Self-Taught MBA: Trickle-Up Economics
What do the nation of Ecuador and Ben & Jerry's ice cream company have in common? Using trickle-up economics to create transparent pay policies and to solve the wage disparity problem.
When Ben Cohen and Jerry Greenfield set up their iconoclastic Ben & Jerry’s ice cream company 40 years ago, they ushered in the age of socially conscious and employee-empowering policies that have become the employee-management hallmark of new economy success stories like Google, Facebook, and Whole Foods.
From chief executive to floor sweeper, the pay ratio of the highest salaried executive and the lowest wage earner at Ben & Jerry’s would not exceed five to one. The countries of Ecuador and Mexico follow a similar scheme, whereby government salaries are set as multiples of the minimum wage. In Ecuador, president Rafael Correa, a University of Illinois trained economist, earns $4,500 a month, 12 times the minimum wage.
Today’s Ben & Jerry is owned by Unilever USA, and while the corporate behemoth maintained the wacky flavors, including Rocky Road and Bonnaroo Buzz, they abandoned the founder’s idealistic wage scheme. Still, no one denies that by setting policies communicating a set of corporate values that empowered employees, delighted customers, and impressed socially conscious investors, the two, counterculture confectioners from Burlington, Vt. (Bernie Sanders territory), parlayed a single ice-cream shop into a multinational corporation. Eat our ice-cream, save the world, resonated with customers.
Empowering Work Environments
If you shop at Whole Foods, you have no doubt noticed the cheerful, high energy staff, eager to help, and seemingly overjoyed to be at work. Now imagine your employees conveying the same spirit of delight and devotion to your clients. Have you ever wonder how Whole Foods manages to achieve this level of employee satisfaction in a low-wage business like retail grocery?
In “The Decoded Company: Know Your Talent Better Than You Know Your Customers,” a book on innovative management practices by entrepreneurs Leerom Segal, Aaron Goldstein, Jay Goldman, and Rahaf Harfoush, the authors analyze the policies that served to make Whole Foods what it is today, a dominant player in the organic foods industry with annual revenues exceeding $15 billion.
Since 1986, Whole Foods has established complete transparency with employees. Anyone can look up any other employee’s salary, including the boss. The company encourages open conversation about wages, to promote competition within the company. Wages and benefits are good, by grocery store standards, with entry level employees making double the minimum wage. But the company does not have a one-wage for all policy.
Employees are compensated per individual, and team results. CEO John Mackey does not shy away from wage conversations. In “The Decoded Company,” he is quoted saying, “I’m challenged on salaries all the time. How come you are paying this regional president this much, and I’m only making this much?’ I have to say, ‘because that person is more valuable. If you accomplish what this person has accomplished, I’ll pay you that, too.'”
The company contends that total transparency – a wide open financial reporting system available to all – has not only helped employee morale, but provided useful data that allows management to communicate clearly the “direct relationship between an individual’s decisions and their impact on the business,” Mackey is quoted explaining.
You will find plenty of advice columns suggesting you must sell clients an “experience,” and not simply construction services. Yet so much of client’s experience is the interaction with your staff, and not just the management systems and design options you offer. Find ways to maintain employee trust through equitable compensation and transparency, and they may reward you with an attitude that delights your customers.