HEB’s Texas Supermarket Competitors Should Be Scared. Very Scared.
A favorite question of mine for any CEO: What’s the toughest thing about your business?
I guarantee you any executive in the supermarket industry will rank among his or her top headaches the hiring and retention of good people, in an industry where service quality increasingly is the mark of differentiation, and worker turnover is brutal and expensive.
A favorite follow-up question: What are you doing about it?
Here, sad to say, I often get a shrug in response, as if to say, “It is what it is.” Companies devoted to excellence, on the other hand, meet their toughest problems head-on, and turn that into a competitive advantage. And they don’t let up.
If you’ve ever spent much time in the state of Texas, you know there’s a homegrown supermarket chain there, H-E-B, whose stores are spiffier than most of the competition’s and whose employees are more anxious to make you feel at home. The family-owned, 110-year-old company employs about 95,000 (about 9,000 of those at stores across the border in Mexico) and operates more than 370 stores.
H-E-B already exhibits all the signs of being a superior place to work – its service wouldn’t be top drawer if its treatment of employees was bottom-of-the-heap – and this week it revealed plans to further distance itself from the competition: it plans to distribute over time about 15% ownership among 55,000 eligible employees.
H-E-B thus joins supermarket industry standouts Publix and WinCo Foods as at least partially employee-owned. A wide survey of academic research has shown employee-owned companies outperform the competition. And a recent study showed, as an investment, employee-owned S-Corporations outperformed the overall stock market.
Publix has been dubbed a Wal-Mart (WMT) slayer for its domination of the lucrative Florida market, and management there credits a highly engaged workforce of owners for the success of the company. WinCo, a smaller chain, operating discount stores across the U.S. West, has vastly outperformed the industry and the stock market as an employee-owned company. And its workers have been rewarded impressively.
Simply put, these companies benefit from employees acting like owners. Waste is reduced. There is a cooperative, self-policing element to the workforce. And friction between management and workers is lessened.
In its announcement, H-E-B didn’t disclose the legal structure of its employee ownership plan. To qualify for the stock awards, employees need be at least 21 years old, have completed one year of service and worked at least 1,000 hours in a calendar year.
If you’re in Texas and someone you know needs a job, it wouldn’t hurt to peruse the 1,149 hourly openings, as of this writing, on the H-E-B website, or the several dozen management openings. There are also openings for pharmacy workers and in supply chain.
The Butt family, owners of H-E-B, have a net worth of more than $10 billion, Forbes has estimated. So the 15% they’re planning to share with employees is a significant amount and will go a long way toward preparing workers for a dignified retirement. It will also likely make the company stronger.
Coca-Cola, in a study distributed to its supermarket customers, estimated that the cost of employee turnover in the grocery business exceeds the entire industry’s annual profit; a single store’s typical cost is about $190,000 a year. The cost of replacing one cashier ranges from about $2,000 to $4,000.
And we all know that service suffers – along with morale – in a high turnover workplace. What’s surprising is that more supermarket companies – and firms in other high-turnover industries – haven’t embraced employee ownership.