Whole Foods Best Practices Essay
Whole Foods Market’s Human Resources Best Practices Abstract This paper looks into the Human Resources Best Practices at Whole Foods Market. Specifically, this paper is divided into three different sections which each identify the best practices as they pertain to different focuses. First, employee morale is examined, featuring how Whole Foods Market engages employees through a corporate culture of empowerment, ensuring pay and benefits exceed competitors, interacting with local communities, and through training and development. Next, corporate wellness programs are examined.
Whole Foods’ is focused upon healthy living for its customers and its employees as is evidenced by its programs. These programs focus on wellness and flexible spending accounts, discounts on health insurance premiums for employees who demonstrate high health factors, and in the United Kingdom, a tax-free bicycle leasing program. Finally, executive compensation is explored. While executive compensation is scrutinized today for executives prospering while nearly 10% of the U. S. workforce is unemployed, Whole Foods’ CEO has taken steps to create a pay environment that is focused on success for all stakeholders.
This has been accomplished through executive salary caps, minimizing the salary gap between employees and executives, and even reducing his pay to $1 per year. Whole Foods Market’s Human Resources Best Practices Whole Foods Market has taken its place in Fortune magazine’s 100 Best Companies to Work For, earning a spot at number 24 for 2011 (CNN, 2011). Some of the reasons cited are a company focus on living a healthy life and discounts for items sold in their stores. However, these seemingly ordinary perks do not add up to being continuously highly ranked as being a great company with which to be employed.
Instead, Whole Foods Market has adopted an entire corporate culture that focuses on shareholders; customers, employees, and communities all prosper from Whole Foods Market’s programs. And it is these programs and human resources practices that make Whole Foods Market not just a Top 25 company, but also an example of how to successfully run a company that focuses on more than the bottom line. This focus is based upon human resources best practices in the areas of morale, wellness, and pay and benefits. Morale at Whole Foods Market is clearly high, as evidenced by the Fortune ranking.
The focus on a corporate culture of empowerment, ensuring pay and benefits exceed competitors, interacting with local communities, and training and development set standards for other companies to emulate. In the wellness category, Whole Foods Market’s practices of providing employees with wellness and flexible spending accounts as well as discounts on health insurance premiums for employees who demonstrate high health factors are focused upon an overall corporate culture of health and wellness for all stakeholders. Pay disparities are minimized by capping executive salaries as a multiplier of average employee salaries.
Ultimately, the corporate culture itself is the driving force behind Whole Foods Market’s effectiveness at creating a company that sets standards for stewardship of resources, employees, communities, and customers. Morale Whole Foods Market is no Pioneer of effective human resources practices that lead to high morale and employee loyalty. However, Whole Foods Market does take morale of its workforce seriously and has implemented a wide variety of different human resources and general business practices that enhance both performance and morale.
Their focus on high employee morale is made very clear in their Core Values where the third listed value is, “Supporting Team Member happiness and excellence” (Whole Foods Market, 2011). Culture In terms of company culture, Whole Foods Market does not attempt to impose their culture on new acquisitions. Instead, Whole Foods Market often adopts the successful culture and human resources practices of companies it acquires. As an example of this, Whole Foods Market actually adopted the practice of providing the freshest of products from its acquisition of Bread & Circus in 1992 (McGinn, 2005).
According to McGinn, “(u)nlike 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. ” Pay and Benefits Whole Foods Market is known for providing a higher rate of pay than its competitors. In fact, it has turned higher pay into competitive market advantage. Whole Foods Market accomplishes this through a number of methods.
For example, Whole Foods Market uses a Pay for Performance plan which integrates profit-sharing into it pay plan. By so doing, employees are motivated to perform at their highest capability in order to receive bonuses based upon the company’s profit margin. Furthermore, as mentioned in the Executive Salaries section of this paper, by capping executive salaries at 19 times the average worker’s pay, Whole Foods Market ensures that workers do not feel as if they are working for “big business” to get rich. Also, employees can look up each others’ earnings.
This transparency helps ensure that employees feel as if there are no secrets and that nobody is being paid unfairly for the work that is completed. Finally, as an example of a benefit plan that rewards workers, stock options are available to all employees. Due to the high success of the stock option plan, 93% of stock options went to non-executives in 2006. All of these pay and benefit plans help in keeping morale high by recognizing the workers and rewarding them for team success (Whole Foods Market, 2011). Employee Engagement Another method of ensuring high morale is through employee engagement practices.
Employees of Whole Foods Market have full say in who they work with; a 2/3 vote is required for a new employee to pass probation. Additionally, instead of a board of directors deciding on company-wide initiatives, employees vote on all company-wide initiatives. This gives those employees power in decision-making and creates ownership in change, thereby keeping morale high, as decisions that will affect workers are being made by the workers that will be affected. Finally, all full-time employees receive health care paid for by employer, at a 100% rate.
In order to focus on the individual, these health plans are chosen by employee in order to meet his/her needs (Whole Foods Market, 2011). Community Involvement Whole Foods Market also tries to provide back to the communities that have helped shape its success. In order to ensure a strong community involvement, and at the same time keep employees engaged in decision-making, a minimum of 5% of profits go to local charities, decided upon by the employees within a particular market area. Combined with the profit-sharing and stock option enefits packages, this continues to put control of Whole Foods Market’s profits into the hands of the employees, and provides a sense of community involvement and pride. Whole Foods Market’s employees get to see their efforts directly contribute to company success, and then get to see this success better the lives of not only themselves, but the communities that Whole Foods Market serves (Whole Foods Market, 2011). Training and Development Whole Foods Market does not merely hire employees and put them to work; instead, training and development is critical to ensuring high morale and continued top performance.
Career training and succession planning is a prime focus of both performance management and ensuring morale. Whole Foods Market also offers their Whole Foods Market University, an online learning environment that teaches the company’s core values, as well as focusing on increasing the knowledge of employees on benefits programs, services, and products. Finally, each store has a budget to spend on team member educational development in job skills and performance (Whole Foods Market, 2011). Corporate Wellness A company’s greatest asset is the employees.
With this in mind, Whole Foods Market has been on the cutting edge for providing health and welfare options for their employees. There have been a number of studies looking at the impact to business and industry in losses due to employee health and illness issues. According to BusinessKnowledgeSource. com (2010), an illness considered minor such as colds or flu cause the most short term work absences. The estimated direct cost of an employee due to sickness was $730. 00 per employee which included the cost of lost production and the cost of covering the work by other means.
When there are unhealthy employees, there is also increased cost for health insurance benefits. A healthy workforce transfers to lesser costs for the organization and for the employee. Employee Wellness Account Whole Foods Market offers the employees who work in the United States a personal wellness account. These accounts provide the employees with company funded amounts to cover the costs of out of pocket allowable health care expenses. These accounts average from $300 to $1,899 annually based on the employee’s years of service with the company.
What is even better for the employees is that the funds that remain in their accounts roll over at the end of the year to the next year. Employees can bank these amounts for when there is a true need. The employees also are afforded the opportunity to have flexible spending accounts. These accounts allow employees to contribute pre-tax funds to pay for eligible out of picket health care expenses. Employees who have acquired 400 service hours are allowed to participate (Whole Foods Market, 2011).
In a continued effort to promote healthy lifestyles, the company allows United Kingdom employees the ability to lease a bicycle, tax-free and then to be able to purchase the bike at the end of the lease period. This encourages exercise and provides employees a manner to purchase equipment with an incentive (Whole Foods Market, 2011). Health Starts Here In January of 2011, the company announced a new program called “Health Starts Here. ” This program offers education, products, practical tools and wellness resources to promote healthy lifestyles.
The company is providing employees identified as healthy eating employees to provide shoppers hands on support with tours of the store and demonstration of healthy foods to encourage healthy eating. The store will label items with a means for consumers to compare foods based on micro nutrients per calorie. They are proving online recipes, cooking tips, meal planning guides and books, and websites to provide more healthy choices for not only their employees but for the consumer. Whole Foods Market also offered a new line of frozen vegetables.
These are tied in to the Health Starts Here program (Whole Foods Market, 2010). Health Insurance Discounts The CEO of the company offered employees discounts on health insurance if they maintained lower readings for blood pressure, cholesterol and body mass index. This is part of the employees’ wellness program. There has been some criticism of the company’s wellness plan, however; it is seen by others as a measure to save employees from themselves. Sometimes people need encouragement and an incentive for eating right and Whole Foods Market seem to have risen to meet this goal (Gilbert, 2010).
Executive Compensation Executive compensation has come under intense scrutiny, particularly with the recent economic downturn. There have been unprecedented levels of concern among shareholders and the general public over what both groups perceive to be excessive compensation paid to top executives. While opinions vary with regard to what constitutes a fair price for the leaders of an organization, many agree that the pay of CEO’s and executives has skyrocketed in comparison to the earnings of the average worker.
Recent History of Executive Compensation Efforts to address the public’s concern that inflated CEO pay has contributed to growing workplace inequality have become more and more common. Organizations such as the AFL-CIO provide analysis and information regarding the disparity between the salaries of executives and other workers. Further, provisions in legislation such as the Dodd-Frank Wall Street Reform and Consumer Protection Act require companies to disclose the ratio of CEO-to-worker pay for their median employee.
Perceptions of workplace inequality due to the pay gaps between executives and employees ultimately have a negative effect on shareholders, the public and the organization’s employees. According to Neely & Boyd (2010), “Downsizing and an ever increasing gap between executive pay and the pay of rank and file employees may contribute to decreased commitment and lower motivation and performance” (p. 556). Wage gaps may also increase the tendency for individuals to perceive more inequity than actually exists, which may amplify negative effects.
These negative perceptions are compounded by the fact that many dissatisfied employees are unable to seek employment elsewhere. Wade, O’Reilly, & Pollock found that “when employees lack the option to withdraw from the organization, counterproductive workplace behaviors provide an opportunity to restore justice” (p. 531). Executive Compensation at Whole Foods Market Whole Foods Market CEO, John Mackey realized very early that employees’ views regarding executive compensation have a direct impact on their productivity, happiness and feelings toward the organization.
According to Mackey (2009), “Because of the yawning gap between the leaders and the led, employee morale is suffering, talented performers’ loyalty is evaporating, and strategy and execution is suffering at American companies. ” He believes minimizing the gap between the average full time salaries of the highest and lowest paid employees (also referred to as a salary cap ratio), increases organizational cohesion, which in turn leads to better employee performance.
This is in line with one of Whole Foods Market’s core values, Supporting Team Member Excellence and Happiness, which states “We recognize there is a community of interest among all of our stakeholders. There are no entitlements; we share together in our collective fate. To that end we have a salary cap that limits the compensation (wages plus profit incentive bonuses) of any Team Member to nineteen times the average total compensation of all full-time Team Members in the company” (Whole Foods Market, 2011). Since the salary cap was implemented in 1986, Whole Foods Market has only increased it three times.
It was originally set at 8 times the average annual pay (Moskowitz, 1994). Therefore, if the highest paid employee earned $250,000, the lowest paid employee could earn no less than $31,250. This ratio increased to 14 in 2000 and finally to 19 in 2006. The organization has increased the ratio over the years due to other organizations competing for their top talent. While Whole Foods Market executives are well compensated, their salaries are considerably lower than the salaries of their counterparts which are often “300 to 500 times that of the average employee” (O’Toole & Vogel, 2011).
Mackey decided to slash his own salary to $1 per year effective January 1, 2007. Mackey (2006) has said his decision was made because he had “reached a place in my life where I no longer want to work for money, but simply for the joy of the work itself”. The dollar per year salary is not viewed as entirely altruistic, but as more of a symbolic gesture to shareholders and the public that the CEO is committed to the organization since the real gains in compensation are typically derived from executives cashing in their stock options.
Therefore, customers, employees and shareholders were impressed when Mackey also opted to donate all future stock options to his two company foundations, The Whole Planet Foundation and The Animal Compassion Foundation. Summary Whole Foods Market has set itself as an example of how to integrate Human Resources Best Practices into the day-to-day operations of a company to ensure stakeholder profit. Customers profit from Whole Foods Market’s focus on healthy, high-quality products. Communities profit from the charitable donations that Whole Foods Market’s stores provide. Employees profit from the compensation packages and wellness programs.
Whole Foods Market itself profits from integrating their corporate culture into all of these areas, creating a sustainable enterprise that is focused upon all stakeholders. Taking into account the practices that lead to improved morale, health and wellness, pay and benefits, and corporate culture, Whole Foods Market has become an organization congruent with its philosophy of healthy living and egalitarianism. Mackey himself understands how much power rests in perception management, and ensures that all stakeholders in the company see that he is committed to the organization and not a paycheck.
It is this selfless service that really holds the key to Whole Foods Market’s success; by Mackey’s leadership by example, as well as his servant leadership philosophy, he has established a work climate that promotes a sense of individual merit that is rare in most companies today. References BusinessKnowledgeSource. com. (2010). Illness costs you but good health is free. Retrieved from http://www. businessknowledgesource. com/health/illness_costs_you_but_good_health_is_free_029772. html CNNMoney. (2011). 100 best companies to work for. Retrieved from http://money. cnn. com/magazines/fortune/fortune500/2011/index. tml Environmental Protection Agency. (2010). Cost of illness handbook. Retrieved from http://www. epa. gov/oppt/coi/pubs/toc. html Gilbert, S. (2010). Whole Foods CEO John Mackey to staff: get slim, save money. Daily Finance. Retrieved from http://www. dailyfinance. com/2010/01/30/whole-foods-ceo-john-mackey-wants-his-staff-slim-like-he-is/ Mackey, J. (November, 2 2006). [Web log message]. Retrieved from http://www2. wholefoodsmarket. com/blogs/jmackey/category/compensation/ Mackey, J. (June, 17 2009). Why sky-high CEO pay is bad business. Retrieved from http://blogs. hbr. org/hbr/how-to-fix-executive-pay/2009/06/why-high-ceo-pay-is