Most people assume that companies are only concerned with making a profit, whether ethically or unethically. In the past decade, more companies are proving this theory wrong. One of such companies is Whole Foods Market. CEO John Mackey has transformed this supermarket-style natural-food store into a multi-million dollar, industry-leading supermarket. With a unique management style, Mackey has attracted the attention of consumers and businesses in Corporate America. I will show how a stakeholder-focused mentality and virtue ethics in the Whole Foods community have led to a profitable and socially responsible company.
Whole Foods Market was founded in 1980 in Austin, Texas. John Mackey and then girlfriend Rene Lawson Hardy desired to turn a natural foods store into a supermarket format. At that time, there were less than half a dozen natural foods supermarkets in the United States. Since its inception, Whole Foods has expanded across the country and acquired many other natural food chains along the way. The most important factor that led to its success is the company’s core values. Whole Foods is committed to selling the highest quality natural and organic products while satisfying customers, employees, the community and the environment. The source of these values is CEO John Mackey. He has created a culture of certain values that permeate throughout the business. Mackey instills a specific management approach that emphasizes each of these values.
Whole Foods Market’s success is closely related to an ethics of virtue. Oliver Williams describes an ethics of virtue as “assuming that being human entails living in community and developing certain virtue or skills required for a human life with others” (Williams 23). In a business setting, this theory enables organizations to develop consciously their own ethical corporate culture, and that is exactly with John Mackey did. Mackey wanted to create a store that created more value for the customers and the people that work there all while maintaining a specific mission with core values, such as care, support, and loyalty. This directly correlates to the idea of virtue ethics. Williams points out that “companies acclaimed for their ethical corporate culture most often can trace their heritage to one or several founders who were intent on managing an organization that respected human dignity and insisted on a human way of life” (Williams 25). In Whole Foods’ case, that person is John Mackey. He had a distinct mission of helping people to live healthier lives, to hopefully reverse the obesity crisis in America. Overall, Mackey embodies a founder who is rooted in virtue ethics and this philosophy helped build a successful company.
Gary Hamel in The Future of Management describes Whole Foods’ approach to management as twining “democracy with discipline, trust with accountability, and community with fierce internal competition” (Hamel 4). Mackey has created a team environment in his stores, where small work groups are responsible for their specific operating decisions, including pricing, ordering, staffing and in-store promotion.
For example, one team may be the produce team. These team members are encouraged to buy locally as long as items meet Whole Foods’ stringent standards. They are also required to vote on a new applicant’s fate: “a newbie needs a two-thirds majority vote to win a full-time spot on the team” (4). The team’s salary is then determined on its labor productivity. This practice fosters the message that “it is you, rather than some distant manager, who controls your success” (5). Employees have the freedom to do the right thing for the company but also the incentive to do the right thing for profits. It’s a balance of freedom and accountability that empowers the employees.
There is also a level of trust amongst the employees of Whole Foods. Each associate is allowed access to the compensation data for all other store employees- from top management on down. This open book policy “builds a company that is bound by trust” (6). Mackey also fosters a sense of equity in his Whole Foods community. He has set a salary cap that limits any individual’s compensation to no more than 10 times the company average. The company’s mission statement is titled a “Declaration of Interdependence” which describes Whole Foods as “a community working together to create value for other people” (Whole Foods). At the end of every Whole Foods meeting, there is a round of appreciations, where each participant acknowledges the contributions of his or her peers. This idea fosters a sense of community and interdependence. Mackey states, “We’re creating an organization based on love instead of fear” (Fishman 75).
This environment is set up for what ultimately binds Whole Foods’ associates, which is a common cause—“to reverse the industrialization of the world’s food supply and give people better things to eat” (Hamel 8). Mackey and his employees strictly follow environmentally friendly and sustainable measures when it comes to the food they sell. He comments that he “sees no inconsistency between a passion for sustainability and a passion for profitability” (8). Mackey ensures that all of his products are the highest quality natural and organic items available. He states, “We want to improve the health and well-being of everyone on the planet through higher quality foods and better nutrition. We can’t fulfill this mission unless we are highly profitable” (9).
Clearly Whole Foods’ management focuses on the happiness of their employees and the quality of their food, but they also pay attention to the customers, the community and its stockholders. The company describes its most important stakeholder as its customers (Whole Foods). Whole Foods implements five key missions with regard to its customers. First, the company focuses on extraordinary customer service. Aaron Foster, a company veteran, described a situation where he put his customer service skills to use. He stated that a customer came up to him only knowing the first letter of a specific cheese. He listened to her description and knew right away which type of cheese she was referring to. Employees, like Foster, strive to serve customers competently, efficiently, knowledgably and with flair (Whole Foods). The company also insists on educating customers about natural and organic food along with health and the environment. Whole Foods offers value to customers through its high quality products and service. It also values retail innovation through new ideas and products to enhance the customers’ experience. Finally, Whole Foods creates inviting store environments that are “bright, well staffed, and seductive; a mouth-watering festival of colors, smells and textures’ an homage to the appetite” (Fishman 70). Mackey and his employees seek to create a community environment in which family and friends can socialize and enjoy their food shopping experience.
Furthermore, Whole Foods supports its communities and the environment. The company supports organic farmers and the environment through its commitment to sustainable agriculture. Since stores are encouraged to buy locally (to help support the surrounding community), every store carries a unique mix of products. This strategy gives local customers a special experience in a store that they can call their own. The company itself gives a minimum of 5% of its profits per year to a wide variety of local and non-profit organizations (Whole Foods). The store tries to become an active participant in its community. Whole Foods also respects the environment by recycling, reusing and reducing waste wherever possible. It also “demands that the meat it sells comes from animals that have been treated with a measure of dignity before being slaughtered” (Fishman 72). This concept means that there are no antibiotics, no steroids and feed that are free of animal by-products. These strict rules encourage sustainable and healthy living and eating. Finally, the company treats its business partners as allies in serving its stakeholders. It vows to “treat them with respect, fairness and integrity at all times” (Whole Foods). Whole Foods uses values of honesty, communication, and transparency with its suppliers and expects the same in return. The company cultivates ongoing partnerships with vendors who share its concern for social responsibility and the environment. These partnerships lead to a continuous supply of natural and organic food to sell and make a profit for investors.
Finally, Whole Foods creates wealth and profits to please its investors. The company attributes its success to the previous values described above. Mackey states, “to maximize shareholder value, you’d better be a positive force in the community” (Hamel 8). He believes that staying true to the company’s values of treating the customers, community, vendors and environment with respect is the key to generating income that in turn helps shareholders. The company is committed to increasing long-term shareholder value. It recognizes that the profits the company makes are essential to creating capital for growth, prosperity, opportunity, job satisfaction and job security (Whole Foods). Mackey has a new outlook on business; he comments, “what I found was that the essence of business was basically based on voluntary exchange for mutual benefit…business is the great creator value for other people and it’s fundamentally a force for good in the world” (Mackey). Statistically, Whole Foods has “proven to be a better bet for investors than any of the five biggest grocers: Wal-Mart, Kroger, Albertsons, Safeway, and Costco” (Sisodia 128). The company has returned 185 percent over the past three years, 400 percent over the past five years, and 921 percent over the past 10 years. Whole Foods believes that its mission will help generate profits for the shareholders—it’s a mutual benefit; the company sticks to what it believes in and the investors make money.
All of the business practices and management strategies mentioned above support a stakeholder theory. The main proponent of stakeholder theory is Edward Freeman. Freeman supports the idea that a business’ purpose is to produce goods or services to satisfy customers and create profit for shareholders, all while protecting the interests and rights of all stakeholders including employees, suppliers, business partners, and the general public (Freeman 38). Whole Foods currently has a holistic vision of its stakeholders, stating, “satisfying all of our stakeholders and achieving our standards is our goal. One of the most important responsibilities of Whole Foods Market’s leadership is to make sure the interests, desires, and needs of our various stakeholders are kept in balance” (Sisodia 55). As mentioned above, Whole Foods has taken many steps to ensure that all of its stakeholders are treated well. Customers are given extraordinary service, along with high quality products; shareholders have benefited financially far more than the competition; employees are given an enormous amount of autonomy and freedom which inspires greater innovation and creativity; suppliers and business partners are treated with respect which fosters a long-term relationship; and the community and environment benefit from the store’s generous support. Mackey himself states in an interview: “It’s this stakeholder philosophy of creating value for all your stakeholders really makes a business far more resilient, more robust. If you want to be competitive in the long term, your business needs to have discovered its higher purpose and it needs to adopt a stakeholder philosophy” (Mackey 6). Whole Foods Market is a great example of living up to stakeholder theory. The CEO praises the theory and attributes the company’s success to the ideals of stakeholderism.
The management practices and core values of Whole Foods directly correlate to the ideas of stakeholderism and virtue ethics. The company ensures that all relationships among stakeholders are in balance. Whole Foods has specific goals and values for its employees, customers, stockholders, community, and environment. It also has an overall mission of helping the health of the world and the environment. This mission coincides with virtue ethics because it promotes virtues of loyalty, justice, compassion and integrity. If these management practices and core values support a profitable company with loyal customers, employees and suppliers, then why doesn’t every company follow stakeholderism and virtue ethics?
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