INSIGHTS

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Early Role of CSR in Building
Whole Foods to an $8 Billion Business

May 31, 2019

John Mackey spent several undistinguished years in college and left without a degree. But, after actualizing a life-long commitment to healthy nutrition and opening a small health food store, he did manage to successfully build that venture into a chain of stores we know as Whole Foods Market.

Spirit of Service

Mackey believes that the true power of free enterprise is a spirit of service to one another, which unites, motivates and empowers people to live a more fulfilled life. Under free enterprise, he says, it is the responsibility of a business organization to benefit customers, employees, suppliers, investors, communities and the environment.

Critical Goals – Customers and Service

Like the late management guru Peter Drucker, Mackey believes that the most critical of these goals are customers and employees. And, of these two, customers require the most consideration for the obvious reason that normally they have the options of shopping somewhere else. He believes that a strength and beauty of free enterprise is the way it motivates businesses to provide greater value, higher quality and better service.

Competition Forces Improvement 

“Competition forces us to continuously improve, innovate and be more creative or we get left behind,” he writes. “To thrive we have to offer customers new products, services and value that our competitors don’t. What makes it even more challenging is that customer expectations about quality and value rise continuously. What might have satisfied them 25 years ago doesn’t satisfy them today. As the Red Queen says in Through the Looking Glass, ‘It takes all the running you can do to keep in the same place. If you want to get somewhere else, you have to run at least twice as fast.’”

Giving Back

Whole Foods gives back to communities through CSR, as well. The company did donate up to 5% of its profits annually – sometimes more. Additionally, 1% of sales from Whole Trade certified products go to the company’s Whole Planet Foundation, which provides microloans to help entrepreneurs and their families escape poverty. Mackey also founded the Whole Kids Foundation, an organization providing kids with healthy meals at school.

New Products and Services

Creativity and innovation—creating new products and services that competitors have not yet thought of and cannot easily duplicate—are the only ways to escape from that trap, Mackey warns. Free enterprise-inspired conscious businesses have the advantage of being inherently creative, he adds. By resisting getting trapped in never-ending competition over efficiency and productivity, these businesses innovate by discovering the unmet needs and desires of their customers. “This,” Mackey insists, “is challenging and fulfilling at the same time.”

Supply Chain Efficiency

He concedes that if Whole Foods Market had to compete with Walmart strictly on the basis of supply chain efficiency or distribution economies of scale they could not possibly win. But what Whole Foods can and has done is to become more nimble, creative and innovative, providing higher quality service while creating a more welcoming and enjoyable store environment. “By the time Walmart figures out what we’re doing,” he writes, “we’ll have moved on to newer and better innovations creating new value for our ever-evolving customers.”

Customer Values

How has Mackey assembled a workforce that can create the store atmosphere his customers so value? Every carefully selected new hire is assigned to a particular team on a probationary basis for 30 to 90 days, Mackey says. At the end of that probationary period, he or she must get a two-thirds positive vote from the entire team to be granted full team-member status. “Anyone is capable of fooling a team leader for a while,” he notes, “but it is much more difficult to deceive the entire team.” And, once hired, team members tend to stay.

“Calling,” Not a Job

Mackey believes that this is the case because they come to regard their work as a “calling” rather than just a job. Callings, he notes, become so meaningful to people that they would tend to continue with them even if they won the lottery and became independently wealthy.

Beyond the Paycheck

“Such work offers us value and satisfaction beyond the paycheck. It relates to something we’re passionate about and something that the world really needs. We feel most alive, most ourselves, when we are doing that work. Ultimately this is what we need to strive for, as team members and employers—that as many people as possible are engaged in work that feels like a calling.”

Team Membership

Employee team membership itself is extraordinarily important in the Whole Foods free enterprise philosophy. Mackey points out that being members of teams enables people to feel safe and develop a sense of belonging.

Creative Ideas

Creative ideas of the various members bounce around and are improved upon. “Especially in the U.S. there is a myth of lone geniuses coming up with ideas that change the world. While that occasionally happens, the more common scenario is that an individual comes up with an idea and shares it with other members of his or her team. They get excited and improve on it and the spirit of collaboration allows that idea to evolve and mature. That’s free enterprise on the employee team level.”

Free Enterprise

One clue as to how Whole Foods has grown so impressively—beyond capturing the spirit of free enterprise, unleashing the dynamic spirits of capable but elsewhere poorly managed employees and the 21st century obsession with natural foods—may be Mackey’s notion of “heroic” selling, the strategy of not just providing customers with what they ask for but routinely searching for additional ways to add value.

Needed and Desired

He cites the analogy of someone lost for days in a desert and finally crawling into an oasis. The oasis “owner” immediately provides water, first aid and whatever else the emergency requires. But he doesn’t stop there. He goes on to discover and furnish whatever else may be needed and desired. And, by the end, we find the erstwhile traveler happily floating in a pool enjoying a margarita.

Adapted from Conscious Capitalism by John Mackey (Harvard Press.) The author makes a persuasive argument for the inherent good of both business and capitalism.

New Special Conference for Nonprofit Affiliate Members of the Satell Institute

In November, the Satell Institute will convene its first private Nonprofit CSR Seminar at The Franklin Institute with a focus on how to attract for-profit financial supporters and partners. This will be an unprecedented opportunity for nonprofit leaders to be able to hear, interact with, and learn from for-profit CEOs and CSR executives about such collaborations and effective CSR initiatives. There will also be vibrant interactive round table discussions which are highly valued.

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