Here in California, we are in the midst of a nasty supermarket strike. Trust between management and employees seems irreparably broken and I’m not sure but what the trust between stores and customers might also be similarly damaged.
The strike has gone on for four months and it’s ugly. I live in a rural area that, because of the skiers and vacationers who stream through town, is fortunate enough to have a Vons larger than a town our size would normally have. It’s a pleasant store: bright, clean, friendly service … a nice place to shop … until the strike. For the past four months, I’ve heard more than I ever wanted to know about low wages (average: $15 per hour), limited hours (average: 24 hours) and health benefits (paid in full till this contract negotiation). The losses are enormous with estimates of $1 billion on the part of the supermarkets and thousands of employees who’ve had to survive four months, including the holiday season, without paychecks.
Read on for a different way of doing business ...
I have no experience in labor issues, but what I have not understood since the beginning was the lack of serious talk. This view was echoed by Ellen Anreder, spokeswoman for six of the seven striking UFCW locals who was quoted in an article by the San Bernadino County Sun as saying she was "profoundly disappointed" the informal talks were not leading to formal sessions. "Every day that we go without an agreement, there are 71,000 people out of work," she said. "I don't understand why we are not talking around the clock, 24 hours a day and seven days a week, until we have an agreement." This lack of sincere negotiation and the fact that the stores rejected a proposal to submit the conflict to binding arbitration seems to support the rampant rumors that the stores are trying to break the union.
Suddenly my local supermarket that I felt a sense of ownership about now seems somewhat sinister, like a respected member of the community whose dysfunctional family secrets are published in the local paper.
The real shame in this whole thing is that there’s a chance that innovation could have prevented it. This was highlighted in a Los Angeles Times column by James Flanigan who compares the supermarkets with Wal-Mart and Costco. The supermarkets are pointing to Wal-Mart as the bad guy because their labor costs are lower, which allows them to offer lower prices. However, equally successful Costco pays higher wages and benefits than either Wal-Mart or the supermarkets. Even union leaders hail it as the best in the retail industry. Costco’s employee turnover is 20% -- one third of the industry average, a factor that some industry experts state could save 20% on labor costs for every 10% reduction in turnover. Plus Costco is refusing to follow the other corporate fad of offshoring jobs such as call centers.
Why? CEO Jim Sinegal says it’s not altruism, “It’s good business.” Costco developed a strategy that fosters higher employee productivity and yields enormous customer satisfaction and loyalty. Sinegal also states, “I don’t see what’s wrong with an employee earning enough to be able to buy a house or having a health plan for the family. We’re trying to build a company that will be here 50 years from now.” Which highlights another ingredient in this stew: Wall Street's short term mindset. Because Costco makes 1.7 centers per dollar of sales compared to 2.5 cents for the supermarkets and 3.5 cents for Wal-Mart, Wall Street considers this a shoddy performance. Bless Sinegal for staying the course.
For most of us who are trying to honor the picket lines at the supermarkets, one of our coping mechanisms has been Costco and they are benefiting to the tune of $40 million per month. If and when the strike ends, my guess is that some of that shopping will stay right where it is and never go back to the supermarkets that have broken our relationship.
The bottom line is always important, and the bottom line here is that perhaps what’s wrong with supermarkets isn’t employees’ salaries but rather the lack of creative thought in management, and, very probably, a management team whose compensation is based on short-term Wall Street performance rather than a more long-term human, and humane, approach.
It might be also good to remember one of the principles of innovation: innovation only comes from PEOPLE. I would doubt that Vons and Albertsons will see much innovation from their frontline employees anytime soon.