The Anarchist's Cookbook

Ten years ago, Mackey was worried about a lot of things with what then seemed like a big ($402 million in sales, 35 stores) company. What worried him most was that someone much bigger would catch on to the potential of natural food, and simply wallop him. "If someone had been ruthless enough, or opportunistic enough -- or, really, just smart enough -- we could've been crushed," he says. "But I don't fear that anymore. We're not that vulnerable anymore. Our culture is too strong. Our locations are too good. And we know so much more than we used to."

http://images.fastcompany.com/magazine/84/wholefoods_duck.gif) no-repeat top center; padding-top: 45px;">Just yesterday, it seems, Whole Foods was a cute, engaging market, obsessed with organic and natural foods, and with a puzzling egalitarian work culture. The customer-service staff had piercings, tattoos, spiky hair -- and an apparently limitless patience to talk about the origins of the fresh mozzarella cheese, or the ingredients of the orzo salad, or the virtues of various homeopathic remedies.

The company had a written "Declaration of Interdependence" (1,571 words, 249 more than the Declaration of Independence). It had a set of written core values ("satisfying and delighting our customers," "team-member happiness and excellence"). And most striking of all, even for a small company, it had a set of quirky management rules that made Whole Foods an odd but effective workplace.

Each store had a book in the office that listed the pay of every employee for the previous year. The book was available to anyone -- and was especially valuable if you were promoted or if you relocated, and wanted to see how your pay compared with your colleagues'. The pay book, surprisingly little used, set a tone of what Mackey called "no secrets management."

Every store was divided into about eight functional teams: You were hired to the seafood team, or the prepared-foods team, or the cashier/front-end team. But you didn't just get hired. You got hired provisionally. After four weeks of work, the team you had joined voted whether to keep you; you needed a two-thirds yes vote to join the staff permanently.

Additional pay (beyond base wages) was linked to the teams, so people were careful about who got their votes. Thirteen times a year, Whole Foods calculated the performance of the people on each team in every store. How productive had the team been against goals? Teams that did well shared in the profits -- up to $1.50 or $2.00 extra an hour was paid right back to team members, every other paycheck. So people didn't want buddies on their teams; they wanted workers -- people who were going to make them some money.

Individual team leaders made decisions about what to stock in their stores, in consultation with the store team leaders. No one in regional offices or in Austin dictated what would go on the shelves. Stores were encouraged to buy and stock local produce, fish, or meat, so long as they met Whole Foods' quality standards. Stores competed against each other in 11 "customer snapshot" reviews a year -- on everything from cleanliness to the drama of the produce displays. Ordinary employees qualified for stock options, and executives limited their own pay to eight times that of the average frontline employee. The company gave 5% of its after-tax profits to charity. And, of course, whenever possible, Whole Foods stocked organic or natural foods.

In 1992, a year after going public, Mackey announced, "We're creating an organization based on love instead of fear."

The question of the 1990s -- after Whole Foods had acquired Wellspring, in North Carolina (two stores); Bread & Circus, in New England (six stores); Mrs. Gooch's, in California (seven stores); and Fresh Fields, on the East Coast (22 stores), while opening an average of five new stores a year -- was about how the whole charming, loving, unlikely enterprise would scale up.

In 2004, with 26,000 employees (twice the number at Apple Computer) and nearly a billion in sales in just the first three months of the year, what has happened to all those Woodstock-generation management ideas?

The question was how a charming, loving, unlikely enterprise would scale up.

Every one of them is still in place -- except that executive salaries are now limited to 14 times frontline workers' pay.

The salary book is still in every store. If you want to join a team -- including, say, the national IT team -- you still need a two-thirds thumbs-up vote. Nonexecutive employees hold 94% of company stock options. And just last year, the National Leadership Team took the health-insurance options to employees for a vote. (Whole Foods pays 100% of the cost for full-timers.)