Culture leads to innovation

Sendik’s game plan to compete with larger grocers

What do you do if you’re in a highly competitive industry and you are taking on giants who have the advantage of pricing because of their size?

Sendik’s Food Market, since its inception in 1926, has competed with giants in the local grocery industry including: Kohl’s, Roundy’s, Sentry and Jewel Osco; and more recently Amazon, Whole Foods, Walmart, Meijer, Costco, Pick & Save (Kroger), Target, Trader Joe’s, Menards and even Fleet Farm!

Some of those large stores have come and gone, but Sendik’s is still standing in the Milwaukee grocery scene, and is expanding the number of stores it owns.

For Sendik’s, competing on price alone is mission impossible against the giants. So, Ted Balistreri, current family co-owner with his siblings, decided to focus on culture. That sounds almost amorphous. How does one measure culture?

But there’s an old saying, “culture eats strategy any day.”

Sendik’s developed a game plan that your company can also follow if you face a similar challenge of trying to compete in the land of giants:

1. Be clear about your vision and why you exist.

The Balistreris set a goal for what their company culture should look like. They wanted to create a “family feel” in all their grocery stores. That family feel would become their distinguishing brand promise.

2. Substitute coaching for the traditional performance review and merit system.

HR executives across the nation consistently rate performance reviews tied to merit increases as uniformly unpopular with executives and the employees being rated. And yet, they continue to do them annually.

Ted and his team perceived early on that ranking employees every year is not a way to build a family culture. There is academic research that supports what they believe.

In his book “Punished by Rewards,” Alfie Kohn laid out the case that statistics show incentive plans, grading people, and dishing out gold stars act as disincentives for employees.

Just think about it. Have you ever watched a child learn to talk? Did you have to bribe them or threaten them to learn probably one of the most complex skills they will learn in a lifetime?

If one of your children misbehaves do you tell them that you will discuss that with them at the end of the year during their annual performance review? If you wouldn’t do that to your children, why would you do it to adults?

They decided to substitute reviews with coaching, giving the employee an opportunity to meet with their coach and discuss their goals and the skills they need to succeed as an employee and advance their careers at Sendik’s.

Compensation is not determined by performance reviews but by the market for the positions, which therefore encourages employees to work with customers and not focus on pleasing the boss.

This is consistent with the advice of the great Dr. Edwards Deming who was responsible for Japan’s post-World War II success when he advised substituting leadership for the merit system. He made clear you cannot have quality and a merit system at the same time.

In his book “Out of the Crisis,” Deming actually describes the performance rating system as a disease. It may be alluring because the claim is that it motivates people to do their best for their own good. But according to Deming, the effect is exactly the opposite. Everyone propels themselves forward, striving for their own good, and the organization is the loser.

They are not alone. Major employers such as Adobe and Deloitte have abandoned the performance review and merit system. Google, Accenture and Microsoft have substituted new ways of working with employees.

3. Set exciting goals and be transparent about progress toward those goals

Any kind of change to the status quo is always problematic because people resist changing habits. To get people to rally around change it is necessary to set an exciting goal that people can rally around. Sendik’s set a goal of expanding the number of stores in this metropolitan region and then were transparent about progress toward those new openings.

Ted feels strongly that it’s critical to “over communicate” those goals to employees and get their feedback on the progress being made.

Conclusion:

Culture may sound like it is soft, but it’s just the opposite. It demands that managers and leaders become coaches and recognize the number one job is to help their employees succeed in accomplishing a common goal. This is not for the fainthearted.

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Dan Steininger
Dan Steininger is the President and founder of BizStarts. He is also the President of Steininger & Associates. The firm focuses on teaching the tools of innovation to drive growth for companies in all sectors of the economy. Steininger is the former CEO of a major financial institution and a graduate of Boston University Law school. He has published in scholarly journals; appeared on Wall Street week; and been covered by the New York Times.