Transparent Companies

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One of my readers alerted me to this article in the April 1996 issue of Fast Company about the open culture of Whole Foods, a company that was approaching $1 billion in annual sales back then. The author called their approach “the future of democratic capitalism.”

Today the company’s market cap is $9 billion and sales will exceed $5 billion this year. This company is doing a lot of things right. Its non-heirarchical open culture is fascinating. Here’s a quote from the 1996 article:

The Whole Foods culture is premised on decentralized teamwork. “The team,” not the hierarchy, is the defining unit of activity. Each of the 43 stores is an autonomous profit center composed of an average of 10 self-managed teams — produce, grocery, prepared foods, and so on — with designated leaders and clear performance targets. The team leaders in each store are a team; store leaders in each region are a team; the company’s six regional presidents are a team.

Whole Foods supports teamwork with a wide-open financial system. It collects and distributes information to an extent that would be unimaginable almost anywhere else. Sensitive figures on store sales, team sales, profit margins, even salaries, are available to every person in every location. In fact, the company shares so much information so widely that the SEC has designated all 6,500 employees “insiders” for stock-trading purposes.

Whole Foods now has more than 39,000 employees. For nine consecutive years it has been listed as one of the Top 100 companies to work for by Fortune magazine.

Does anyone know of any other companies that act like this? Why wouldn’t other companies follow suit, with a model that makes such happy and productive employees?

Has anyone ever seen any scholarly research on how this kind of openness and transparency affects productivity, interpersonnal relations, etc? What about office politics and jealousy when some people are paid more than others? Obviously this open culture works incredibly well at Whole Foods. I wonder how it would work in a high tech company.

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6 Responses

  1. The makers of Gortex have such an open non-heirarchial culture that it’s difficult to get anyone on the phone. Rather than traditional naming (CEO), their titles include short descritions of what they do. It’s still one of the most innovative and open “lab” company’s out there.

  2. Matt

    This is very interesting. I work for Microsoft going on 11 years now. There were about 20,000 employees when I started. We never had access to the kind of financial information the article talks about, but for the most part every employee had open access to all the code for ever product we make. Windows, SQL Server, Flight Simultator. It was a lot of fun and I even submitted fixes for other products.

    Things have changed. It’s now quite a process just to get access to builds of early release projects. It happend slowly and its hard to argue they should allow all 60,000 employees source code access, but it sure was and incredible perk while it lasted. I imagine Whole Foods will have to (has already?) scale this back some as they grow

  3. Umesh Kumar

    I think in cultures like india, where people openly discuss how much are they paid and how much is the company making etc it will be more successful.
    for e.g. when u meet someone in USA , u ask where he works, what he does but not his pay.
    in india u also ask pay because if your pay more or less reflects ur importance and actual work profile .

    but obviously it is dying in india too with the incoming of mnc’s who promote non discussion of salaries etc.

  4. jordy

    This is part of the dynamic that makes open source software so successful. Every team member communicates via a discussion list that is available to all contributers and even the public at large. This means that everyone has the same access to information, so everyone can contribute to their fullest potential. This method makes organizations become very flat and very effective.

  5. Josh

    We just used Whole Foods in my Leadership class Tuesday night as a case study….Bottom line at least for Whole Foods is management feels the openness creates a more efficient work place…The efficiency is attributed to the employees not having to worry about who is making what or who is making more than them…Whole Foods also have a very clearly defined pay structure based on time with the company, position, and skills…So employees know how they can increase their income…

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