Image by: Gage Skidmore
By Michael Sterling
Named the Ernst & Young Entrepreneur of the Year in 2003, John Mackey has created one of the most unique and innovative business growth strategies for food retail. Having started Whole Foods Market (WFM) in 1980, the company has grown to be the largest supermarket chain of natural and organic foods in the U.S.
With 300 stores around the world, Whole Foods is beginning to rival such corporations as Walmart and Safeway. For 33 years, Mackey has prided himself on a successful business model which doesn’t focus on money, but instead, on the consumer’s needs. Every company has a higher purpose, according to Mackey, and it’s the business owner’s job to see it flourish.
Whole Foods reigns on top as a customer favorite in food retail. Representing more than just a grocery store for most of its consumers, the company has become a politically active voice in health and nutrition, and was one of the leaders in the organic movement, all thanks to Mackey. But don’t call him a hero.
“There’s a tendency for you to identify the company as yourself, because you created it,” Mackey said in an interview with Inc.com, “It’s like having a child. When a child grows up, you recognize it’s different than you are. It has its own destiny. Your company has its own destiny as well. Just like you wish your child to flourish and outlive you, so should your business.”
Mackey has contributed his success to Conscious Capitalism, which according to him, is broken down in four words: Purpose, Stakeholder Integration, Conscious Leadership, and Empowering Culture.
When asked what a company owner should do to create their own niche, Mackey replied, “Find the innovation.”
“In business, you have to balance the idealism of your purpose with the pragmatic reality of what’s possible today in the market place.”
Mackey’s purpose has always been to provide better health for his customers. The innovative system of having his customers vote over which products should stay (and go) in the store has enhanced education about their own eating habits.
“At the end of the day your in business to satisfy customers,” said Mackey to Inc., “And if you’re not willing to do that, someone else will. You have to put the customers first and not be too self righteous, otherwise, you’ll put yourself out of business.”
When the store first opened in 1980, it seemed to be perfect timing for Mackey. Organic foods were beginning to rise in popularity, and the store became the loudest voice in the fight.
In the beginning, organic foods were only 5% of sales. Today it’s over 50%. Mackey credits the success on the education the company bestowed to its customers about the benefits of such products. Eventually, as they learned more and more, they began to vote for more organics inside the store.
In his book Conscious Capitalism: Liberating the Heroic Spiritualism of Business, Mackey recognizes that stakeholders are interdependent on each other and conscious capitalism creates value for all of them, which will result in a business being more successful.
It’s widely known that Whole Foods is a very competitive place to work, not just because Mackey makes sure that all the employees are well-versed on their purpose, but because all their salaries have a cap, unlike other companies which thrive on competitive salaries. Not just that, but 93% of Whole Foods’ stock options go to non-executives.
This strategy is quite innovative since most companies that have similar success gives 75% of their stock options to the 5 – 8 people on the top. According to Mackey, transparency among the employees is important, and because everyone knows that Whole Foods executives receive 7% of options, there is little resentment/drama.
“A conscious leader is one who understands the higher purpose of the business, and observes it so it may reach its highest potential.”
As a leader, Mackey claims to have learned his method by making a lot of mistakes, learning from them, and evolving them overtime. According to the book, the qualities he looks for in leaders are emotional, spiritual, and system intelligence.
As described in the book, emotional intelligence is empathy for others and their situations (be it a customer or employee). Spiritual intelligence is the ability to implement the most valuable, ethical, and purposeful decision towards any situation. System intelligence is the ability to see the bigger picture, how things interconnect and relate together to create the whole.
Here’s a good example: Every week, each Whole Foods location gets a record of what they made in sales. They also get a number of what other locations made in sales – which often leads to a friendly competition. The numbers are seen by every employee in the store, from the top to the bottom.
“It’s vital that you give [all employees] the weekly number information so they know what they need to do to gain more sales.” Mackey said to Inc.
“A business has a higher purpose besides making money,” said Mackey, “Like a body produces red blood cells, the purpose of life isn’t to produce red blood cells. Businesses can’t exist without making profit. But that doesn’t mean it can’t have value for the world.”
By implementing customers to vote for the products they want in the stores, not only is Mackey telling them that they matter, but he’s also pleasing individual communities that might not like certain products that other areas do. This creates empowerment and exclusivity among the consumers.
His innovative customer-integration strategy was appreciated early on. In 1981, Austin (the city the first store was based in) had a flood, leaving the store 8 feet under water. The day after the flood, dozens of customers and community people helped to rebuild the store. It was then, Mackey realized, where his focus should be lying.
“Stakeholders matter,” Mackey said about the flood, “They can hold you. Responsibility matters for them, even beyond the investors.”