The conventional response to all challenges in the retail grocery industry is to just keep squeezing everything—customer service, wages, employee benefits, training, and anything else—to keep prices low and still eke out a profit. However, CEO Danny Wegman and his colleagues are adamant that joining the discounters in a never-ending race to cut, cut, cut is not the Wegmans way. Instead, the company defines its mission as being “the very best at serving the needs of our customers.” In pursuit of that mission, the company makes employees its number-one priority and counts on employees to then meet the needs of customers. To compete successfully against both traditional grocers and Wal-Mart, Wegmans’s strategy emphasizes a huge selection of products and employees who know food and love serving customers. The cheese department is a good example. Unlike the typical selection of two or three dozen varieties at other stores, Wegmans offers four or five hundred varieties—and knowledgeable staff who can help customers select and serve the perfect cheese. In fact, chances are the department manager has been sent on a research tour of cheese-producing areas in Europe to gain first hand knowledge of the tastes and traditions of each region. Such training is expensive, to be sure. Add in higherthan-average wages and employee benefits, and Wegmans’s labor costs are higher than those of its competitors. Moreover, Wegmans managers exhibit a degree of personal concern for employees not often found in the hectic retail industry. As an example, when one manager whose job required frequent out-of-town travel learned that her mother had been diagnosed with cancer, Wegmans executives modified her responsibilities so that she could stay in town to care for her mother—before she even asked. Another indicator of the company’s care for its employees is the investment it makes in their futures, even if those futures take them outside the company. More than 25,000 employees have received company scholarships, and roughly 4,000 employees attend college every year with financial assistance from Wegmans. This investment in employees pays off in important ways. For starters, customers buy more when they understand how to use various products and are successful and satisfied with them. These positive experiences with Wegmans employees also help shoppers build emotional bonds with the store, further increasing customer loyalty. And employees who enjoy their work and feel they are treated with respect are more productive and less likely to leave for other jobs. Employee turnover (the percentage of the workforce that leaves and must be replaced every year) is a major expense for retailers, but turnover at Wegmans is a fraction of the industry average. As just one measure of the positive organizational culture at Wegmans, the company has made Fortune magazine’s list of the 100 Best Companies to Work For every year since the survey began—and it is usually at or near the top of that list. The mission to be the best at serving consumers extends to the company’s decision-making style as well. For day-to-day decisions, laissez-faire management is widespread; executives want front-line employees to make whatever choices are needed to keep customers happy. As a Wegmans executive joked a few years ago, “We’re a $3 billion company run by 16-year-old cashiers.” The scheme must be working: The company is now approaching $6 billion in sales and shows no signs of slowing down.37
1. Wegmans has always been managed by members of the Wegman family. Do you think the company could continue its winning ways if the next generation doesn’t want to take over, forcing the company to hire someone from outside the family as CEO? Explain your answer.
2. Would the Wegmans approach work for a car dealer? A bookstore? A manufacturer of industrial goods? Explain you answers.
3. How does low employee turnover contribute to the distinct and positive corporate culture at Wegmans?