Zingerman’s co-founder Paul Saginaw treats his employees like customers

PAUL SAGINAW: So I employ,
along with my partners, a little over 700 people. And I think that Dr.
Laura might refer to those jobs as not
high quality jobs. Fair enough. We could debate that,
but I know one thing is that we make some
high quality products. And I got a really great
high quality candy bar that they’re going to
distribute to you right now. And I’m going to tell
you how we get people in a job that isn’t
a high quality job to put out a
high quality product. But how many of you
have at some point had a Zingerman experience? Quite a few. And how was that experience? Pretty good. OK. So I’m going to tell you that
there is a really good chance that that experience was
provided to you by someone who quit or walked off
their last 10 jobs, maybe just came out of jail
after 10 years as a convicted felon. Or they’ve suffered up
and down through addiction and now they’re in recovery. Those comprise a very,
very large percentage of our employees. And so how do we
get that to happen is something I’d
like to talk about. First, though, I’d like
to give you a quiz. With your permission, I’d
like to ask all of you to close your eyes. And with an outstretched arm,
please point in the direction that you believe is north. OK. So hold your arms up. Open your eyes. We’ve got a big problem. We’ve got to get to
Vancouver Island tonight, and we’ve got to know
which way is north. So we could appoint a
committee and have them go off and study the issue. We could take a vote. Majority rules. Or we could try to come
to a consensus decision. But lucky for you because
Vancouver Island’s far away, I have a compass. And it’s going to tell me, if
it’s working– is it working? So this is saying
that magnetic north is about right in
this direction. So some of you– who
wants to argue with that? Some of you held your
arms up pretty firmly. OK, no, you’re not going to. That’s ridiculous. You’re not going to argue it. It’s a natural law. And we’re going to pay really
close attention to natural laws because if we don’t, we get
in really, really big trouble. The point I’d like
to make is that I believe in business there’s
also some natural laws. If you want to stay in business
over a long period of time, your customers have
to perceive value in your product or service. If you want your employees
to give great service to your customers, you, as
leaders in the organization, have to give great
service to your employees. If you want employees
to be highly productive, you have to give them the
tools and the training that they need. Those are all natural
laws in business. There’s many others,
but you get the idea. One that I think is really,
really, very, very important is that if you want to
have a successful business, a successful initiative,
a product roll out, a new business,
a new employee policy, you have to very,
very clearly be able describe what
success looks like. You have to have a clear idea
of this preferred future. In our organization,
we call that a vision. In our organization, a vision
is a written definition of success. If everything goes
the way you want it to go at some
point in the future, exactly what does
that look like? We operate with a very,
very long range vision. It is a hopeful vision. It is inclusive. It is widely communicated. It is shared with everybody
in the organization. We say that a good vision,
it has to be inspiring. We heard earlier people
want to be inspired. Laslo was saying we want to
work for something greater than ourselves. There’s a really big world of
difference between one worker if you go up to her and you
ask her what she’s doing and she says, I’m
rough framing a wall. And you go to another who
has the exact same job and you ask her
what she’s doing, she says, I’m building a home
for someone in my community. That worker is part of
an organization that has an idea of who they
are, what social good they are delivering to the
community, where they are going, and what that person’s
role is in the organization. We believe that’s
very, very important. So when we first opened, there
was my partner Ari Weinzweig and I, and we had two employees. And we had a very clear vision
of what we wanted to do. I still have the initial vision
that we wrote down on Sunday morning when I went
over to his house. And I told him that
I found the location where we could open up. And we sat down at a Smith
Corona electric typewriter, and we typed out three or four
pages– maybe 14 paragraphs. And we said we were going to
gather the finest artisan made foods from around
the world, and we were going to smash it down in
this busy, bustling specialty food store. We are going to have
this sandwich shop, and we’re going to serve
sandwiches that were so big, it was going to take
two hands to pick it up. And when you finally got it up
to your mouth and bit into it, the Russian dressing was
going to roll down your arms. And this was really
very, very clear in our heads before we
made our first sandwich. We also said that we didn’t want
an organization where decisions were made based on who
had the most authority, but rather who had a good idea. Who had a solution to an issue
that we were dealing with. Who we had information
and data that was relevant to the
problem at hand. We wanted to push decision
making down as far as we could in the organization
and invite everybody in and help run that business. And then we also said that we
were going to gather this food and we’re going to
produce and we’re going to deliver to
people with very, very high level of service. This was 1982, when nobody
talked about customer service. If you went to the
bookstore then– if you want the Barnes
Noble– and you looked for a book on customer service
in the business section, you wouldn’t find it. You could get one. You’d have to special
order, and it would probably be an academic publication. Today, you can go
in there and you could find dozens and dozens
of books on customer service. One is better than
all the others. It’s called “Zingerman’s Guide
to Giving Great Service.” And I recommend it to you. But I don’t know about here
in Mountain View, California, but in Ann Arbor, Michigan,
nobody gets up in the morning and says if I don’t
get a $14 sandwich, I’m going to kill myself. Or if I don’t get a $9 loaf of
bread, life isn’t worth living. It just doesn’t happen. And so we had to give people
a reason, and that was they were going to be
treated like royalty. We were going to wow them. We were going to service
the hell out of them and have them believe that
the only reason we got up in the morning was on the
chance they would grace us with their patronage. And moreover, we were going
to extend that service to our employees. Because I have no right to
ever expect that someone that works for us is going to
give a higher level of service to a guest than I’m
willing to give to them. So how do we do that? So one of the ways we do that
is that we are an open book organization. We practice open
book management. What does that mean to you? Has anybody heard
that term before? I’m going to ask a couple
questions and none of them are rhetorical. Has anybody heard the term
“open book management.” Somebody, what does
it mean to you? Shout it out. Transparency. Share the numbers. Yeah. Most people, when you talk
about open book management, they talk about the finances
and sharing those numbers. That is a very big part of it. And certainly, in
our organization, every employee has
the ability know where every penny comes from
and where every penny goes. But it’s much bigger than that. Open book management means
we hold everybody personally responsible for the
success of the business. We invite everybody
to come in and make the decisions to
run the business. Because in most organizations–
and the financial information is certainly a big part of it. In most organizations, where is
all the financial information? Hello? At the top, right? The accountant, the CFO. And who’s really dealing
with the products? Who’s on the floor? Who’s dealing with customers? Who’s producing the products? The people up here have
all that information, and they think the people
down here are stupid and they don’t care. And the people down here
have all the real information on what’s going
on, and they think the people up here are
stupid and they don’t care. And so we wanted a system
where that information flows back and forth. So in every department–
well, first of all, in every business, we have
8-9 separate businesses, they’re all separate
legal entities and they have managing partners. Every managing partner started
as a front line employee. We’ve grown our organization
by providing the opportunity for ownership in
the organization by being entrepreneurial. And entrepreneurs do
create lots of jobs. And the people that we create
jobs for raise families, pay taxes, they’re
not on welfare, they send kids to school,
and for the most part, they’re pretty happy. Anyways, so we
have an annual plan that’s developed by
the entire staff. And so that’s the plan. The plan is the plan. It doesn’t change. Every department in each
business has a white board. And on that whiteboard
is the profit and loss statement for that department. And every line
item– cost of goods sold, sales, labor,
out of stocks, on time delivery– every line on
there is owned by an employee. So the dishwasher can
own this sales line. The dishwasher
reports– he might have to go to the accountant
to get the figure– but he reports on it and he’s
responsible for meeting plan. He’s the cheerleader
that’s going to lead a discussion
in that meeting– 45 minutes to an hour– every
week on are we beating plan? Great. How do we keep doing it? Are we off plan? What are we going to
do to get back on plan? So that you have everybody from
somebody on their first day to somebody that’s
managing the whole business is participating
in this meeting. And that’s how we
engage everybody in running the business. And I want to tell you a real
life story of how that works. Because you’re going to hear
a lot of theoretical stuff. How many people here
meet a payroll– are responsible for
meeting the payroll? OK, not many of you. So this is real shit, OK? This is how it really works. 2008, 2009, you guys
remember what was going on? We thought it was over with. It was dark. And for us, for our
sales, it didn’t trickle, especially our
producers, our wholesalers. It shut off overnight. And our bake house, which
produces stone hearth oven breads and specialty cakes
and wonderful pastries, they were hurting for the
first time in their history. They were in danger of
not meeting payroll. Does anybody got any water? And so Amy and Frank, my
partners– the managing partners of the bake house–
they’re having their huddle. Thank you. And they’re saying to the
staff, wow, this is really bad. For the first time
in our history, we’re not going to be
meeting our numbers. Were thinking we might actually
have to lay people off. It’s never happened. Does this mean I have zero time? Really? Give me a couple minutes
because it’s a really good story and you’re going
to appreciate it. So they came together and they
go, what are we going to do? And that business,
like here, there’s a chef that makes a meal. Everybody that works
a shift gets a meal. And the current
chef had just quit, and they’re going
to hire another one. And they know exactly
what that cost. They know what it
costs to hire someone. They know the fully
loaded cost of that. And they know how much it
costs to feed everybody. And they came back and
they said, you know what, all we ever do is complain. No one’s ever really happy. They’re happy, and
they’re unhappy. Why don’t you just
don’t hire anybody. We’ve got lots of
bread and pastry. Put some cold cuts out there. Put some potato chips out there. We’ll make our own food. We’re going to cut out
this amount of money. Great. What else are we going to do? A bunch of the managers huddled. They came back and they said,
OK, we will cut our salary 5%. But we want you to accrue
that, and when we get back to profitability– before
there’s any distributions, any gain sharing– we
want that money back. What do you think
would have happened if Amy and Frank
walked in and said, we’re cutting out your
entitlement, your meal, and we’re lowering
your salary 5%. Do you think that happiness
quotient would have gone up? No. But you know what? The happiness quotient
went through the roof because they were empowered. They knew exactly
what the problem was. There was nothing hidden. They trusted us. They saw all the numbers, and
they made their own decision the cut out things
that were theirs, that they had been getting, in
order to get the business back to profitability. You cannot get that if you
don’t have an open book. We have been successful
over the last 32 years because we have a
strategy that has sought to develop the human
potential that surrounds us and not discard it. Thank you very much.

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