The HBR Interview: “What Is It That Only I Can Do?”

He’s been a grocer and a CEO for 32 years now. Lately, Whole Foods Market cofounder and co-CEO John Mackey, with his controversial utterances on health care reform and climate change, has been in the news as much for what he says as for what he sells. But in this edited interview with HBR’s Justin Fox, conducted in collaboration with the online video forum Big Think, Mackey talks about what makes a corporation run.

For the complete video interview with John Mackey, please visit BigThink.com/johnmackey.

HBR: You recently announced that you were committed to staying at Whole Foods Market for another 10 years. What brought that on?

Mackey: The announcement came when we made the decision to promote Walter Robb to co-CEO. That, combined with the fact that I stopped being the chairman of the board in December 2009, led to speculation that I might be leaving the company. So I thought it was important to announce that I’m not phasing out.

You had thought about having three co-CEOs.

Yes, because we function as equals on our team. People make the same compensation, except for me—I donate it all. We tend to make decisions by consensus. We don’t have a three-to-two vote. It’s not the Supreme Court trying to work things out. We really want to reach consensus, and we respect each other. In a sense we could have had five co-CEOs. But A.C. Gallo and Walter Robb were the copresidents and co-COOs, so we decided that Walter would take the title of co-CEO and A.C. would be the sole president and chief operating officer. That seemed to make everybody happy.

Has this emphasis on consensus been there from the very beginning, or has it evolved over the years?

It has evolved over the years. I found that when you make decisions by consensus, and you let all the disagreements get expressed, you make better decisions. If you don’t do that, there is a natural human tendency on the part of whoever didn’t get their way to want to be proved right. It’s like “See, I told you that wasn’t going to work.”

Does it sometimes take a long time to reach consensus?

It can. Generally, if you’re making decisions that really are going to impact the business, it’s good to talk them over. It’s a little bit like Japanese management decision making—they spend a lot more time trying to develop consensus in the decision group. The virtue of it is that although it takes longer to make the decision, implementation goes a lot faster, because there isn’t resistance or sabotage that works its way through the organization.

What you call conscious capitalism—is that part of it, or is that just a management style?

That is a management style.

What is conscious capitalism?

First, you have to understand the basic principles that help capitalism flourish. One is property rights. You need the ability to trade your property, and to trade it to pretty much whomever you want. Another is the rule of law—laws and regulations that are well understood so that you can factor them into your business decisions. The rule of law has to be applied equally to everyone. For example, if Whole Foods goes into a city and is told our cheese has to be refrigerated, it’s fundamentally unjust if that rule isn’t applied to our competitors as well—which, I might add, does sometimes happen in New York City. You also need to have conscious businesses—that is, businesses that become conscious of their higher purpose, which is not just about maximizing profits and shareholder value.

Second, you have to recognize the stakeholder model: Customers, employees, investors, suppliers, larger communities, and the environment are all interdependent. You operate the business in such a way that it’s not a zero-sum game.

Third, you need what we call conscious leadership. You could also call it servant leadership. Leaders identify their own flourishing with the flourishing of the organization. They’re trying to serve the organization and its purpose.

You have to create a conscious culture— a culture that allows the organization to fulfill its higher purpose.

Fourth, you have to create a conscious culture—a culture that allows the organization to fulfill its higher purpose, implements the stakeholder model, and enables conscious leadership to flourish.

So, what are the core principles of Whole Foods, and where do they come from?

I think business enterprises are like any other communities. They can aspire to the highest values that have inspired humans throughout time. You can use different value models, but I like Plato’s the good, the true, and the beautiful. Add the heroic to that—meaning changing and improving the world and standing up for what you believe is true and right and good. I think Whole Foods’ highest purpose is a heroic one: to try to change and improve our world. That is what animates me personally. That is what animates the company. I resisted that purpose for a long time, by the way. I actually thought we were in some variant of service—that it was really about fulfilling the good. The team members consistently told me I was wrong, that we had a different purpose. It was this more heroic purpose.

Where Whole Foods (and John Mackey) Came From

After he dropped out of the University of Texas, John Mackey moved into a vegetarian co-op in Austin in

…

In terms of the age-old debate about whether companies exist for the shareholders or for something else, is there one group? Is it customers? Is it employees? Or is it this purpose?

That gets back to the second principle of conscious capitalism—the stakeholder model. I think it’s kind of deep in human nature to think in terms of the zero sum. If one stakeholder is winning, someone else must be losing. It comes from sports, where there is one winner and lots of losers, and this idea of a fixed pie, where if someone is getting a bigger piece, someone else has to be getting a smaller piece, and what’s needed for social justice is to make sure people get equal pieces. But a conscious business recognizes that you can have an expanding pie, and potentially everyone can get a larger piece.

Whole Foods by the Numbers

301 stores $9 billion annual sales 35 store openings planned for the next two years 12% sales growth in

…

I’ll give you a simple example: Management’s job at Whole Foods is to make sure that we hire good people, that they are well trained, and that they flourish in the workplace, because we found that when people are really happy in their jobs, they provide much higher degrees of service to the customers. Happy team members result in happy customers. Happy customers do more business with you. They become advocates for your enterprise, which results in happy investors. That is a win, win, win, win strategy. You can expand it to include your suppliers and the communities where you do business, which are tied in to this prosperity circle. A metaphor I like is the spiral, which tends to move upward but doesn’t move in a straight line.

In 2008 and 2009 a lot of people thought that they weren’t moving forward. How did Whole Foods handle that?

We did take a couple of steps backward. But we saw it as an opportunity to refocus on how to create more value for our customers. We did that in two ways. One was to look at our prices more carefully. We’re quite aware that we’re lampooned and criticized for being too expensive. So we’ve focused on trying to get our prices down, and we think we’ve done a good job of that. The other way was to create more quality differentiation. We looked at all the areas of our store—meat, seafood, prepared foods, bakery, grocery—and asked how we could differentiate ourselves by giving customers a better experience or better quality. So we worked on it from both ends, and as the economy has begun to improve, our company has jumped out in front. We’ve been growing very rapidly again for the past few quarters.

Did any specific product or process surprise you and move the company forward in a big way?

I would say that we’ve done a few things that were very interesting. On the price side, for example, one of our strongest competitors is Trader Joe’s. Trader Joe’s does a really good job in its wine selection. It has a lot of inexpensive wines, including the famous Two-Buck Chuck. We’ve come out with our own wine, called Three Wishes, which matches Two-Buck Chuck in price. We think it’s a higher-quality wine, judging from blind taste tests. We’ve introduced it just in the past couple of months, and it’s doing amazingly well. That’s an example of how we are trying to get less-expensive products into our stores.

We’ve also done some differentiation: We’ve announced our seafood sustainability initiative. We want to have transparency on each of the species we sell in our seafood departments, so we’re working with the Blue Ocean Institute and the Monterey Bay Aquarium. If you look in our seafood cases, you can see that each species has been rated according to their standards. Combine that with our commitment to the Marine Stewardship Council, and we think we’ve got a good sustainability initiative, which our customers appreciate.

Has that limited the kinds of seafood you’re able to sell?

It has, and it will limit them a bit more in the future, because we’re going to gradually phase out any species that have been given a red rating, meaning that they’re least sustainable. You’re either committed to sustainability or you’re not. You either do it or you don’t. Sometimes that means you do things that might hurt you in the short term but will underscore your integrity as an organization, which ultimately proves to be valuable in competing with companies that maybe have less commitment to that type of integrity.

HBR’s pages are full of discussions about how sustainability is becoming a competitive advantage. Do you believe that?

I do think sustainability is a way to compete. I don’t think it’s the most important way. I see it as more of a niche. It reflects the consciousness of your customers, and the truth is that most customers don’t care about it. Most customers at the end of the day care mostly about price. That consciousness is still dominant out there. But there is a growing consciousness about things like environmental sustainability and animal welfare. When we started out, 30 years ago, organic was a niche, and most people didn’t know what it was. But I would say that partly because of Whole Foods’ success, organic is now very much in the national consciousness.

More recently, Whole Foods has gotten behind the emphasis on local agriculture and has helped to popularize it. Wal-Mart is beginning to pay attention to this also, so in a lot of ways Whole Foods is helping to evolve the agricultural system in the United States.

You had an interesting back-and-forth with Michael Pollan a few years ago, when he criticized you and Whole Foods. What was your evolution through that process?

Well, I think Michael took some unfair pokes at Whole Foods in his book The Omnivore’s Dilemma . He did his four meals in that book, and for three of them he did a lot of research. For the fourth meal, from Whole Foods, he didn’t talk to anybody at the company. He didn’t dive deeper. He just did his own personal investigation in the stores, and therefore I think he got a lot of things wrong. When I read his book, of course I wasn’t very happy about how Whole Foods was portrayed, and I began a dialogue with him. We ended up in a debate in Berkeley, California, back in February 2007, and a couple of thousand people showed up. That was a healthy exchange. And to give Michael credit, I think certain parts of his criticism ended up being true. Whole Foods wasn’t doing enough to promote local agriculture. We were not doing enough to promote, for example, grass-fed beef. We had put way too much emphasis on organic and not enough on some of these other aspects, and it was good that Michael called us to task. That kind of criticism stings, but there was also an opportunity there. I actually think you should engage your critics and see them, too, as stakeholders who are helping you to improve.

What’s the division of labor for you and the rest of the executive team back in Austin? Are you spending all your time writing op-eds?

I’ve written one op-ed in 32 years.

I guess you write about one blog post every two months?

More like two a year. My job has evolved steadily over the years. I’ve always asked myself this question: “What is it that only I can do?” If somebody else can do it, then maybe it’s not the best job for me. That has caused me to give up many things that I really liked doing and was really good at. I’m up in New York right now. I’m going to go to a Morgan Stanley conference, talk to investors. I’m going to talk to media.

I tour our stores a lot. For right or wrong, good or bad, I am seen as sort of the father of the company, so the team members really like it when I come into their stores. They want to meet me. They want to have their picture taken with me. So I’ve found that it’s very good for morale for me to go to the stores and just walk around meeting people. That is not something I really enjoy doing or am particularly good at. I’m actually more of an introvert than an extrovert. But through constant practice I’ve gotten a lot better at it.

I talk to suppliers, so in a sense I’m also probably still the major strategist for the company. I’m very creative, so a lot of initiatives—from seafood sustainability to animal welfare to healthy eating—have come up through me. I don’t worry too much about the day-to-day operations of the company. I’m more of a big-picture guy.

If you’re talking to somebody who is starting a company or trying to grow one, do you have any pearls of wisdom?

I think it’s important that you get some idea of what your purpose is—why you’re doing what you’re doing. I actually don’t think trying to maximize profits is a very good long-term strategy for a business. It doesn’t inspire the people who work for you. It doesn’t lead to that higher creativity.

Was there some point early in Whole Foods’ growth when you had to step back and ask, “What is our purpose?”

The interesting thing about our purpose is that it has continued to evolve. As a company grows, its purpose grows with it.

I actually don’t think trying to maximize profits is a very good long-term strategy for a business. It doesn’t inspire the people who work for you.

Let me give you an example. We’ve always tried to be good citizens in the communities where we do business. We originally thought of that as meaning we would support not-for-profit organizations there. But then we asked the question, “Do we have any responsibility in the developing nations where we’re trading, where we buy our coffee, where we get our bananas?” The answer was yes. We began to work with Muhammad Yunus, of Grameen Bank, who won the Nobel Peace Prize in 2006 for microcredit loans in Bangladesh. We worked with him and with Grameen replicators, and we are now in 23 countries. Through the Whole Planet Foundation, we’ve set up microlending organizations in the communities we’re actually trading in.

If you take a very narrow sort of Milton Friedman view that the only social responsibility of business is to maximize profits, what we did looks like theft from the shareholders. We’re taking their money and giving it away in loans to developing-world poor people. But nothing we’ve ever done in our history has created more goodwill with our team members than that.

We now have a program where our team members can volunteer to go work in some of the communities where we’re doing microlending. We have what we call a prosperity campaign, in which our customers make small donations at the cash registers. We raise a couple of million dollars a year that way and funnel it into microcredit, so the customers are now engaged in it. Our suppliers get preferential marketing callouts in our stores if they’re part of our microcredit alliance, so they are benefiting. Rather than take a narrow win-lose view, we’ve built goodwill with our customers, goodwill with our team members, goodwill with our suppliers, and, we believe, higher profits for our shareholders. The foundation has actually created shareholder value, because of these complex feedback loops.

Final question: Thirty years from now, what will Whole Foods look like? What will its purpose look like?

I don’t play that game any longer. It’s really hard to predict more than a few years out. I can prove that by just saying that nobody Googled anything 13 years ago because Google didn’t exist. Nobody had an iPod nine years ago, and nobody had an iPhone five years ago, and nobody was on Facebook seven years ago. The world changes. They weren’t doing Big Think six years ago. So I don’t really have a clue what Whole Foods is going to look like in 30 years. But I sure as heck hope we’re still following a higher purpose, we’re still using the stakeholder philosophy, and we’re still for conscious businesses that attempt to fulfill a heroic purpose in the world. If we’re doing that and we haven’t lost our way, I think the business will continue to flourish. I’ll be 87 years old. One thing I can pretty confidently predict is that I won’t still be in charge of Whole Foods in 30 years. If I am, then look out, because I’ll be a pretty crotchety old man at 87.

For Further Reading

More about Whole Foods and alternatives to shareholder capitalism: Firms of Endearment: How World-Class

…