Michigan has something to teach Nassau OTB, a public benefit corporation, even if you don't like pastrami?
-
Op-Ed Contributor
End the Tyranny of 24/7 Email
-
Paul Krugman
The Fall of France
-
Saving on College Textbooks
-
Sam Kass, the Obamas’ Foodmaster General
-
Q&A
The Dirt on Your Sponge
-
Nicholas Kristof
Is Everyone a Little Bit Racist?
-
The Dawn of the Post-Clinic Abortion
-
Student-Built Apps Teach Colleges a Thing or Two
-
Retiring
Increasingly, Retirees Dump Their Possessions and Hit...
-
With Gaza War, Movement to Boycott Israel Gains Momentum in Europe
-
New Study Offers Clues to Swift Arctic Extinction
-
Exorcising a Phobia, One Stroke at a Time
-
Machine Learning
Bringing Tech Culture to the Staid College Quad
-
Charles M. Blow
Bill O’Reilly and White Privilege
-
Op-Ed Contributors
The Truth About Down Syndrome
-
Evictions Soar in Hot Market; Renters Suffer
-
The Upshot
In Defense of the Knee Defender
-
A New American Oil Bonanza
-
Medal of Honor for a Civil War Hero 150 Years in the Grave
Credit Joshua Lott for The New York Times
It was a typical Wednesday morning at Zingerman’s Roadhouse,
a restaurant in Ann Arbor, Mich., that offers nine varieties of
macaroni and cheese and smokes its own hogs for pulled pork. But on this
particular morning, in a colorful back dining room, finance was on the
menu.
Gathered
for their weekly huddle at various booths and tables were roughly 50
restaurant staff members, all studying a large whiteboard filled with
handwritten numbers. Alex Young, a James Beard Award-winning chef who
has run the restaurant since it opened in 2003, noted one figure in
particular: $165,256, the previous week’s sales.
That
number, as the board showed, was nearly $13,000 more than they had
anticipated in the monthly plan for this third week of April and close
to $5,000 more than they had forecast just seven days earlier. Smiles
erupted across the faces of everyone from the busboys to the line cooks
to the wait staff. For one thing, they had served 300 more meals than
anticipated.
“I
think we could get that number up to $180,000 next week with the start
of graduation ceremonies,” said Mr. Young, referring to the
fast-approaching festivities at the University of Michigan. “How do you
think we might get to that goal?”
Staff
members started offering suggestions, including promoting products made
at one of the restaurant’s sister businesses: graduation cakes from Zingerman’s Bakehouse, for example, or a gift package of “Zingerman’s Guide to Good Leading,” a three-part business book series sold by Zingerman’s Press.
“Great
ideas,” said the author of the books, Ari Weinzweig, who was sitting in
a booth, dressed in his standard uniform of gray jeans, slip-on rubber
shoes and black T-shirt. The books explain how Mr. Weinzweig and his
co-founder, Paul Saginaw, turned Zingerman’s Delicatessen,
a tiny sandwich shop near the university, into a group of nine
businesses that, three decades later, has 650 employees, 18 managing
partners and combined annual sales of $50 million.
Founded
in 1982, Zingerman’s Deli is now known internationally for its many
huge and creative sandwiches. President Obama ate there recently. (“The
Reuben is killer,” he told a cheering crowd of students.) But its most
important creation may turn out to be a highly unusual business model —
one that has produced impressive growth while engaging employees who
enjoy the opportunity to help run the businesses and even to start new
ones. Zingerman’s has also introduced a business to share its
philosophies with other business owners who come from around the country
and the world to learn how to create work environments where employees
think like owners.
Shortly
after the Roadhouse huddle, Mr. Weinzweig received an email from a line
cook, Leo Chen, who pointed out that four of the cocktails prepared at
the restaurant bar required egg whites. Mr. Chen estimated that 30 egg
yolks a week were being thrown out, yolks that could be “used for
breakfast, puddings, etc.,” he wrote to Mr. Weinzweig, who encouraged
him to prepare a plan for collecting the yolks at the bar and
transferring them to the kitchen; the plan could be presented at the
next huddle.
That ‘Zingy’ Feeling
The
original business plan for the deli was quite simple. “It started with a
vision of a sandwich that was so large it would take two hands to pick
up and when you finally bit into it, the Russian dressing would roll
down your forearms,” said Mr. Saginaw, who was wearing, as he often
does, a fedora and a bowling shirt. By the early 1990s, on football
Saturdays, the line at the sandwich counter stretched around the corner
and down the block.
Once
the deli connected, the founders were besieged with offers to replicate
it — from Disney, from Las Vegas casinos and from would-be franchisees.
Mr. Saginaw and Mr. Weinzweig turned down all of them.
Still,
they weren’t satisfied with the deli, which had hit a plateau, and they
wanted the business to grow. But they weren’t interested in
cookie-cutter growth. They wanted to retain the things that they
believed made Zingerman’s special. “When I see a model like Steak ’n
Shake, I think it’s great,” Mr. Weinzweig said, referring to the
hamburger chain, “but I don’t want to do the same thing again and again
in places where I don’t even live.”
If
anything, he and Mr. Saginaw were more focused on how they would run
their business than what the business would be. “From the beginning,”
Mr. Saginaw said, “we wanted to build an extraordinary organization —
not the biggest, not the most profitable — but an organization where
decisions would not be based on who had the most authority but on
whoever had the most relevant information.” He added: “We wanted to
invite everyone to help run the business and convey that each one of us
was personally responsible for its success.”
In
1994, the two founders wrote a vision statement for what would become
the Zingerman’s Community of Businesses, or ZCoB (pronounced ZEE-cob).
Instead of building delis wherever they could, they envisioned a dozen
or so distinct, local businesses that would all be operating by 2009.
Each would be founded and run by a passionate managing partner who would
know the Zingerman’s culture and values, having gone through extensive
in-house training, what they now call “the path to partnership.”
These
partners would invest their own money, generally 10 to 15 percent of
the initial investment, so they would have a stake in the success of the
business. Mr. Saginaw and Mr. Weinzweig, who would contribute capital
as well, hoped that by offering staff members an opportunity to move up
within the company, they would recapture the start-up spirit they had
initially enjoyed with the deli.
Not
everyone liked the new vision. Within three years of its introduction,
80 percent of their managers had resigned. With increased opportunity
comes increased responsibility, and many of the employees were
accustomed to the deli’s relaxed environment and didn’t want to
recapture the spirit (or workload) of a start-up. Disappointed with the
departures, the founders went looking for people who shared the vision.
And
they started rolling out new businesses: A bakery that had been started
to make bread for the deli became Zingerman’s Bakehouse. A training and
consulting business, ZingTrain, would share Zingerman’s strategies and philosophies, especially its emphasis on customer service and staff training.
There are now six ZCoB businesses clustered on the south side of Ann Arbor, including the Zingerman’s Mail Order business, the Zingerman’s Coffee Company and Zingerman’s Creamery.
They
have begun to resemble a real-life version of Richard Scarry’s Busy
Town, right down to the storybook cheerfulness that comes from
decorating every business with motivational messages written in
Zingerman’s signature typeface and illustrated with quirky cartoons and
drawings. But that cheerfulness can take a toll.
Former
staff members talk about the frustrations of having to placate
difficult customers, as well as the stress of being “Zingy” throughout a
long shift. “It is exhausting to work somewhere where you feel like
you have to improve what you do constantly,” said one former worker at
Zingerman’s Roadhouse.
Eight
miles west of Zingerman’s Roadhouse is the 42-acre Cornman Farms, where
Mr. Young, the chef, has been growing vegetables and raising goats,
cattle and pigs for Zingerman’s Roadhouse since 2005. This year, at the
same location, ZCoB has opened its newest business, Zingerman’s Cornman Farms, an event space with a restored barn and farmhouse. In its first 10 days, it held both a wedding and a fund-raiser.
The
businesses sell to one another and work together, but they all have to
stand on their own. Not all of them have stayed in the circle. In 1994,
Zingerman’s Practical Produce opened to sell fresh fruits and
vegetables, as well as Zingerman’s bread, and operated for six years
until it was sold. The original partner ended up having differences with
Mr. Weinzweig and Mr. Saginaw and left after less than a year. “Without
the right partner, the business couldn’t work for us,” Mr. Weinzweig
said. “It was a good lesson to learn. But you can’t try a lot of things
and have them all work out, either.”
Today,
each business has its own “training engineer,” and the nine businesses
offer staff members more than 50 training classes, including sessions on
knife and food safety,
effective interviewing and how to buy a house. At the deli, employees
are taught the provenance of all of the cheeses, meats and smoked fish
they sell, as well as how to greet customers with a friendly “10/4” — a
smile from 10 feet followed by a greeting from 4.
“We
get price questions a lot,” said Maddie LaKind, a recent University of
Michigan graduate who worked part time in the deli during college and is
now working and training full time at the deli, hoping for a career in
food. “Customers might want to know, for instance, why our Italian
submarine sandwich costs $15.50. I explain to them the value of the
product. It has 11 different high-end ingredients. But we also happen to
be paid and treated well.”
For
employees, there is little reason not to participate in the training.
They are paid their normal wage during class time — they carry a
“passport” that tracks their completed course load — and can receive
raises or promotions for completing segments. For example, deli
employees earn a 50-cent-an-hour increase for completing orientation. “I
feel like I have received a business degree working here,” said Heather
Kendrick, a music major at the University of Michigan who works in the
deli.
Ji
Hye Kim, 36, who started at the deli in 2008 after beginning her career
in health care, is now on the path to partnership. In 2010, she wrote a
vision statement for an Asian restaurant called San Street, and the
partners approved her pursuing the idea.
Since
2011, Ms. Kim has been selling pan-fried glazed tofu, soy garlic
chicken and steamed buns stuffed with pork and shiitake mushrooms off
the back of a rolling trolley near the deli. The food cart has worked as
an “entrepreneurial lab,” she said, producing sales of $165,000 so far
in the fiscal year that ends July 31, up nearly 50 percent from the same
period last year. Although the partners have not committed, she is
working on a business plan for a Korean restaurant and looking for a
space that would seat 50.
“I
am hoping to have a brick-and-mortar restaurant within the next six to
10 months,” she said, adding that Mr. Young, the Zingerman’s Roadhouse
chef, recently helped her get a three-week internship at a Korean
restaurant in New York.
Code Reds and Code Greens
Not
long after the introduction of the Zingerman’s Community of Businesses,
Mr. Weinzweig came across a book titled “The Great Game of Business,”
by Jack Stack and Bo Burlingham. It recounted how Mr. Stack and a group
of managers responded when International Harvester decided to close an
engine manufacturing plant in Springfield, Mo., where they were
employed.
Mr.
Stack and the managers bought the plant, renamed it Springfield
ReManufacturing and turned it into a thriving collection of more than 30
businesses now known as SRC — thanks largely to an innovative strategy
that came to be known as open-book management.
It
was Mr. Stack’s insight that all kinds of good things would happen if
managers shared information with employees: If employees knew more about
how they and their colleagues were performing, they would be motivated
to perform better. And if they were rewarded for improved performance,
they would come to believe that they had a stake in the outcome. They
might suggest ideas that would never occur to a manager who wasn’t on
the front lines, for example, and generally engage with the business and
its mission in ways rarely seen at American companies.
Mr.
Weinzweig found the book eye-opening. “It was like turning on the light
in a dark room where we had been bumping into the furniture,” he said.
Though
the Zingerman’s founders had never hidden the business’s financials
from their employees, they had also never actively distributed them. The
emphasis had always been on food and customer service. Now, employees
were given responsibility for performance metrics that were tracked on a
scoreboard.
The
metrics showed how the company was performing in sales and expenses,
but also in composting and energy efficiency. The Zingerman’s Experience
Indicator even turned customer service into a performance metric by
tracking code reds (complaints) and code greens (compliments). Today, a
code-red mistake, like a lost order, quickly sets off the customer
recovery program, which gives a server the discretion to undo the damage
by offering a coupon, a free item or more.
Still,
the introduction of open-book management at Zingerman’s did not go
smoothly. It might have failed but for a trip that Mr. Weinzweig and
some of his staff took to visit Mr. Stack in 2001. Only after observing
how it was done at SRC did they realize that they’d been sharing the
numbers but not helping employees understand them.
The
problem, they concluded, was that they weren’t holding weekly meetings
to discuss the results. Mr. Weinzweig says he previously wanted to do
so, but was persuaded that the last thing the company needed was more
meetings. After visiting Springfield, however, they introduced the
huddles, like those held on Wednesday mornings at the Roadhouse. (As
many as 50 are now held every week at the assorted ZCoB companies.)
Employees
are encouraged, but not required, to attend the sessions. Most do —
they are paid for their time, and there is usually free food — and they
often see the results, especially when improved performance triggers the
company’s profit-sharing plan.
But
open-book management has paid off at Zingerman’s even when times were
hard and there were no profits. One advantage of sharing performance
numbers is that there are no surprises when the numbers turn south. In
2009, at the worst of the economic downturn, those attending weekly
huddles at the Bakehouse confronted the possibility that the bakery
would run out of cash within nine months. Hoping to prevent layoffs, the
two managing partners and other employees who could afford to do so
volunteered to take a pay cut.
“It
was amazing,” said Amy Emberling, one of two managing partners at the
Bakehouse. “We made it through and ended up being able to retroactively
pay all those employees.”
A Growing ‘Deli Campus’
It
has now been 20 years since Mr. Saginaw and Mr. Weinzweig drew up their
vision statement. At the time, the deli produced a little more than $5
million in annual revenue. Today, the deli has grown from its original
1,300 square feet into a 30,000-square-foot “deli campus” that, thanks
to a recent addition, now includes seating, both inside and out, for
hundreds and has greatly reduced waiting times.
One
measure of the vision’s success is that while annual revenue at the
deli topped $14 million in 2013, it represented less than 30 percent of
total revenue for the nine businesses.
Over
the last few years, the organization’s net operating profit has hovered
around 5 percent. That profit margin would be considered disappointing
at many companies, but Mr. Saginaw and Mr. Weinzweig say they are happy
knowing that the slim margin is a result, in part, of paying employees
well and providing good health care.
(The
lowest entry-level wage for most ZCoB employees is now $9 an hour, and
the company has committed to paying an entry wage of $11 an hour by
January 2016. Full-time salaries range from $32,000 for an assistant
manager at the deli to $95,000 for a senior accountant.)
“Employees who are stressed out financially, wondering how to pay for their kid’s allergy meds, or their rent or auto insurance,
are not going to be able to do their job well,” said Mr. Saginaw, who
has been lobbying in Washington for the last year for an increase in the
minimum wage. “We’re comfortable with the notion that there’s such a
thing as enough. Others may be wealthier than we’ll ever be, but I
wonder if they’ve lost a certain amount of joy in their work.”
The business model that he and Mr. Weinzweig created has been studied and emulated.
Wayne Baker,
a professor in the Ross School of Business at the University of
Michigan, turned it into four case studies. Bo Burlingham featured
Zingerman’s in a book called “Small Giants,” which is about companies
that “choose to be great rather than big.” And the owners and employees
of more than 1,000 companies have attended ZingTrain seminars to learn
more about the Zingerman’s model.
ZingTrain
now has six full-time trainers and eight ZCoB staff members teaching
seminars at a new educational facility that can accommodate up to 35
participants at a time. Recent seminars covering open-book management
attracted business leaders from a water-treatment plant in the nearby
community of Plymouth, a marijuana company in Colorado and a chef
academy in Singapore.
At
one session, the managers of a California winery that instituted
open-book management in 2013 explained how they had struggled to get
employee bonuses right. And the chief executive of a chain of ice cream
shops based in Austin, Tex., talked about how the company had exceeded
its projections thanks to a suggestion that had emerged from employee
brainstorming.
The
internal training courses are taught by staff members — except for the
required employee-orientation class, called “Welcome to the ZCoB,” which
is always taught by one of the two founders.
Recently,
about 15 new employees from across the nine Zingerman’s businesses
gathered in a room upstairs from the deli, all sampling a new torte that
Mr. Weinzweig had brought from the Bakehouse.
“First
of all, here is my cellphone number, as well as Paul’s,” he told the
surprised group, as they scribbled down the numbers. “Call us anytime
you have a problem. That is what we are here for.” (Mr. Weinzweig still
fills water glasses most evenings at the Roadhouse to stay connected
with the customers and the staff.)
Krystal
Walls, who works in the mail-order business and has two children and a
third on the way, said at the session, “I have never worked anywhere
where I was trusted or respected like this.”
Another
employee, Tess Eastment, who was starting work in the catering
business, said, “I was pretty cynical when I started working here but
have to admit, I am drinking the Kool-Aid now.”
“I
hate that analogy,” Mr. Weinzweig said to her. “That Kool-Aid killed
people and cults imply being secretive. We are totally open.”
He
went on to talk about the opportunities that awaited the new recruits
and to emphasize that Zingerman’s also offers personal counseling and
even loans to any employees facing hardship. “Welcome,” he said, summing
up. “Any one of you may one day be a new partner in the ZCoB.”
No comments:
Post a Comment