Learning from Whole Foods

Who shops at Whole Foods? We don't. Distance from our home (7 miles or so), lack of familiarity and perceived expense (whole paycheck) are factors that keep us very much outside the orbit of the retail phenomenon. On the other hand, I know of a couple who help account for why Whole Foods seems to have such a loyal following. My brother's in-laws, who live in North Sioux City, S.D. are committed Whole Foods customers, though the closest one to their residence is in Omaha, Neb. This week the couple visited Kansas City to rendezvous with my brother's family for a Christmas celebration. At the same time, they brought coolers so they could make a big stock up shopping trip to a KC Whole Foods before their return to North Sioux City. What makes them true blue customers of Whole Foods and devoted organic food aficionados?

Mary, my brother's mother in law, is a cancer survivor and is scrupulous about what she puts in her body. Randy, My brother's father in law is an endodontist, suggesting a level of disposable income that easily defeats resistance to higher prices.

How has Whole Foods captured the hearts and minds of customers like Mary and Randy? There is a book review in The New York Times on the Gary Hamel book "On the Future of Management" that profiles the Whole Foods business model. From the book review by William Holstein:

If companies now innovate by creating new products or new business models, he asks, why can’t they do the same in how they manage organizations? Might not a more modern approach to management be just the ticket to keep American companies ahead of their global competitors? This would entail moving from a century-old command-and-control model to a more latticed, networked style of organization.
If industrialization and world wars created one model of management hierarchy shared by business and the military, perhaps the next set of management ideas should be spawned by the Internet and the upheaval it has prompted in how humans think about information and community.
Mr. Hamel, who wrote this book with Bill Breen, critiques three companies that he argues may be harbingers of the future: Whole Foods Market, W. L. Gore & Associates (a privately held company that invented Gore-Tex, among other products) and Google.
Whole Foods has organized itself into roughly eight teams at individual stores, all of whom have the mission of improving the food that Americans eat. These teams, which have the right to hire and fire their own members, are given wide latitude about what to stock on the shelves and how to manage their stores as a whole.
But their performance numbers are open to all to behold, and their compensation is strongly linked to team, not individual, performance. “Unlike so many other companies, front-line employees at Whole Foods have both the freedom to do the right thing for customers, and the incentive to do the right thing for profits,” Mr. Hamel writes.
The fact that front-line employees are empowered to respond to the changing tastes of finicky shoppers is powerful. “In a more hierarchical company,” Mr. Hamel argues, “top management only sees problems once they’ve become pervasive and, therefore, expensive to fix.”

TK: More than a philosophy about food, Whole Foods also has ownership of a distinctive management approach that delivers a customer experience that is satisfying for Mary, Randy and millions more. Hamel suggests this management approach, at least, is transferable to other organizations.