires for full-time jobs.Store leaders screen candidates and recommend them for a job on a specific team. But ittakes a two-thirds vote of the team, after what is usually a 30-day trial period, for thecandidate to become a full-time employee. This hiring referendum affects the behaviourof everyone involved in the process: the job candidate, the team, and the store teamleader. Store leaders take great care not to recommend people they dont think the teamwill approve. The team is the cornerstone of Whole Foods Market; thus the teammeeting is where all values come to reality. Each team in all 300 stores meets at leastonce a month. Each store meets monthly as a team as well. More often, they are anopportunity for team members to swap stories, constantly learn analysing guestcomments and job improvement opportunities, solve problems, and share information.They are central to how stores operate and improve -- an important ritual for promotinggroup accountability and reinforcing the companys values. Trust, between teammembers and managers, is decisive. At Whole Foods that trust is optimized in this typeof smaller team organizational structure. This is because each person is a vital and
  5. 5. Whole  Foods  Case  Study.  A  benchmark  model  of  management  for  hospitality   5    important member of his or her teams. The success of the team is dependent upon theinvaluable contributions of everyone on the team. Trust is optimized when it flowsbetween all levels within the organization. Whole Foods structural organization is verydecentralized, the basic operating unit is based on teams; each team such as grocery,bakery, fruits and vegetables, meat and seafood, cashiers, prepared foods…works asindependent units with much decision power, committed to business objectives, valuesand mission. Teams are also fundamental in company improvements and innovation.Teams compete against their own goals for sales, growth, and productivity; theycompete against different teams in their store and against similar teams in differentstores and regions. This competition is a major reason why performance information isso available within an open-book-management philosophy. Since every team canmeasure other team´s performance, there is a healthy competition among businesses,comparing performance indicators such as sales, profits, and customer satisfaction…The main vehicle for competition at Whole Foods is an elaborate system of peer reviewsthrough which teams benchmark each other. But they also collaborate sharingknowledge and best practices, as Mackey view: it is natural for people both competeand collaborate.Empowerment.Mackey wrote in an article: “Empowerment must be much, much more than a mereslogan, however. It should be within the very DNA of the organization. Empowermentunleashes creativity and innovation and rapidly accelerates the evolution of theorganization. Empowered organizations have tremendous competitive advantagebecause they have tapped into levels of energy and commitment which their competitorsusually have difficulty matching”.Empowerment is also based on Self-responsibility that is, to take responsibility for theirown success and failures. They celebrate success and see failures as opportunities forgrowth and recognize that they are responsible for their own happiness and success.“Business must view people not as resources but as sources”. John Mackey said. “Aresource is like a lump of coal; you use it and it’s gone. A source is like the sun –virtually inexhaustible and continually generating energy, light, and warmth. There is nomore powerful source of creative energy in the world than a turned-on, empoweredhuman being.” Innovations thus happen from bottom up, and merge strategies show upfrequently, since all this working freedom allows organizational learning and jobimprovement to flourish constantly. When people are expected to take moreresponsibility from their jobs, they normally boost their strengths making the companyworking processes advance better. Organizations such WF believes in workers and teamself-responsibility, self-management and empowerment. People don’t need to becontrolled or supervised in order to ensure job performance. Paradoxically, thosecompanies that empower their workers-and reduce bureaucratic controls- are the oneshaving more control. The style of management based more on command and control,has the pretension of better controlling jobs and workers performance, but the reality isthat, once the manager or supervisor is not there to control, performance certainlydecreases. A sort of self-fulfilling prophecy takes its place. Contrary to this mind-set andas a direct consequence of trusting in workers we have companies like WF that over-perform expecting from teams and individuals self-management. Mackey referred toControl by saying: “Conscious managers exercise a minimal amount of control. Their
  6. 6. role is not to control other people; it is to create the conditions that allow for more self-management”. Their conditions are basically based on strong and shared values, as wellas greater sense of responsibility from each one of the team members.Customer -and product- experience.Whole Foods is very committed with Peter Drucker statement, which said that the onlybusiness purpose is to create a customer. Customers are the reason for being of everybusiness. Without customers there is no business, nor employments.Part of Whole Foods success, part of its style, is to constantly up the bar in terms of thekinds of foods it offers, how it presents that food, and what it tells you about how thefood got to the store. Satisfying and delighting their customers, is it´s primary corevalue. WF writes about customers on its Web: “They are their most importantstakeholders in our business and the lifeblood of our business. Only by satisfying ourcustomers first do we have the opportunity to satisfy the needs of our otherstakeholders”. It is the first commitment of all employees, serving customers andinforming them about the advantages of the healthy food that they are selling. WholeFoods team members are the best ambassadors of their brand; they are the best “actorsand actress” of this “performance” –they called it, of selling food to customers. It is notjust selling food, it is about fulfilling the companys purpose and core values, and theydo it with passion, transmitting it to their guests. Service to customers though becomesmore natural and authentic since it´s deeply rooted in employees’ behaviour. WholeFoods Market is passionate about helping people to eat well, improve the quality oftheir lives, and increase their lifespan. Passion is the right word to show how service isprovide to guests. Their purpose is to teach people that what they put into their bodiesmakes a difference, not only to their health and to that of the people who supply thefood, but also to the health of the planet as a whole.Transparency.There isn’t sufficient trust between team members and mangers without the propertransparency. As Mackey stated, “if we want to optimize trust then we must optimizetransparency” Many companies act in the opposite way, hiding information, or selectingsome people to whom trust and share relevant information. This lack of honest,authentic communication and transparency usually boomerangs, however, andundermines trust and creates cynicism. But in WF, such grade of trust it´s showneveryday to all team members, by acting with full transparency throughout all workingactivities.The open-salary policy is undeniably radical. But its trust-building payoff is substantial.CEO Mackey initiated the policy in 1986: "I kept hearing from people who thought Iwas making so much money. Finally, I just said, Heres what Im making; heres whatCraig Weller –co-funder-is making -- heck, heres what everybodys making." Allsalaries are open; if someone is making more money it is because he or she isperforming better within his or her team.By sharing much information, do we risk revealing important information tocompetitors? Maybe, but overall the advantages outweigh the drawbacks. Mackey make
  7. 7. Whole  Foods  Case  Study.  A  benchmark  model  of  management  for  hospitality   7    it clear writing: “The high-trust organization takes the risk of revealing too muchinformation. We must be willing to take the risk that some valuable information mayfall into the wrong hands because our commitment to empowerment and trustnecessitates taking that risk. Creating transparency and authentic communication is anongoing challenge that every organization faces. We must continually strive to removethe barriers that prevent it, knowing that we cant maintain high levels of organizationaltrust without it.”Innovation.Innovation is a purpose that affects everyone. It is not a business task only assigned tocentralized offices, coming from the top-down. Contrary to this tayloristic view, WFsbasic unit is the team within a very decentralized organization structure. Teams,especially teams, are responsible for improving jobs and developing new ideas –respecting core values. Innovation thus happens as a social process within a team, in-group, and by analysing jobs and guest feedback. Innovation is democratized andexpected to happen, especially, from the bottom-up. Here is how Mackey sees it:“Imagine the impact if every single person working for a company were able to be acreator and innovator. Team members should be enabled, empowered, and challenged tounleash their entrepreneurial energy and their creativity to help improve their team,store and company”.The common wisdom about innovation is either by focusing on the result, forgettingthat first of all it is a process -indeed a social process, or referring innovation totechnology or technological industries. But innovation refers also small workingimprovements seeking to provide more value to your guests. That is how WF focuses oninnovation, by developing ideas that appeared as a job reflection, and closely, monitorsit. Then, if the idea has been proved with measured results, they may share it as the bestpractice. John Mackey also demystifies the common view about innovation by saying:“In the United States, there is a myth of the lone genius coming up with brilliant ideasthat change the world. While that occasionally happens, the more common scenario isthat an individual comes up with an idea and shares it with other members of his or herteam; they become excited and improve upon it. The spirit of collaboration allows theidea to evolve and mature”.Innovation has basically two financial purposes: (1) to increase revenues by providingmore value to guests, and (2) to reduce costs by making operations more effective. Allteams and members are focusing their efforts on them.    

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