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HR Lessons from Whole Foods

HR Lessons from Whole Foods

by Frank Roche on January 8, 2007

in Management

Whole Foods BuildingI like Whole Foods. Heck, I just like food in general, but that’s another story. But I really like how Whole Foods does business. Here are a few business lessons I culled from an article I recently re-read. (How often do you re-read articles? Sadly, I don’t do it enough.)

CEO John Mackey practices what he preaches about customer contact and customer service. And employees respond.

At the 2003 shareholders’ meeting of Whole Foods Market, of which Mackey is cofounder and CEO, animal-welfare activist Lauren Ornelas lambasted Mackey for selling meat from ducks that were raised in what she considers cruel conditions. Instead of giving her the textbook brushoff, Mackey offered his e-mail address. They corresponded for a few weeks, but stopped when the debate failed to sway either of them. Six months later Ornelas opened her in box to find a new e-mail from Mackey. After talking with her, he’d read a dozen books on animal welfare, he wrote, and eventually decided Ornelas was right. He’d become a vegan himself. And he wanted her help in rewriting Whole Foods’ policies on farm-animal treatment. “It made me fall out of my chair,” Ornelas says. After she spent years boycotting Whole Foods, “now we’re working together.”

The company doesn’t try to impose its culture on its acquisitions. In fact, Whole Foods looks to learn from the companies it buys:

Unlike most acquirers, which forcibly graft their culture onto acquirees, Whole Foods adopted many of the successful practices of the companies it bought—especially those of Boston-based Bread & Circus, renowned for its fresh produce, meat and seafood. “Whole Foods has been very smart about their expansion program, taking time to digest acquisitions before moving on to the next one,” says Darrell Rigby, a retail consultant at Bain & Co.

They pay for talent and reap the benefits. There has been a trend lately to think that pay for performance isn’t working. Remember in the 1980s when management started to make themselves feel better about lowered incentive and merit pay by repeating the “people don’t work for money” mantra? Whole Foods doesn’t buy it.

To boost employee morale, executive salaries are capped at 14 times the average worker’s pay. Employees can look up each other’s earnings, and 93 percent of stock options awarded last year went to nonexecutives…Yet Whole Foods “has found a way to turn higher compensation into a competitive advantage rather than a liability, in the same way that Costco has,” says Rigby, the Bain consultant, by proving that happy workers provide better service.

I know that Whole Foods has been knocked around a little in the business press in the past year, but I think the business lessons they apply are universal. How can you go wrong with a company that holds “sustainability” as a corporate mantra? Their ideas will be around for a while. And with a sustainability approach, so will Planet Earth.

[tags]Whole Foods, HR, sustainability, pay for performance[/tags]

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