531: In Retrospect - From Startup to Amazon: John Mackey on the Whole Foods Story

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0:39Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. Hey, founder fam, today we're diving back into the archives to bring you one of my favorite episodes with John Maggie, who's the co-founder of Whole Foods. In this interview, he shares his insights on leadership from navigating the complexities of running a business as an Amazon subsidiary to attracting and retaining great talent during challenging times and everything in between. This is a huge 101 on leadership and leading teams. All right, let's jump in. Hear the stories, learn the proven methods and accelerate your growth and future through entrepreneurship.

1:23Welcome to the Founder Podcast with Nathan Chan. The first question that we ask everyone that comes on is, how did you get your job? I created my job, right? I mean, entrepreneurs don't really have jobs. They have passions. They have something they're trying to bring to life, something they're trying to create. So I've never thought of it as a job. I always thought it was more of a passion, a mission, a purpose, you know, meaning for my life. Largely, I've done Whole Foods for 42 years. Yeah. And how did that come about? How did it start? Like, you know, everyone knows Whole Foods. My mom was excited.

2:10Like every time I go to the States, she always, she loves supermarkets and she always wants to check out Whole Foods because you got like, she finds it an interesting thing when you travel to a country. So very well known. obviously I do the same thing when I travel I look at other try to get some ideas I mean you know it's always a tricky thing to when you want to start an origin story because you know you could go back to the big bang right and work our way forward but in this case we'll just say that when I was about 23 I moved into this vegetarian housing cooperative and I wasn't a vegetarian at that time, but I was interested in kind of all things counterculture and I just thought I'd meet some really cool people, maybe some really cool women as well in a vegetarian co-op and I did and I sort of had a food awakening at that point.

3:09I learned about healthy eating and natural foods and organic foods. I learned how to cook while I was there And for the first time I realized, really, I mean, I knew, because I'd always been an athlete. So I knew that if you worked out, you'd feel better. But it never occurred to me that what you ate, I always thought of that was more like fuel, right? Fuel the machine. But it's actually obviously a lot more complicated than that. And your health, your vitality, your energy levels are very dependent upon what you ate. And I learned that for the first time when I moved in that cooperative. it. So I became the food buyer for that cooperative.

3:48And then I went to work for a small natural food store, learned about retailing, came home to the co-op and talked to my girlfriend one night and said, Renee, what do you think if we open up our own store? And she loved that idea. And so we did that together and co-founded the company back in 1978. Yeah. Wow. And yeah, you guys are massive. It's very, very well known. About the way, part of success, if you're going to build something great, I mean, part of it is your creativity and having the right idea and building a good team and all those things that we'll probably talk about. But it didn't hurt that the world was kind of starting to move this way and we were just early to the party.

4:35I mean, you could say that's true of almost all the really successful entrepreneurs. I mean, Bill Gates got into software right when there was a personal computer revolution. And Steve Jobs, you know, he wasn't the first personal computer, but he was the one that saw the potential of it being such a great tool. So I think that's true for so many stories. Yeah, that's true. So you wrote a book that's called Conscious Leadership. Funnily enough, Conscious Capitalism, when I went out and started Founder, one of my mentors, he said, yeah, look, this is a big thing. You've got to read this Conscious Capitalism book.

5:18And they've used a lot of the principles behind Conscious Capitalism for their company. You might know it. Do you know Intrepid Travel? I've heard that name before, but I don't know the business. Yeah, they're one of the largest adventure travel companies in the world. So, yeah, that book. Are they an Australian company? Global, but based in Australia. Yeah, one of the HQs is in Melbourne, Australia. But yeah, so well-known book. You're releasing a new book called Conscious Leadership. What compelled you to write that book and what is the premise? Well, conscious capitalism basically has four pillars to it.

6:01So the first pillar is purpose. Every business, every organization has the potential for a higher purpose that besides just maximizing profits, making money is essential to business, but it doesn't logically follow that that's why the business exists. We think that's a myth and we argue against it in Conscious Capitalism. Secondly, there are stakeholders in a business and they all matter and they're somewhat interdependent. customers, employees, suppliers, investors, the communities that we're part of, they're all trading with the business voluntarily and they're all gaining from it. So a stakeholder philosophy is a second pillar of conscious capitalism.

6:48Third is we need a different kind of leadership, one that is more of a servant leader that serves the higher purpose of the organization, serves the stakeholders, is attempting to make the organization, optimize the organization. And fourth, we need cultures that human beings can flourish in. That'll lead to more successful business, but we spend a lot of our time of our lives at work. It might as well be something we enjoy doing and that we don't hate it. I mean, a lot of statistics show that only about 30 % of the people that work in a job, at least in the United States, are particularly engaged in it.

7:29It's just a paycheck for them. And so creating a conscious culture is one where people flourish. So you've got purpose, stakeholders, conscious leadership, and purpose. And that was a very successful book. It's been printed all over the world. And when I go talk about it, I got a lot of questions about the leadership. Because who's going to go here, somebody, a business guy talk about conscious capitalism are mostly people that are leaders and interested in how they can be more effective leaders. And we had two chapters in the book on leadership. And that's where I got the most questions. And so I realized, you know, we could go so much deeper on this than we went in conscious capitalism.

8:11So we basically just took that pillar of conscious leadership and we've expanded it into book form and gone into much deeper. It's something I felt like I had to write. It's part of why Whole Foods has been successful. And, you know, it's my philosophy of how you build a company, how you lead a company. I mean, the very thing that your organization founder is trying to do, we talk about that in the book. Yeah. And I'm curious, during times like these, you know, we're both in lockdown. Looks like you're at the office. I'm at my office. I am. but yeah so it's starting to lift it's late may 2020 like this is like history in the making um i'd love to hear like what is your take on leadership how do you lead a company during times like these i'll tell you it's been difficult it really is um and old foods is part of amazon now so what we've learned is that there's probably not a company in the entire world that's more under the microscope than Amazon.

9:17I mean, maybe Apple or Google, but Amazon's right up there. They are just everything Amazon, the media just pours over. So we've learned the hard way that as Whole Foods now being a subsidiary of Amazon, that anything Whole Foods does that might reflect badly on Amazon or the media could blow up and make a big deal. I've got to be careful. And so that means a lot of things that Amazon does, they want Whole Foods to do. And a lot of things they don't do, they don't want Whole Foods to do. So because of the potential blowback that can occur, which makes perfect sense if you think about it. So that's been difficult in this crisis because we have been, we have to think about what's best for Whole Foods.

10:08But we also, at the same time, have to be thinking about what's good for Amazon. on. And when you're in crisis, like we are, I mean, think about it. Our stores, all our team members are wearing masks every day. We're disinfecting the stores. We're giving masks to customers, encouraging them to wear masks. And we're social distancing six feet apart. That's not the way Whole Foods was just a few months ago. We were packed stores and we limit the number of people in our stores, so people won't get too close together. It's been very crazy. Our prepared foods, stuff we would sell like our salad bar, hot big bars, those have been shut down.

10:49So it's, and at the same time, our sales have exploded in other categories. So we've had supply chain challenges. So it's about how do we keep our customers healthy? How do we keep our team members healthy? How do we get the supply that we need to sell to our customers? And also So home delivery and pickup, those have exploded. I mean, it got so, I mean, it went up, you know, 400, 500 % from what they were a year ago. And systems weren't geared up to handle that. So we had to get over some crashes. We've had to queue people up before they could become customers. And adding additional capacity on, it's been, I mean, it hasn't been fun, except for one thing.

11:35we are in business. We were not shut down. So I don't think people that were offering restaurants or businesses that government shut down will have much sympathy for me talking about how stressful it's been because we've had a busy time. It's just sort of every day is a new crisis. Something's going wrong somewhere that we have to deal with. But I suppose I prefer that to basically sitting around twiddling my thumbs, hoping the government will let us open. So obviously, you guys are in kind of the 5 % or 10 % that have been able to thrive just due to this economic change. I mean, thrive, let's think about that for a minute.

12:23Our sales are doing really well, but we're not making any money. It's all going into just like, oh, yeah, no. We've raised our pay. We raised our pay$2 an hour up to a high minimum wage, starting pay of$15 minimum. Plus, we've... Think about this for a minute. Just think about it. Just give you an idea. So we have 100 ,000 team members that work for our company. And we give a... You get a new mask every day or multiple masks because maybe you're going to throw that mask away. You might use three or four masks. So think about it. Each mask costs us about 80 cents. Every single day, we're going through several hundred thousand masks at 80 cents a pop.

13:06Every day, every single day, just on mask alone. And then we're having to, we give an extra two weeks of sick pay. Anybody that contracts COVID-19 or has to quarantine. So we're paying that time for people as well. And the amount of powerful disinfectants we're using to sterilize our store every day, when Amazon just reported their quarter, for example, they had a record sales, but Jeff Bazelis announced we're going to spend$4 billion next quarter trying to keep our stores and our facilities safe or safer. So it's a profitless time because of the additional costs that were unanticipated. Are you hesitating to take the next step in your e-commerce journey?

13:57Founder Plus has you covered. With proven frameworks tailored to your business needs for fast results, a supportive community of over 30 ,000 like-minded entrepreneurs, and weekly live mentorship sessions, Founder Plus is your key to success. Try Founder Plus today for just$1 for seven days and start building your dream business with confidence. You can visit founder.com forward slash start dollar trial or click the link in the description to claim your trial. Yeah. Wow. You wouldn't think that, right? No, you wouldn't think it, but that's the reality. I think that's true for a lot of businesses, by the way, not just Whole Foods.

14:32I think a lot of the supermarket companies are experiencing similar things, higher labor costs, higher cleaning costs. Some parts of their business are doing well. And also delivery is a less profitable business when people shop in the stores because you do so much labor for them. You're picking it in the stores and you're packing it and then you're delivering it to somebody's home. And if you're a prime member, you're getting all that service for free, part of your membership package. So we've seen sales transfer over from in-store to more delivery and pickup. So it's just been a very interesting time.

15:16Without a doubt, there's been no year of my life like 2020. I think I can speak for almost everybody on the planet, right? Yeah, no. It's a weird time. Yeah, no, it's been crazy. So coming back to the leadership piece, I guess, how do you leave during a time like this? Should you be open and honest with how the business is going with your team? Yeah, absolutely. You have to be. You have to tell. Well, I mean, I think you should be open and honest with your team all the time. I think if you, that's just fundamental integrity, which is one of the leadership principles we talk a lot about in conscious leadership.

15:55If you want to build trust with people, you have to tell them the truth. Sometimes you can't tell people things because the media might blow it all up and make it into a big deal. So sometimes you have to be a little cautious in what you share, but you don't ever deceive people. because telling lies is just, you know, it's unethical for one thing, but it also destroys trust. And if you want to be a good leader, people have got to trust you. They've got to believe that what you say is true. And should you open up like how honest and open should you be around, you know, profitability, revenue? Because you don't want to scare people either, like they might be looking somewhere else or looking for another job or no i mean and our sales are strong and we're not we're not laying any but we're not laying our people off um in fact we give unlimited call outs during this time that's so anybody that doesn't feel like coming to work for any reason maybe they got a child care issue maybe they're just nervous about uh COVID-19 could be for any reason at all.

17:05It's want to take a day off. We're having unlimited call outs. And so we value our team and we're holding everybody together. Fortunately, our sales are strong enough to be able to afford to do that. So that's, I think, a lot of companies that have been shut down, they've had to lay people off. They've had to, at least temporarily. And I know that we haven't had to do that. I'm thankful for that. And what are some of the other principles from your latest civil servant leader that people, that are relevant to people? Conscious Leadership. That's the title of the book. It'll be coming out on September 15th.

17:49That's the publication date. So some of the other principles. So one is integrity and also purpose. I talked about purpose. I think a conscious leader has a strong sense of purpose, and he or she is able to communicate that purpose to people on their team. And purpose tends to unite people together. It brings them together. People need to feel that their work is making a difference in the world, that they're creating value for other people. in any business, I mean, practically any business, you could think of some exceptions, but 99 % of what a business does is creating value for other people.

18:32So your purpose lies in your value creation, whatever that might be. I talked about integrity. Also, the second chapter in the book is called Lead with Love. And we think love is very important in business. It's in the closet. It's in the corporate closet for the most part, primarily because most of the metaphors people use to think about business are hyper-competitive metaphors, whether they're war metaphors, let's roll over those guys, let's kill them, destroy them, or they're sports metaphors, we're winners, they're losers, we're the champions. or their Darwinian metaphors, survival of the fittest, only the paranoid survive, it's a jungle out there.

19:21And those metaphors, if we think of business that way, then we don't really have a place for love. And yet love is the glue that holds the organization together. Love is what will keep customers coming back again and again and again. So we think love needs to be let out of the corporate closet. And it requires us to begin thinking about the business differently, not in terms of those hyper-competitive metaphors. It's not that competition doesn't exist in business. Of course it does. It's not that you can ignore that. But it doesn't mean that's the definition of what business is, winning or chilling the other guy, the competitor.

20:00It's about creating value for your customers. And you provide jobs for your employees. you trade you have suppliers that you're trading with you're creating value for them and they're creating value for you you're have investors that you're trying to return give good returns on their investment for you have communities that you live in and you're you're a good citizen in those communities we have these greater responsibilities so love is at the essence of what business is and yet business is is mis is disliked and mistrusted by most people because it's seen as just greedy and selfish and exploitative, that it's a bunch of greedy bastards running around just lying in their own pockets.

20:41And so businesses oftentimes condemned that somehow or another are almost unethical. And so getting love and putting it at the forefront of what you're doing, we think is a very important aspect of conscious leadership. So those are three qualities. And we talk about looking, for example, I'll give you a fourth one, finding win-win-win solutions. We have a tendency to think win-lose. I win, you lose, or you lose, I win. But business is not about that. It's really not. That's getting back to that competition metaphor because customers are trading with you for their own benefit, right? Nobody takes a gun and sticks it to their head and says you have to trade.

21:25They're doing it because they believe it's in their best interest to do so, right? Same thing, nobody forces people to work for you. If they don't like their job, they can go find another job most of the time, maybe not right now in this massive layoffs that have occurred, but in general, there's competitive alternatives out there. So if you don't pay your people well enough, you don't treat them well, they have alternatives in the marketplace. So you have to create value, a win for the employees, win for the customers, win for your employees or team members at Whole Foods with Calm. Suppliers, they don't have to trade with you either, and you don't have to buy from them.

22:01So you make a trade and you're both winning. So business about win, win, win. And once you start to use that as a framework, it almost serves as a complete ethical framework because you can begin to think in every situation, is anybody losing here? Are any of my stakeholders losing? And if somebody's losing, then maybe you don't have the best strategy there. What's a strategy that everybody can win at where everybody's better off for these trades being made? So a conscious leader is always looking for that win, win, win. Good for you. Good for me. Good for the larger community that we're all part of.

22:41See, conscious leaders, I can keep going on. Conscious leaders got to think long term. just making the short term win will not pay off for very long. You have to manage your business for the long term. And by the way, that's one of the things I love about being part of Amazon because they think really long term. And that was when Whole Foods was independent, but a public company, it was a lot harder. We were under that quarterly earnings pressure that you hear so much about. It really is real. when you say we say long term how long term and like would be difficult for many companies during times like this right well you can't ignore the short term it's not like he but i think you have to make decisions that if you sacrifice the long term for a short term gain it'll eventually blow up on you so you have to be looking for strategies that win in the long term that don't kill you in the short term.

23:48So you make investments that you think will pay off in the long term. For example, right now, in this very moment, we're living in what used to be considered the long term. And the companies that are really successful today made investments in the past that are really paying off today because they invested for the long term. And I've seen this for companies. A lot of companies go public. They start chasing those quarterly earnings, trying to get the stock price up, and they start making bad long-term decisions. Oh, we can't miss the quarter here. So they do something that they know is stupid to do over the long term, but it's going to help them right now get past this earnings.

24:32They might sell off a good business, make a profit so they can report that on their income statement. But that was a good business. They're not going to have those profits in the future. So you got to think long-term. And we go into that in some depth. And we give a lot of examples of how thinking long-term pays off. And you got to continuously learn and grow. That's another principle that we talk about in the book. that in some ways you can view life as an opportunity to continue to learn and grow. Every day, if we're not learning something new, if we're not growing, if we're not taking advantage of the opportunities, then I think we're falling behind.

25:15Life is this adventure. I see life as an adventure. This will come natural to people from Australia. Life's a darn adventure, and we should make the best of it. And the best way to make it an exciting adventure is to keep learning, Keep growing. Keep evolving. Keep challenging yourself to be better and better and better. It's continuous improvement. And since everything we do in business, we do with a team, then one of the chapters we have in the book is how do you upgrade your team, constantly upgrade your team? How do you develop the team and make it better and better and better? Because ultimately, you'll be no better than your team.

25:52If your team sucks, so you're going to suck too. and if your team is really good, if you hire great people and make sure they're well-trained and you empower them and they're creative, they make you look really good. A lot of my success in business has not come from me being some kind of specially wonderful genius. I just hired a lot of great people, and together we've built a really successful business. Yeah, I agree. Let's talk about team because I think that is something that a lot of people don't talk about. They talk about the shiny tactics and strategies, but what have you done over the years to attract great talent?

26:34And what do you look for in a person? Do you have a set of rules or principles when you're looking to hire? I do actually. And I've gotten better at it over the years. Like any skill, the more you practice it, the better you tend to get. I will also say that almost all the worst mistakes I've made in business, not all of them, I made some other boners, but most of the worst mistakes were people, people, bad, bad people decisions, promoting the wrong person or hiring the wrong person or being slow to recognize that somebody wasn't working out and keeping them too long. I think those are the, those are the tough decisions that a leader has to make.

27:17but what is it in answering your question I think again there are several things that I look for first since I think purpose is so important I am looking for people that tend to align with the purpose of the company that have passion for it that this is something they're not in it just to say wow I'm going to work for Whole Foods this is a step up for me I'm going to make more money I'm looking for people that are excited about what Whole Foods is doing, what our purpose is, what our mission is, and they want to get on board and help us fulfill that mission better. So I'm looking for purpose. Obviously, I think you got to look for intelligence, not just analytical intelligence.

28:01I consider you got to hire smart people. That's kind of an anti to get into the game, but also emotional intelligence, because increasingly it's all about relationships and, you know, people that are jerks, they're not going to fit well in your culture. By the way, that adds to the next thing, which is, will they be a good cultural fit? Because I found the culture in organizations a bit like an immune system. People that don't, that are in the immune system, when something comes into the body that the body doesn't, that recognizes as an invader, the immune system is activated to destroy the invader.

28:40Similarly, cultures will begin to try to repel elements that come into it that are dissident to the culture. It tries to protect itself. So cultural fit. I did something recently. I did a calculation. that the last 16 executives that I've hired at senior levels, eight of them washed out because of culture. Half of them, only 50 % made it. And they were all smart. And they all were passionate. And a lot of them were aligned with our purpose. They just didn't fit into the whole business culture. And the culture rejected them and pushed them out. So cultural fit is very important and finally i'd say i look for integrity if you can't trust somebody they'll screw you in the end eventually so somebody that's that's honest truthful and you know wants to do the right thing and uh uh if you surround yourself with people that will cut corners eventually they're going to cut a corner on youtube and hurt the organization yeah i love that um you talked about something that I think will resonate with leaders and that is keeping someone too low because it's it's the hard thing it's you know the hard thing to to make that realization what like what do you do there like how how do you avoid that that's such a good question Nathan and uh any organization that's successful and growing will outgrow some of its people that's just that's just inevitable and uh what i've learned is that oftentimes somebody gets promoted because they were doing a good job right at their previous job so they get promoted but then they're not doing such a good job they've gotten promoted over their heads and what what the organization generally does is fire them and i just think that's such a such a terrible thing Here's somebody who's worked for you for 10 or 15 years or whatever.

30:50They've done a good job. They've been promoted maybe multiple times, but they've not gotten a job now that they can't quite handle. You can work with them. You can try to help them do some leadership development work with them, or maybe you get them a coach, or you send them to a seminar to train, but even then, maybe they can't cut it. Well, if they've been loyal to the company and they've worked hard, the rational thing to do is not toss them overboard, but to recycle them. Find another job for them where they can be successful again. Because they're loyal, they care about the company, they're aligned with your culture and your purpose.