Creating the High Trust Organization

By John Mackey, March 9, 2010  |  More Posts by John Mackey

American society appears to be undergoing a crisis in trust. Most of the major organizations that we depend upon, including governments of all types, corporations, our health care system, our financial institutions, and our schools all seem to be failing us. Indeed, I do not believe it is an exaggeration to claim that our society is actually undergoing a disintegration process whereby the fundamental premises and values supporting our institutions are all being called into question. While such disintegration is very painful to experience, it is also a tremendous opportunity for genuine transformation. My essay outlines some of the most important values and strategies necessary for the creation of, and the transformation to, high trust organizations.

 

Higher Purpose

Virtually all of our societal organizations seem to have either forgotten or have never really known why they exist and what their higher purposes are. Instead, they have often elevated narrow individual and institutional self-interest into the only purposes that they recognize as valid. Our governments all too frequently serve the interests of the politicians, the public service unions, and various other special interests rather than their citizens. Our schools too often serve their educational bureaucracy and teachers’ unions instead of their students and their parents. Our health care system too often seeks to maximize the profits of pharmaceutical companies, hospitals, doctors, and insurance companies rather than the health and wellness of patients. Many of our corporations primarily exist to maximize the compensation of their executives and, secondarily, shareholder value rather than value creation for customers, employees, and other major stakeholders.

 

The single most important requirement for the creation of higher levels of trust for any organization is to discover or rediscover the higher purpose of the organization. Why does the organization exist? What is it trying to accomplish? What core values will inspire the organization and create greater trust from all of its stakeholders?

 

While there are potentially as many different purposes as there are organizations, I believe that great organizations have great purposes. The highest ideals that humans aspire to should be the same ideals that our organizations also have as their highest purposes. These include such timeless ideals as:

 

The Good: Service to others—improving health, education, communication, and the quality of life. Southwest Airlines, Nordstroms, The Container Store, Amazon.com, and Joie de Vivre Hospitality are examples of this great purpose.

 

The True: Discovery and furthering human knowledge. Google, Intel, Genentech, and Wikipedia all express this higher aspiration.

 

The Beautiful: Excellence and the creation of beauty. Apple and Berkshire Hathaway share this ideal in their own unique ways.

 

The Heroic: Courage to do what is right to change and improve the world. Grameen Bank and the Gates Foundation express this higher purpose in their actions.

 

Organizations that place such higher purposes at the very core of their business model tend to inspire trust from all of their major stakeholders: customers, employees, investors, suppliers, and the larger communities in which they exist. Higher purpose and shared core values tend to unify the organization behind their fulfillment and usually act to pull the overall organization upwards to a higher degree of ethical commitment. Higher levels of trust are a natural result of this unity of purpose, shared core values, and greater ethical commitment.

 

Conscious Leadership—Walking the Talk

Next to the power of higher purpose, nothing is more important for creating high levels of organizational trust than the quality and commitment of the leadership at all levels of the organization. It doesn’t matter if an organization has a higher purpose if the leadership doesn’t understand it and seek to serve it. The various stakeholders of an organization, especially employees and customers, look to the leadership to “walk-the-talk”—to serve the purpose and mission of the organization and to lead by example. It is especially important that the CEO and other senior leadership embody the higher purpose of the organization.

 

As the co-founder and CEO of Whole Foods Market, I’m the most visible person in the company. One of the most important parts of my job is touring our stores and talking to our Team Members, customers, and suppliers. I know that in virtually everything that I say and do, our Team Members are always studying me, trying to determine whether they can trust me and the mission of the company. I’m always on stage. So walking the talk is very important. I try to communicate the mission and values of Whole Foods Market at every opportunity and I try to live those core values myself with complete fidelity. Fidelity to the mission and values builds trust, while any deviation from these ideals undermines trust. High trust organizations and hypocritical leadership are mutually exclusive.

 

Teams Everywhere

Human beings evolved in relatively small tribal bands. Many scientific studies indicate that our ability to maintain close trusting relationships with family, friends, and co-workers is constrained to about 150 people. We can, of course, know many more people than this, but it is hard to know them well enough to develop close bonds of trust based on actual experiences. At Whole Foods Market we recognize the importance of smaller tribal groupings to maximize familiarity and trust. We organize our stores and company into a variety of interlocking teams. Most teams have between six and 100 Team Members and the larger teams are divided further into a variety of sub-teams. The leaders of each team are also members of the Store Leadership Team and the Store Team Leaders are members of the Regional Leadership Team. This interlocking team structure continues all the way upwards to the Executive Team at the highest level of the company.

 

It has been our experience at Whole Foods Market that trust is optimized in this type of smaller team organizational structure. This is because each person is a vital and important member of their team. The success of the team is dependent upon the invaluable contributions of everyone on the team. Trust is optimized when it flows between all levels within the organization. Many leaders make the mistake of believing that the key to increasing organizational trust is to somehow get the workforce to trust the leadership more. While it is very important that employees trust leadership, it is equally important that the leadership trust the workforce. To receive trust, it is usually necessary that we give trust. Organizing into small interlocking teams helps ensure that trust will flow in all directions within the organization—upwards, downwards, within the team, and across teams.

 

Empowerment = Trust

While small teams are essential to optimizing the flow of organizational trust, equally important is the philosophy of empowerment. The effectiveness of teams is tremendously enhanced when they are fully empowered to do their work and to fulfill the organization’s mission and values. Empowerment must be much, much more than a mere slogan, however. It should be within the very DNA of the organization. Empowerment unleashes creativity and innovation and rapidly accelerates the evolution of the organization. Empowered organizations have tremendous competitive advantage because they have tapped into levels of energy and commitment which their competitors usually have difficulty matching.

 

Nothing holds back empowerment more than the leadership philosophy of command and control. Command and control (C&C) is actually the opposite of empowerment and it greatly lessens trust. C&C usually involves detailed rules and bureaucratic structures to enforce the rules. Such detailed rules almost always inhibit innovation and creativity. People get ahead in the organization not through being innovative, but by following the rules and playing it safe. C&C may produce compliance from the workforce, but it seldom unleashes much energy or passion for the purpose of the organization. Empowerment = Trust. C&C = Lack of Trust.

 

The Importance of Transparency & Authentic Communication

A very important measurement and condition of trust is transparency. If we want to optimize trust then we must seek to optimize transparency. When we decide to keep something hidden the motivation is almost always a lack of trust. We are afraid that the information that we wish to hide would cause more harm than good if it were widely known. While some discretion is usually necessary to protect important organizational information from migrating to one’s competitors or to outsiders who wish to harm the organization, such discretion can easily be overdone. Transparency is a very important supporting value for empowerment. Indeed, it is difficult for an organization to be empowered if it lacks transparency.

 

Whole Foods Market strives to optimize transparency to all of our stakeholders. Authentic communication with honesty and integrity are essential attributes of both transparency and trust. This is the exact opposite of what many organizations do, which is to try to “spin” their messaging to tell people what they believe people want to hear so that people will think well of them. This lack of honest, authentic communication and transparency usually boomerangs, however, and undermines trust and creates cynicism. One of the main reasons why Americans don’t trust many political leaders, including various Presidents who have led us, is that we discover that they routinely lie to us. They don’t tell us the truth and we come to understand that they don’t trust us and feel that they need to manipulate us. We tell the truth to people we trust.

 

The high-trust organization risks revealing too much information. We must be willing to take the risk that some valuable information may fall into the wrong hands because our commitment to empowerment and trust necessitates taking that risk. Creating transparency and authentic communication is an ongoing challenge that every organization faces. We must continually strive to remove the barriers that prevent them, knowing that we can’t maintain high levels of organizational trust without transparency and authentic communication.

 

Fairness in all Things

Nothing unravels trust more quickly in an organization than either the reality or the perception of unfairness. Another important virtue of creating a culture of transparency is that it helps ensure that unfairness is clearly seen and can therefore be corrected quickly. It is essential that the ethic of fairness apply to all key organizational processes such as hiring, promotion, compensation, discipline, and termination. Favoritism and nepotism undermine organizational trust. They cannot be tolerated. People are often prone to envy and any perceived unfairness exacerbates this tendency greatly, giving it the energy of justification.

 

Creating a Culture of Love and Care

Ultimately we cannot create high trust organizations without creating cultures based on love and care. The people we usually trust the most are the people that we also believe genuinely love and care for us. All too often, love and care are not qualities that we associate with organizations. We tend to look for love and friendship with our families and friends, but not from our work. Why is this? Many people believe that love and care in the organizational setting interfere with efficiency and get in the way of making the “tough but necessary” decisions that the organization requires for success. This type of thinking reflects our own lack of integration of love and care in our own lives. We have created an artificial barrier that is holding back our own personal growth and the full potential of our organizations.

 

Fear is the opposite of love. When fear predominates in the organization, love and care cannot flourish. The opposite is also true—love and care banish fear. How can we create more love and care in our organizations? To answer this would require another essay, perhaps even an entire book. After discovering the higher organizational purpose and securing the commitment of leadership to these ideals, nothing is more important than encouraging and nurturing love and care. Here are a few suggestions that will hopefully stimulate further thinking on this incredibly important goal of creating more love and care in our organizations:

  • The leadership must embody genuine love and care. This cannot be faked. If the leadership doesn’t express love and care in their actions, then love and care will not flourish in the organization. As Gandhi said: “We must be the change that we wish to see in the world.”
  • We must “give permission” for love and care to be expressed in the organization. Many organizations are afraid of love and care and force them to remain hidden. Love and care will flow naturally when we give them permission and encourage them.
  • We should consider the virtues of love and care in all of our leadership promotion decisions. We shouldn’t just promote the most competent, but also the most loving and caring leaders. Our organizations need both and we should promote leaders who embody both.
  • We must cultivate forgiveness rather than judgment and condemnation. Too many organizations believe that judgment of others and criticizing failures are essential for creating excellence. While striving for excellence is important for all organizations, this can be done at a higher level of consciousness—without condemnation. Forgiveness doesn’t mean condoning mistakes and failures. It simply means that we help the other person to learn from their mistakes through non-judgmental feedback and encouragement.
  • Consider ending all your organizational meetings with “appreciations.” This is something that Whole Foods Market has been doing for 25 years with wonderful results for spreading love and care. Give everyone participating in the meeting the opportunity to voluntarily appreciate and thank other members in the group for services they have contributed or qualities that are admired. This one simple cultural practice of appreciating our fellow Team Members moves us out of judgment and fear into the consciousness of love.

Conclusion

We have the opportunity to create more conscious and higher trust organizations in the 21st century. To do so will require three major changes. First, the organization must become conscious of its higher purposes. Without consciousness of higher purposes, organizations will not reach their fullest potential because the creative energy within the organization will not be fully expressed.

 

Second, we’ll need our leaders to evolve to higher levels of consciousness and trust. We will not be able to create high trust organizations without more conscious and high trust leaders. Less conscious leaders will tend to hold their organizations back.

 

Third, we will need to evolve the cultures of our organization in ways that create processes, strategies, and structures that encourage higher levels of trust. These will necessarily include the important ideals of teams, empowerment, transparency, authentic communication, fairness, love and care.

Taxonomy: conscious capitalism, social responsibility, Stakeholders, trust

Latest 8K Filing

By John Mackey, December 24, 2009  |  More Posts by John Mackey

After much thought and consideration, I have decided to voluntarily give up my title as Chairman of the Board.  While I don’t expect this to impact the day to day operations of the company in any way, I wanted to share the reasons for my decision with you.

 

I have held the Chairman title since Whole Foods Market’s beginning in 1978, but the reality is that today it is merely a title with no authority or responsibilities.  The authority and responsibilities normally associated with the Chairman position were all shifted over time to John Elstrott, after he became our Lead Director back in January 2001.  Despite this shift in responsibilities, Whole Foods, along with many other companies with combined CEO/Chairman roles, has been targeted by corporate governance activists for several years now seeking a separation of these roles.

 

The members of the Board and E-Team tried to talk me out of giving up the title; however, I don’t believe it is in the best interest of our company or our stakeholders to devote any more time or resources to fight this misperception over a title any longer.  John Elstrott will now take the title of Chairman of the Board, which will accurately reflect the authority and the responsibilities that he has had for many years.  I will remain a member of the Whole Foods Market Board and will continue to passionately serve as CEO, hopefully for many more years to come.

 

I remain incredibly excited about the future for Whole Foods Market!  As the world slowly moves out of the deep recession we’ve been in for most of the past two years, our company is well positioned to resume our growth and to continue to fulfill our company’s mission and core values.  Happy holidays to everyone.

Taxonomy: Board of Directors

Reason.tv Interview

By John Mackey, October 16, 2009  |  More Posts by John Mackey

John Mackey was interviewed recently by editors at Reason.tv and Reason Magazine. Here are links to the videos they produced. A Q&A print version of this interview will be published in Reason Magazine in January.

John Mackey's Conscious Capitalism

An hour-long conversation with the Whole Foods Market CEO about health care reform, veganism and his unstinting defense of free markets.

Additionally, Reason.tv talked to protesters, Mackey, and employees about "the Whole Foods alternative to ObamaCare." Here’s a link to that 5 minute video: Natural Food Fight: Whole Foods and Health Care

Taxonomy: conscious capitalism, health care reform

Health Care Reform - Full Article

By John Mackey, August 14, 2009  |  More Posts by John Mackey

As you are probably aware, I wrote an Op/Ed piece that was published in the Wall Street Journal earlier this week on health care reform, one of the biggest and most emotional issues facing our country. I was asked to write an Op/Ed piece and I gave my personal opinions. While I am in favor of health care reform, Whole Foods Market as a company has no official position on the issue.

 

In answer to President Obama's invitation to all Americans to put forward constructive ideas for reforming our health care system, I wrote this Op/Ed piece called simply "Health Care Reform." An editor at the Journal rewrote the headline to call it "Whole Foods Alternative to Obamacare," which led to antagonistic feelings by many. That was not my intention - in fact, I do not mention the President at all in this piece.

 

I fully realize that there are many opinions on the healthcare debate, including inside my own company. As we, as a nation, continue to discuss this, I am hopeful that both sides can do so in a civil manner that will lead to positive change for all concerned. You are welcome to share your thoughts in the comments section below. (Just remember our comment guidelines prohibit vulgarity and personal attacks.)

 

Here is the original unedited version that I submitted.

 

Health Care Reform

 

"The problem with socialism is that eventually you run out of other people's money" —Margaret Thatcher.

 

With a projected $1.8 trillion deficit for 2009, several trillions more in deficits projected over the next decade, and with both Medicare and Social Security entitlement spending about to ratchet up several notches over the next 15 years as Baby Boomers become eligible for both, we are rapidly running out of other people's money. These deficits are simply not sustainable and they are either going to result in unprecedented new taxes and inflation or they will bankrupt us.

 

While we clearly need health care reform, the last thing our country needs is a massive new health care entitlement that will create hundreds of billions of dollars of new unfunded deficits and moves us much closer to a complete governmental takeover of our health care system. Instead, we should be trying to achieve reforms by moving in the exact opposite direction-toward less governmental control and more individual empowerment. Here are eight reforms that would greatly lower the cost of health care for everyone:

 

1. Remove the legal obstacles which slow the creation of high deductible health insurance plans and Health Savings Accounts. The combination of high deductible health insurance and Health Savings Accounts is one solution that could solve many of our health care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high deductible health insurance plan, and provides up to $1,800 per year in additional health care dollars through deposits into their own Personal Wellness Accounts to spend as they choose on their own health and wellness. Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan's costs are much lower than typical health insurance, while providing a very high degree of team member satisfaction.

 

2. Change the tax laws so that that employer-provided health insurance and individually owned health insurance have exactly the same tax benefits. Right now employer health insurance benefits are fully tax deductible for employers but private health insurance is not. This is unfair.

 

3. Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that health insurance wherever we live. Health insurance should be portable everywhere.

 

4. Repeal all government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance many billions of dollars. What is insured and what is not insured should be determined by individual health insurance customer preferences and not through special interest lobbying.

 

5. Enact tort reform to end the ruinous lawsuits that force doctors into paying insurance costs of hundreds of thousands of dollars per year. These costs are ultimately being passed back to us through much higher prices for health care.

 

6. Make health care costs transparent so that consumers will understand what health care treatments cost. How many people know what their last doctor's visit cost? What other goods or services do we as consumers buy without knowing how much they will cost us? We need a system where people can compare and contrast costs and services.

 

7. Enact Medicare reform: we need to face up to the actuarial fact that Medicare is heading towards bankruptcy and move towards greater patient empowerment and responsibility.

 

8. Permit individuals to make voluntary tax deductible donations on their IRS tax forms to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid, SCHIP or any other government program.

 

Many promoters of health care reform believe that people have an intrinsic ethical right to health care-to universal and equal access to doctors, medicines, and hospitals. While all of us can empathize with those who are sick, how can we say that all people have any more of an intrinsic right to health care than they have an intrinsic right to food, clothing, owning their own homes, a car or a personal computer? Health care is a service which we all need at some point in our lives, but just like food, clothing, and shelter it is best provided through voluntary and mutually-beneficial market exchanges rather than through government mandates. A careful reading of both The Declaration of Independence and the Constitution will not reveal any intrinsic right to health care, food or shelter, because there isn't any. This "right" has never existed in America.

 

Even in countries such as Canada and the U.K., there is no intrinsic right to health care. Rather, citizens in these countries are told by governmental bureaucrats what health care treatments and medicines they are eligible to receive and when they can receive them. All countries with socialized medicine ration health care by forcing their citizens to wait in lines to receive scarce and expensive treatments. Although Canada has a population smaller than California, 830,000 Canadians are waiting to be admitted to a hospital or to get treatment. In England, the waiting list is 1.8 million citizens. At Whole Foods we allow our team members to vote on what benefits they most want the company to fund on their behalf. Our Canadian and British team members express their benefit preferences very clearly-they want supplemental health care more than additional paid time off, larger donations to their retirement plans, or greater food discounts; they want health care dollars that they can control and spend themselves without permission from their governments. Why would they want such additional health care benefit dollars to spend if they already have an "intrinsic right to health care"? The answer is clear: no such right truly exists in either Canada or the U.K. or in any other country.

 

Rather than increase governmental spending and control, what we need to do is address the root causes of disease and poor health. This begins with the realization that every American adult is responsible for their own health. Unfortunately many of our health care problems are self-inflicted with over 2/3 of Americans now overweight and 1/3 obese. Most of the diseases which are both killing us and making health care so expensive-heart disease, cancer, stroke, diabetes, and obesity, which account for about 70% of all health care spending, are mostly preventable through proper diet, exercise, not smoking, minimal or no alcohol consumption, and other healthy lifestyle choices.

Over the past two decades, breakthrough scientific research by Colin Campbell, as documented in his book The China Study, and clinical medical experiences by many doctors including Dean Ornish, Caldwell Esselstyn, John McDougall, Joel Fuhrman, and Neal Barnard have shown that a diet consisting of whole foods which are plant-based, nutrient dense, and low-fat will help prevent and often reverse most of the degenerative diseases that are killing us, and becoming more and more expensive to treat through drugs and surgery. We should be able to live healthy and largely disease free lives until we are well into our 90's and even past 100 years of age.

 

Health care reform in America is very important. Whatever reforms are enacted it is essential that they be financially responsible and that we have the freedom to choose our own doctors and the health care services that best suit our own unique set of lifestyle choices. We are responsible for our own lives and our own health. We should take that responsibility very seriously and use our freedom to make wise lifestyle choices that will protect our health. Doing so will enrich our personal lives and will help create a vibrant and sustainable American society.

Taxonomy: health care reform

Leonard Green & Partners

By John Mackey, November 7, 2008  |  More Posts by John Mackey

I’m really excited to announce that Leonard Green & Partners has invested $425 million in Whole Foods Market (a 17% percent ownership). We are pleased that Leonard Green, one of the most experienced and successful investors in the retail industry, has decided to make such a significant investment in our company.  We view this as a strong vote of confidence in our business model and our long-term growth prospects, despite the tough current economic environment.  This equity infusion, combined with our strong cash flow from operations, gives us the financial flexibility to manage through these difficult times while continuing to prudently invest in our long-term growth as we remain committed to our mission and core values. For my further thoughts, check out this video.

Taxonomy: investors

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