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  Whole Foods co-CEO Walter Robb with
Chris White,managing director of the
Center for Positive Organizational
Scholarship.
 

A Fresh Take on Capitalism

2/21/2013 --

Whole Foods co-CEO Walter Robb says companies need to consider all stakeholders, not just investors, when they do business.

Watch Video of the conversation.

ANN ARBOR, Mich. — The leaders of Whole Foods Market Inc. have some big ideas about changing the way we eat, the way food is farmed, and how to get fresh food to underserved areas.

They also want to change the way people think about capitalism and the role of business.

Walter Robb, co-CEO of Whole Foods, told the Ross community that a company should involve all of its stakeholders in its decisions and mission — not just shareholders. Employees, communities, and suppliers need to be part of the picture. He said Whole Foods has a broader idea of what is possible for business in society.

"Real sustainability should be built into the very core of who you are and how you operate," Robb said during his Positive Leaders Series conversation in Blau Auditorium on Feb. 19. "Companies have to start putting that at the very center. You think about your circle of stakeholders in everything you do."

Robb, who took questions from Twitter and email, said Whole Foods was founded to make a change in the world — to bring more and better-quality fresh food to people, promote awareness of the food/health connection, and create a great place to work.

Performing well financially is a big goal, of course, but one of several.

When asked about the best way to balance the company's altruistic values and profits, Robb said, "The best way is to perform. If you perform, they have nothing to say other than, 'Thank you very much.'"

But Whole Foods has learned from its investors, most of which are institutional. Robb said several of them were critical of Whole Foods' return on invested capital, which at one point was around 6 percent. Top companies return about 15 percent, Robb said.

"We said, 'You know what? You're right. We're not being good stewards of capital.' That was a good lesson from them," Robb said. Whole Foods then found ways to reduce the cost of opening stores and improved its return on capital.

But becoming a national brand while keeping its culture intact hasn't been an easy journey, Robb said. When the 2008 recession hit, Whole Foods saw a steep sales decline as well as customers dissatisfied with its prices, which made the company realize it was spending too much on expansion.

It was, Robb said, what Authentic Leadership author Bill George called a "crucible moment."

"We had to come to grips with a few things," Robb said. "We went back to our knitting and ate a lot of humble pie." Whole Foods was growing for growth's sake, so the company's leaders slowed down and re-focused on its core values. Robb said the company had to be clear on what it was going to be and how it was going to get there.

"Those are good qualities in a competitive marketplace and it has served us well," he said.

Whole Foods' size and influence helps it tackle some big issues. For example, Whole Foods will open a store in the city of Detroit later this year, part of the company's vision to bring fresh, healthy food to areas where it's harder to find. The company is in a position to be more patient with the financial return on the store, he said. It's a fair trade-off since Whole Foods will learn a lot about operating in a market outside its norm.

"It's not a typical market for us," Robb said of the Detroit location. "It's a stretch, quite frankly, when you look at the demographics. But we have the size and scale to take this sort of step."

Since the store will serve different customers, Robb said Whole Foods is looking harder at product selection, price, and engaging local suppliers. It's also holding workshops to teach people about fresh food, how to cook it, and how doing that is more economical.

"We're going to take the learning there to make us better," he said. "We're good grocers. We know how to make it a happy place to work and a happy place to shop."

He also chafed at the notion that Whole Foods' entry into a market is bad for local grocers.

"A lot of people get attached to the idea that big is bad and small is good," Robb said. "Why? What matters more is what the values and ethics of companies are, small and large."

In addition to the company's values and mission, Robb also shared his personal journey as a leader. Early on, Robb said he concentrated on pushing and driving, which "has its healthy aspects and unhealthy aspects, particularly as it relates to other people."

Later, he learned more about the compassionate side of leadership, how to be more direct with feedback, and how to delegate responsibility as a company grows.

"One of the things that lets companies grow is for leaders to let go," he said. "You don't get work done by yourself. You get it done with a team."

To students graduating this year, he said, "I hope you are in this for the bigger picture, for the well-being of humanity."

— Terry Kosdrosky

Learn more about how Ross develops leaders who make a positive difference in the world.

Also visit the Center for Positive Organizational Scholarship for more on how its research can energize and transform organizations.



For more information, contact:
Terry Kosdrosky, (734) 936-2502, terrykos@umich.edu