Whole Foods woos its staff

R. Michelle Breyer, The Austin American-Statesman, June 6, 2003



When workers at a Whole Foods Market Inc. store in Madison, Wis., voted last summer to unionize, it shocked company chairman and founder John Mackey. "The Madison vote was a wake-up call," Mackey acknowledged this week.

In response to the Madison vote and what it symbolized, Mackey has spent the past nine months criss-crossing the country, with a goal of visiting every store by the end of the summer. He has 23 of the company's 143 stores left to go. His goal, he said, is to get back in touch with the company's 27,000 employees, who are called team members.

"Before the Madison vote, I did a question-and-answer session and realized that team members didn't have a clue what Whole Foods was about," Mackey said. "I realized I need to get back into the stores and I need to talk to the people. I need to listen to people."

Despite six consecutive years on Fortune magazine's list of the 100 best companies to work for -- Whole Foods ranked 32nd this year, up from 48th last year -- Mackey said he knows there's room for improvement. As Whole Foods has grown into a $3.2 billion company, the balance between the company's attention to its employees and to the company's other stakeholders may have gotten a little out of whack, he said.

Although the company's share price has been on a hot streak, profits and revenues have steadily risen, and new stores have opened, union leaders say Whole Foods' employees have lost their voice. That may have enabled organized labor -- which long has criticized Whole Foods for the company's efforts to keep unions out of its stores -- to gain a foothold. Whole Foods is the second-largest nonunion food retailer, behind Wal-Mart Stores Inc.

"The status quo was no longer good enough for Whole Foods employees," said Dan Welch, president of the United Food and Commercial Workers Local 1444 in Madison, which is negotiating a contract with Whole Foods. "Regardless of what happens in Madison, Whole Foods will have to face this all around the country."

The National Labor Relations Board postponed a scheduled April 4 election at a Whole Foods store in Tyson's Corner, Va., while it investigates charges the company engaged in efforts to stop employees from organizing. The United Food and Commercial Workers ran ads in weekly newspapers in 11 cities from New York to San Francisco criticizing labor practices at Whole Foods.

Union demonstrators have picketed stores and the company's annual meetings. "The unions are after us," Mackey said.

Mackey said the company has spent a lot of time and money trying to improve the relationship with employees. In addition to his national tour, Mackey plans more face-to-face meetings between the company's leaders and employees, better orientation videos and streamlined employee morale surveys to encourage more participation.

Perhaps the most dramatic change will be a series of companywide votes this summer through which employees will help determine what benefits will be offered.

Beginning in January, the company decided to pay 100 percent of health care premiums -- with a higher deductible -- for all full-time employees, who make up 87 percent of its work force. In the past, the company paid from 50 percent to 100 percent, depending on which of three plans employees chose. The company also starting issuing "personal wellness cards" to full-time employees -- a debit card with $1,700 to spend on medical and dental expenses.

But while beefing up health benefits, Whole Foods stopped matching contributions for its 401(k) plan, which didn't sit well with some employees. About 22 percent of employees currently contribute to the 401(k) plan. With the vote, Mackey said employees will choose their benefit priorities, such as reinstituting the 401(k) match, tuition reimbursement or full health-care coverage. The company has a set amount of money allocated for benefits.

"I'm not smart enough to make these trade-offs for people," Mackey said. "They'll make the trade-offs." Whichever plan employees choose will be in effect for three years, when they will vote again on benefits for the next three years. It's too soon to tell whether these measures will ward off organizing efforts.

"I think the company generally has been regarded as being progressive," said Bob Goldin, executive vice president of Technomic Inc., a Chicago-based research and consulting firm for the food industry. "They need to make sure their practices live up to the hype. That doesn't mean they'll keep the wolves at bay. But the best defense is a good offense."

Although a step in the right direction, the company's action is not akin to a union contract, said Jill Cashen, spokeswoman for United Food and Commercial Workers International, which represents 1.4 million supermarket and retail workers. "The problem with a company-sponsored employee involvement program is it still belongs to the company," Cashen said. "The company can change it at will or eliminate it at will."

Mackey, an outspoken Libertarian, is unlikely to budge on his views on unions. "Unions are not a good thing," he said. "They are resistant to change and they create an adversarial relationship to management. We think unions would be very harmful to our business."

Goldin agrees that unionization could have a significant effect on Whole Foods' bottom line and its corporate culture. "They're kind of a touchy-feely, New Age kind of business," Goldin said. "With unions, you get a certain amount of rigidity."

The company's union problems erupted in 1990, when Whole Foods moved into Berkeley, Calif., taking over the stores of a failed co-op. Mackey believed union demands were to blame for the demise of the co-op, and he refused to hire its employees -- an unpopular move in left-leaning Berkeley.

Unions representing butchers and retail clerks picketed the stores and accused Whole Foods of age discrimination, a charge they later withdrew. Until last year, organized labor hadn't had much success.

Whole Foods opened the Madison store in 1996. Workers complained about such issues as health insurance and a dress and appearance code. Although no contract has been signed yet between the the union and Whole Foods in Madison almost a year after the vote, union leaders think more stores will follow the Madison example and attempt to organize.

Cashen said organizing efforts are in early stages at some other stores around the country, although she declined to disclose those locations, citing fear of management retaliation. "They want to have a say," Cashen said.

Mackey says he thinks he is giving workers that voice without union help. And ultimately, he says he thinks all of the company's stakeholders will benefit. "If you don't have happy team members, you won't have happy customers," Mackey said. "If you don't have happy customers, you don't have happy shareholders."