Connect with Fast Company

Walk into a Whole Foods supermarket and it's obvious: this is not your mother's grocery store. The produce is gleaming, stacked head high, perfectly arranged, each apple stem and celery stalk facing in the same direction. The prepared foods are mouth-watering. The freshly baked breads are irresistible. The youthful staff is cheerful, knowledgeable, eager to answer questions and offer samples. There are no plastic mountains of Coca-Cola, no coupon dispensers for Tide or Crest. There are fact sheets about wheatgrass juice and residue-free beef, and posters celebrating the virtues of sustainable agriculture.

What you won't find on the shelves, however, are the most important items in the store: the business principles by which it operates. Whole Foods Market, Inc. is the largest natural-foods grocer in the United States. It is also one of the business world's most radical experiments in democratic capitalism. Plenty of companies talk the talk of empowerment, autonomy, and teamwork. This company has spent 16 years turning those (often empty) slogans into a powerful - and highly profitable - business model.

It's a strategy that's conquering new markets and clobbering the competition. Over the last few years, Whole Foods has been on a mission of rapid-fire growth. It opened its first store in 1980. As recently as 1991, it had barely a dozen stores in three states. Today it has the clout of a nationwide chain: 43 stores in ten states from California to New England, revenues of $500 million, net profits double the industry average, publicly traded shares, a goal of 100 stores and billion-dollar revenues by the end of the decade.

All this prosperity comes with a purpose. The Whole Foods culture is insistently counter-cultural, its values rooted in the funky corner health-food store in Austin, Texas where everything began. Whole Foods stores don't stock products with artificial colors, flavors, or preservatives; offer as much organic produce as possible; only sell meat and seafood that are free of chemicals and hormones. The company's "Declaration of Interdependence" proclaims an unwavering commitment to diversity, community, and saving the planet. A salary cap limits executive pay to no more than eight times the average wage.

In short, Whole Foods Market is an upscale retailer with a hip twist -- a marketing formula that's worked miracles for "lifestyle" companies such as Ben & Jerry's, Starbucks, and The Body Shop. But how the company positions itself is not nearly as compelling -- or instructive -- as how it manages its operations. Its values are soft-hearted; its competitive logic is hard-headed.

"There's this notion that you can't be touchy-feely and serious," says cofounder and CEO John Mackey. "We don't fit the stereotypes. There's plenty of managerial edge in this company -- the culture creates it."

The Whole Foods culture is premised on decentralized teamwork. "The team," not the hierarchy, is the defining unit of activity. Each of the 43 stores is an autonomous profit center composed of an average of 10 self-managed teams -- produce, grocery, prepared foods, and so on -- with designated leaders and clear performance targets. The team leaders in each store are a team; store leaders in each region are a team; the company's six regional presidents are a team.