Bob Sutton

Zingerman's: A Civilized Workplace

Today's New York Times business section had a front page article about Zingerman's, called A Corner Deli With International Appeal. I have fond memories of Zingerman's, as it opened when I was a doctoral student in Organizational Psychology at The University of Michigan in Ann Arbor Michigan back in the early 1980's.  I thought it was one the greatest places I had ever been, with fantastic sandwiches, delicacies from all over the world, and a great staff.  But I hadn't followed it very closely over the years.

I do recall that, even in the early days, The New York Times called it the greatest deli outside of New York City.  But until I read the article and did a bit more homework, I hadn't realized that this little deli --which still exists in an unassuming part of town -- was now part of a 30 million dollar a year business with over 500 employees.  Founder's Paul Saginaw and Ari Wienzweig remain the owners and remain dedicated to quality ingredients of all kinds, and expanded to other areas including a brisk mail order business and other areas including their own brand of coffee.  Now they are world renowned for their quality foods, and many people trek to Ann Arbor to visit the deli rather than The University of Michigan. That little deli now brings in about 10 million a year.  Even though it it is still almost impossible to park nearby, the deli remains the emotional and financial heart of the business. What I was most taken with, however, is that that Saginaw and Wienzweig have grown this business by focusing in the quality of their products and service, and on treating their employees very well, and treating profit as a secondary goal.   

They share their financial results with everyone, including in the newsletter for customers.  They make modest margins because they buy expensive ingredients and treat their suppliers fairly, are so devoted to quality in other ways, and give so much back to their employees (the return this year on their deli's 10 million was 5% and, on the mail order business's 8 million, was 3.5%). As the Times reports:

Along with hourly wages, vacation time (as much as six weeks after 20 years), health and dental care and food discounts, full-time employees receive “gain sharing,” which pays out if their part of the company exceeds its annual business plan......The structure also helps explain why margins remain low even as revenue has risen. To pay employees, support local producers and contribute to the community, “a big piece of it is charging enough money,” Mr. Weinzweig said.

After living in Silicon Valley so long, where there is so much greed, and just about everyone seems focused on squeezing every cent of everyone around them -- employees, customers, suppliers -- Zingerman's is a refreshing reminder that financial greed isn't always the first priority for every owner and manager.  It reminds me of Kurt Vonnegut's poem Joe Heller, which as I have written here before, Vonnegut allowed me to reprint in The No Asshole Rule.   Paul Saginaw and Ari Wienzweig seem to believe, like Joe Heller (the author of Catch 22) did, that they have enough, and that using their talents to create something beautiful and to give back along the way is a better thing than maximizing their personal wealth at every turn. Indeed, the article ends with two great points from the founders:

But Mr. Saginaw said profit, in itself, was not Zingerman’s motivation. “We’ve had dozens and dozens of opportunities to franchise, sell the name, take the check and walk away,” Mr. Saginaw said.

Instead, Mr. Weinzweig said, the idea was to create a special experience. “Our goal in 2020 is to leave our world better than it was when we came here,” he said.

P.S. In addition to The New York Times article, check out this INC article on Zingerman's, called The Coolest Small Company in America

True North: Economics and Humanity are Compatible

Today's New York Times has a glowing review of True North, by Bill George (Former CEO of Medtronic, a Jim Collins "Good to Great" leader, and now a Professor at Harvard Business School teaching leadership), with help from Peter Sims.  The book is based on interviews with 125 other leaders and executives like Starbuck's Howard Schultz and Xerox's Ann Mulcahy.  These cases -- in combination with George's accomplishments -- show that leaders who create humane organizations that really care about their people and their customers -- and don't just view them as units that exist for the purposes of extracting "as much economic value as possible" every minute of every day -- not only can thrive financially, they do it in such a way that people can travel through their days with dignity.  And as George shows with his cases of successful leaders, they can also have a life outside of work.

I find this book so encouraging because it defies the assumption in so many companies that the key to success is squeezing everything you can out of your people (and customers) RIGHT NOW and then discarding them the minute that the return on investment goes south.  I saw these assumptions in action at a professional service firm that I spoke at about five years ago in Baltimore.  I had a couple phone conversations with the Chair of the firm where he was abrupt and -- although he had signed the contract already -- didn't want to talk about the content of the talk, he just wanted to continue negotiating the terms of the deal in his favor.  Then, when I arrived, I sat next to a partner who had been with the firm over 30 years, and -- although we had barely met -- one of the first things out of his mouth was, "This used to be a place where we prided ourselves on striking a balance between humanity and economics; now it is all economics all the time. It is a cold heartless place that sees people and clients as units of production, and nothing else."  Perhaps 30 minutes later, when I spoke to the head of the firm, all he talked about was how important he was and about pushing profits higher and higher as quickly as possible.

I was shocked by how widespread the asshole poisoning was in the company.  During the time I was around, I only had two kinds of interactions with people:

1. Either they expressed hurt or fear (like the woman -- a senior partner -- who told me how hard it was for her to succeed because the "model" partner had a wife who did all the child care, and her husband also worked. Even though she was "highly profitable," the senior management of the firm viewed her children as a black mark against her).

2. Or they people expressed hostility -- putting down people in nasty ways. At first, I thought they didn't like me, as nearly every conversation wasn't just an argument, it was like talking to Simon Cowell on the American Idol.  People didn't just put down my ideas, the disagreement was also peppered with personal insults.  I then realized that this was exactly how the Chairman interacted with everyone else in the firm, so it was an interaction norm that everyone followed and enforced.   

True North is such an important book because  -- in sharp contrast to this nasty firm -- it shows that leaders who authentically care about their people and customers not only create more humane places, but that caring translates into greater commitment and loyalty.  And it has other more subtle effects too.  If you care about people, and are humble and wise enough to listen to them and hear what they actually say, you end-up focusing  on what they need to succeed emotionally and financially. Not on getting as much money out of them this minute as much as possible.  At the Stanford d.school, we call this the human-centered design process, and Bill George's words and (more importantly) his actions show that such understanding translates into better leadership because you can end-up giving employees and customers what they need -- not what you believe they should have or what is best for you in the short-term.

Let me give you a specific example from Bill George.  I have met Bill a couple of occasions and seen him speak twice.  When Bill took over as CEO of Medtronic, which is a medical device company, he had no prior experience in the industry. As Jeff Pfeffer and I show in The Knowing-Doing Gap, leaders who are brought in to operate a business that they don't understand often get in big trouble -- too often, they ride into town and make massive changes, without taking the time to learn the business.  I asked George how he dealt with his lack of knowledge of the industry. He told me that he spent 70% of his time during the first nine months that he was CEO in hospitals, watching surgeons install Medtronic devices in people and talking to doctors, hospital administrators, nurses, and patients about their view of the company and it's products.

I believe that most boards of directors and stock analysts would balk at a CEO who did this and complain that he or she wasn't spending enough time running the company.  But George's understanding of the human impact of his company's products appeared to pay off in the long run -- during the decade that he led Medtronic, it's market capitalization rose from about 1 billion to about 60 billion. Not bad for a guy who puts people first and believes that employees need a balance between life and work.

To return to the difference between the leader of that professional services firm and the leaders that Bill George wants to select and breed, as The New York Times says, "That's a common thread  in the strongest leaders, Mr. George argues: they have a deep desire to serve a greater goal beyond making money."