Employees are the lifeblood of an organization and should be treated like so—something Whole Foods Market understands well. The supermarket chain has long been recognized for keeping its workforce extremely satisfied, marked by its 16-year running as one of Fortune’s “100 Best Companies to Work For” in America.
In an interview with Inc.com, John Mackey, founder and CEO of Whole Foods, discussed five business practices that support and enable his employees, and therefore, his company, to be incredibly successful.
1. Let Employees Approve Healthcare
Whole Foods is famous for providing some of the most generous health care programs in the country, allowing for coverage of part-time and full-time workers, as well as dependents.
“We have a great plan,” Mackey says. “Team members love it. We let them vote on it every three years. It gets very high approval rates.”
Despite the popularity, government regulation looks to condemn the Whole Foods policy for its current lack of recently mandated coverage. Though it’s unclear whether Mackey will be able to continue his company’s policy unchanged, the Whole Foods tradition of providing agreeable health care for employees will likely endure.
2. Establish Fair Compensation
Fair compensation can be thought of in two ways: external equity (meeting the market rate) and internal equity (considering what’s fair within the organization).
“Most companies pay a lot of attention to external equity and don’t pay enough attention to internal equity,” says Mackey. “And yet, we know almost nothing destroys morale in a company faster than the perception that the compensation system is rigged and unfair and that some people or few people are taking most of the goodies for themselves.”
Whole Foods encourages transparency by making compensation numbers public knowledge—including for senior management. To further protect from unfair practices, the majority (93 percent) of company stock options go to non-executives, and a company-wide salary cap stops pay from getting higher than 19 times than the average.
“I think it’s important that companies police themselves, and a salary cap serves that purpose within Whole Foods Market . . . On the other hand, it’s still pretty high at 19 times. People earn a good living at our company.”
3. Encourage Innovation (By Watching Competitors)
Whole Foods stores are decentralized and empowered, allowing for innovation on a team-by-team basis. Given the freedom to improve on their own and others’ ideas, employees come up with some of the best strategies, says Mackey, and they spread them much faster than could a strictly top-down organization.
An important part of this creative process comes from admiring competitors—one of your greatest stakeholders and sources of inspiration.
“[Competitors] can teach you more than anybody else because they’re going to do some things better than you do,” Mackey continues, “I always teach people if you go into a competitor’s store, I don’t want you to come out unless you can tell at least one—if not three—things they’re better than we’re doing, and how you’re going to implement it.”
4. Manage With Love, Not Fear
Mackey disapproves of the culture created by former General Electric CEO Jack Welch in which employees who fall in the bottom 10 percent are asked to dig deep or go home. Far from a motivational tactic, Mackey says such policies create a culture of fear.
“People are going to be afraid that they’re going to fall in the bottom 10 percent, and it’s like they’re going to die,” he describes.
While Mackey understands pressure can result in valuable opportunities for people to rise up stronger, he thinks it unnecessary for leaders to go out of their way to create a crisis environment.
“You may need to get hit on the head to learn something, but that doesn’t mean you want to go out looking to get hit on the head,” Mackey explains. “That’s my problem with the ‘Jack Welch fire the bottom 10 percent,’ because it scares most people. They don’t have a sense of security. I think it’s better to manage with love than fear.”
5. Foster A Culture Of Resilience
Mackey isn’t planning on retiring soon, but he’s taken many steps to ensure the company he built will live on with a robust and resilient culture.
“It’s the rare company that is able to transcend the loss of their entrepreneur founder and still maintain at a high level,” he says.
To create such lasting values, Mackey advises pouring your heart into developing a strong culture: “Culture is like an immune system of an organization,” Mackey says. “If you create a really vital culture, it protects the values because everybody takes ownership for them. Then if you get a bad leader in, the immune system rejects it.”
What company policies or traditions do find keep employees happy?