John Mackey, Whole Foods and the Best Little Handbook in Texas
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You've got a growing company. Some of your employees have been with you since the beginning. But you've also added a number of people, and the newest ones haven't the foggiest idea of what's so special about your business. You'd like them to understand why you do things in addition to how you do them. But communicating standards -- and values -- to a widening circle isn't easy. And it takes time. What do you do?
Most small-business owners would dismiss employee handbooks as any kind of solution. Bureaucratic gibberish, they'd say, and, by and large, they'd have a point. Anyone who's ever worked for a company with a handbook -- or a policy manual, as they're sometimes called -- knows that the content is often irrelevant. They're impersonal, technical documents, written, it seems, by lawyers to protect the company -- period. If employees refer to them at all, it's seldom to learn about the purpose of the business or about the company's culture -- they're more apt to look up how many vacation days they have coming. But, as the experience of Whole Foods Market, headquartered in Austin, demonstrates, handbooks can deliver much more.
For the past five years, Whole Foods, which operates a chain of eight natural-foods supermarkets, has used its handbook in a way that bears almost no resemblance to how other businesses use theirs. It isn't a litany of dos and don'ts. Instead, it's a detailed introduction to the business -- providing information on where it came from, what it stands for, and, above all, why it exists. Among other things, the handbook talks about the organization and its operating style. It advises employees on how to advance their careers and what to expect from co-workers and supervisors. It explains their rights so they know exactly where they stand, making them less vulnerable to arbi-trary managers. It also, one suspects, makes them more inclined to support the company's game plan. The handbook even counsels workers on how to initiate changes in existing policies. More than anything, says John Mackey, Whole Foods founder and chief executive officer, "It's a tool for showing people how the business works. We want it to be their company, too."
Back in 1980 and 1981 when there was only one Whole Foods Market, Mackey, now 35, saw no burning reason to put things in writing. Operating standards were generally discussed among his 80 employees as they came up. Questions about personal behavior or employee benefits were dealt with individually, or by the occasional memo. But when Whole Foods opened its second store in 1982, Mackey, for one, felt that the pieces of information -- and the spirit with which things were done -- had to be pulled together to help new employees get their bearings.
"When people come into a business, they don't know what to expect," he explains. And he didn't feel he could look to managers to provide a complete picture since some of them would be new themselves. Invariably, he thought, things would be omitted or distorted and eventually magnified. That's why he decided to develop a handbook.
Mackey, a philosophy student before dropping out of the University of Texas, didn't think he was embarking on anything unusual, at least not at first. He gathered handbooks from other companies, mostly supermarkets of one kind or another, and assumed they'd furnish him with valuable ideas. But they were almost entirely mechanical in their approach, bulging with rules about everything imaginable. More disconcerting, Mackey recalls, was the tone. "They seemed almost contemptuous of employees." So after talking with his managers and employees about what needed to be said, and how, the first Whole Foods "General Information Handbook" was written five years ago.
Certainly there's nothing state of the art about the way the handbook looked -- typewritten text without even a chart or illustration. But the content of the original -- and the editions that have followed -- is geared to meet the needs of people who work at Whole Foods Market. There's no way the handbook could be confused with, say, what a Safeway might put out. The current edition, for example, begins with a section on the company's history and its plans to expand into California. There's a discussion of corporate philosophy: a mission statement that underlines the importance of satisfying customers while at the same time providing "team members" opportunities for personal growth. It also notes the need to earn a net profit of 3% to 6% and a 25% to 100% return for investors (some of whom, by the way, are employees).
Even in laying out company rules, there are explanations of what lies behind them, a rarity in employee manuals. Employees aren't allowed to use store parking lots, for example, and for a good reason, the handbook notes: parking is scarce. ("Never put your personal convenience ahead of that of our customer.") Where policies are a little more subjective, as with dress codes, the goal is clearly stated. ("We all are in business to serve our customers and we have no desire to shock them unnecessarily.") An attitude of respect for individuals flows through the discussion of employee benefits as well, and everything is spelled out in plain English. Mackey says whatever legal protection the handbook provides is secondary to everything else.
Within Whole Foods, the handbook is generally seen in a very favorable light -- even among veteran employees. "It gives people a good starting point," says Patrice Sullivan, an employee at the downtown Austin store. "It's a good place to learn about how things are done." At several stores, new hires take a quiz to show they understand the basics, a practice that was suggested by employees, not by management.
At most companies, once the handbooks are distributed, the rules stay as they are -- often for longer than they should. But at Whole Foods, it's understood that the handbook will be revised whenever there's a good reason to do so. A couple of years ago, for instance, management was concerned about the number of in-store accidents and the rising cost of workers' compensation insurance. So it initiated a safety-education program in hopes of reducing injuries. Subsequently, it included a two-page section in the handbook outlining safety procedures; since then, accidents have declined.
Another recent addition is compensation information. Since 1986 there's been a detailed chart that summarizes what one can earn at various levels throughout the company. This, too, was initiated by management, but it's been well received. It's brought a level of realism to the company, Mackey says, letting people evaluate for themselves whether they want to work toward a new position.
Some of the more popular changes in the handbook have been suggested by employees. In 1986, for example, several people inquired about the company's long-standing employee-discount program. For years, it had excluded produce and meat because, as the handbook explained, the profit margins in those areas were always thinner. Was this still the case? Management looked into it and found that it wasn't. So the latest handbook provides for a 20% employee discount on everything. The next edition will reflect a change in the dress code that was approved last summer. After much haggling, employees are now allowed to wear shorts. A task force of employees and managers hammered out the details -- no cutoffs or running shorts are allowed, only khaki shorts with pockets.
Since the first handbook was compiled, a new edition has come out every year; it's now grown to nearly 70 pages. To streamline the production, the company keeps everything on a floppy disk. Even though Whole Foods is several times larger than it was when the first version of the handbook appeared -- sales now exceed about $45 million and there are 750 employees -- the process hasn't changed. Nor, for that matter, has the purpose. "It helps us give people a sense of the past, the present, and the future," says Mackey. "It's how we tell them about the game we're playing."
Of course, the Whole Foods handbook isn't the only way employees learn the game. It's part of a communications process that's central to how Whole Foods operates. There are regular meetings, both within individual stores and companywide, to share operating reports, for example. And new employees aren't entirely dependent on the handbook for their information -- they also have a one- or two-day orientation session. Mackey's approach to the handbook, with all its explanations of why things are done the way they are, is based on his belief that better communications leads to a better, more profitable business.
Because this approach depends on a high degree of openness and trust between managers and the people they manage, it may not be for everyone. At Whole Foods, for example, once something is written down, employees can challenge managers, and the managers have to be willing to explain their actions.
"In our company," Mackey says, "it's a collective process. We try to build consensus. If people don't have input, it isn't alive for them. But if you invest time and energy explaining things, employees take the whole program more seriously." And that, he says, is the whole idea.
BY THE BOOK: The Essential Ingredients of a Great Employee Handbook
It's easy to fashion an employee handbook around a laundry list of dos and don'ts. But if you're looking to generate a higher level of interest -- and commitment -- from your employees, you may want to do more. As Whole Foods Market's John Mackey has found, a handbook that combines the theoretical with the practical can be enormously helpful to both new employees and veterans. Here are some things to keep in mind:
Explain the mission. Employees are much more sympathetic to what you're trying to accomplish if they understand the overall context they're operating in. Somewhere along the line -- sooner rather than later -- you should tell them what that framework is. "The handbook is a great vehicle for passing along your goals," Mackey says. Whole Foods' handbook, for instance, devotes 10 pages to company philosophy and the importance of customer service.
Stick to the basics. You can't cover everything in elaborate detail -- not without turning people off and undermining the bigger themes. So don't try. "If it's too long," says Mackey, "they'll blow it off." Rather than going into all the fine points of health benefits and stock options, Whole Foods Market's handbook provides a good summary -- and then tells people how to get more information.
Plan for change. Even the best handbooks require frequent updating. But the process by which revisions come about can be a critical factor in whether employees take it seriously. At Whole Foods Market, a new version of the handbook comes out every year, and employees are encouraged to play an active role in making it more timely. Many of the changes are initiated by employees. "As much as possible," says Mackey, "this needs to be a collective effort. If people don't have input, it won't be alive for them."