Congruence Model: Whole Foods Market

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Congruence Model

It is important to evaluate a business on some sort of business model because it helps to organize and perform an organizational diagnosis in all of the most important aspects of that business. In the case of Whole Foods Market, there is plenty to analyze. Recently, their sales have been receiving a hit, but there still is no end in sight for the giant organic grocery store chain. “The models that individuals use influence the kind of data they collect and the kind they ignore; models guide people's approach to analyzing or interpreting the data they have; finally, models help people choose their course of action” (Nadler & Tushman, 1980, p. 36). The importance of business models is in that structure helps for business to run more smoothly, as a unit and on each individual level of operation.

The congruence model works on three levels: organization, group, and individual. It is created this way in order for there to be an open, interactive system for all levels of a company to work together for the same goals. Congruence “is a measure of how well pairs of components fit together” (Nadler & Tushman, 1980, p. 42). Of course, different levels will have to meet separate goals, but an open system is a set of unrelated elements, and they each affect the other. “An open system is one that interacts with its environment; it is more than just a set of interrelated elements” (Nadler & Tushman, 1980, p. 36). Organizing Whole Foods Market, as a business, into the Congruence model is a perfect fit.

Outputs

Whole Foods has been a primary supplier of organic groceries for decades. The founder, John Mackey, saw a vision of a model business that both earned a profit and upheld a responsibility to benefit society at the same time (Daniels Fund Ethics Initiative, n.d.).These services and products are well organized, and the meaning of this system of organization measures the performance of the company itself. These include sales, net profit, return on sales, return on assets, market share, customer satisfaction, and so on. According to Nadler and Tushman, “outputs are what the organization produces, how it performs, and how effective it is” (1980, p. 40). There have been dips, but Whole Foods has had steady growth, and has stores in both the United States and the United Kingdom (as of 2007).

As of 2013, Whole Foods has seen steady growth. As of November of 2013, share earnings have increased from 5.5 percent to 7 percent, with price per share up to $1.65 to $1.69, although it was forecast that shares would rise to $1.72. “Comments from one Austin, Texas-based Whole Foods reported a 7.1% rise in fiscal fourth-quarter profit. But shares fell 8.9% to $58.75 in after-hours trading. Whole Foods has been working to shed its reputation as an overpriced grocer, so that it can appeal to lower-income consumers” (Gasparro, 2013). The outputs of reaching out to customers and caring for employees are beneficial to the life of a business, and Whole Foods Market sees this importance.

Group Ethics

There are several ways that Whole Foods Market, as a company, identifies with certain groups. As with any business, it is important to measure demographics, and measure the outputs of such groups. It is helpful to measure the ‘worth’ of these groups. “In a period of time when green is on everyone’s mind, it seems fitting that Whole Foods Markets are popping up with their distinctive green signs in neighborhoods across the country” (Daniels Fund Ethics Initiative, n.d.). Whole Foods, once known for being overpriced, is branching out to lower income groups as well as people who are recently ‘going green,’ which is a popular trend right now. It is important for Whole Foods to catch the eye of the group following this trend because it benefits business.

Recently, to appeal to other groups of people, Whole Foods has started offering different incentives to allow others, who may not be in that primary group of customers, to be able to afford and shop there regularly. “They have started offering more discounts, value-oriented brands, and matching lower prices of its competitors such as Trader Joe's. For the period ended Sept. 29, Whole Foods reported a profit of $121 million compared with $113 million a year earlier” (Gasparro, 2013). Whole Foods Market is opening up more stores and showing continuous documented growth, but there are concerns that ‘cannibalization’ may be eating into its comp-store sales have been rising. However, despite such concerns, there is talk that these changes are only temporary and most are still confident in the long-term growth of Whole Foods (Gondo, 2013). Whole Foods is strengthening its need for group demographics and is using this to their advantage.

Functions of the Individual

Although sometimes forgotten, the individual – be it customer or employee – is a very important factor in the management of a business like Whole Foods Market. There are several key functions of the individual, and the ways that they can help produce output. In turn, these outputs almost directly contribute to the group outputs, and how they measure up to individual performance.

Two very important aspects of the function of the individual lay in the customer and the employee. These individuals help to drive sales and service at Whole Foods Market. Ultimately, without the customer, there would be no upward climb in stock, no reason to reach out to other groups of shoppers, and no reason to actually run their business at al. Customer satisfaction is very important for Whole Foods:

“Although customers are considered to be the company’s highest valued stakeholder, Whole Foods has adopted a stakeholder orientation that focuses on the needs of its stakeholders, including its employees and the community” (Daniels Fund Ethics Initiative, n.d.).

Employees that create a difference as an individual are a cashier, manager, and employees in marketing or public relation. These employees have very important jobs at what can be called the ‘front lines’ of the business, on a daily basis. Customer service employees like a cashier and manager deal directly with Whole Foods shoppers and make sure that they are satisfied and ensure that they come back time and time again. Marketing and public relation employees are also very involved in the ‘front lines’ activities, also dealing with the public to ensure Whole Foods’ name is polished.

Interactions of Outputs

It is important to evaluate how the outputs interact at different levels, and with each other. As Nadler and Tushman note in their model, businesses have several moving parts and require for positive interactions in order to succeed. The interactions of the moving parts as analyzed – organizational, group, and individual – are important for the outcome, the outputs, made by the company.

In spring of 2013, it was reported that Whole Foods Market shares went up by 8 percent in after-hours trading, after the company had posted their quarterly earnings that had gone above expectations. Revenue in the 2013 fiscal year was 13 percent higher than fiscal year 2012, and that meant a rise 6.6 percent in same-store sales. “The company also announced a two-for-one stock split that will increase the total shares of common stock outstanding from roughly 185 million to 370 million” (O’Toole, 2013). The congruence of Whole Foods market is at a medium level, but may grow to a higher point if they are able to keep up with this ‘cannibalism’ that is keeping them out of trouble. They had a good fiscal year in 2013, and it is very possible that they will only continue growing and leave the tough spots behind.

Relatively, congruence involves a feeling of consistency, a fit that involves each input of an organization. The congruence between the organizational, group, and individual levels at a company adhere to a certain degree at which the needs of the customer and the company are met and are consistent. (Nadler & Tushman, 1980, p. 40). Whole Foods Market has always been an organic grocer, but was once very expensive and exclusive. Of course, they cannot beat the price of bananas at Wal-Mart, but it is important in this economy to not over-reach pricing and product. The Congruence model pushes for the interactivity of each level - organizational, group, individual – and Whole Foods Market has begun to truly apply those principles to the way that they run business.

References

Daniels Fund Ethics Initiative. (n.d.). Whole Foods strives to be an ethical corporate citizen. University of New Mexico. Retrieved from http://danielsethics.mgt.unm.edu/pdf/whole-foods-case.pdf.

Gasparro, A. (2013, Nov 07). Earnings: Whole Foods lowers sales outlook. The Wall Street Journal. Retrieved from http://search.proquest.com/docview/1448960447?accountid=458

Gondo, N. (2013, Dec. 12). Whole Foods' sales cannibalization seen as temporary. Investor's Business Daily. Retrieved from http://search.proquest.com/docview/1467538324?accountid=458

Nadler, D. A. & Tushman, M. L. (1980) A model for diagnosing organizational behavior. Organizational Dynamics, 9(2), 35-51. Retrieved from http://www.cumc.columbia.edu/dept/pi/ppf/Congruence-Model.pdf.

O’Toole, J. (2013). Whole Foods shares surge as growth continues. CNN Money. Retrieved from http://money.cnn.com/2013/05/07/investing/whole-foods/index.html.