The Organizational Structure of Whole Foods Market: An Analysis of Output via the Nadler-Tushman Congruence Model

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Success in any business organization relies on the organizations capacity to adapt to changing market dynamics. As the role of a sea captain is to steer the ship according to the changing winds and tides –The role of the organizational leader is to facilitate effective organizational adaptation to the changing competitive landscape, in order to achieve the desired goals, or outputs, of the organization. Whole Foods Market is a unique organization that has thrived by implementing a unique organizational structure that empowers every employee, or “team member”. As the etymology suggests, Whole Foods Market’s organizational structure operates by the idea that each member of the team contributes to the success of the organization. This essay will define and review David Nadler and Michael Tushman’s congruence model of organizational behavior. The concepts will be applied to the organizational structure of Whole Foods Market, in order to analyze the efficacy of the organizational structure, as determined by the achievement of desired outputs.

Congruence Model of Organizational Behavior

The congruence model of organizational behavior demonstrates the individual, interdependent factors that contribute to an organization. This Model goes beyond the simple hierarchal pyramid of authority that traditionally described an organization. (Nadler & Tushman, 1980), Nadler and Tushman were well aware of the social, intangible components of the individuals within an organization, and adjusted by created a model that accounted for individual and group dynamics within the larger organization in its entirety.

Here is the organizational model in review: Every organization has four primary components: Individuals, tasks, formal organization, and informal organization. The synergetic interplay these four components will determine whether the company will effectively achieve its desired goals. Here is how each of the components interacts with one other: Individuals interact within the organization based on their own personality, skills, and motivation, which heavily influence the informal organization of the company (Gough, 2009). Tasks are the outlined job responsibilities, which are primarily enumerated under the formal organization aspect of the company. The Formal organizational arrangements have an impact on the individual employee, who carries with them their own strengths and personality traits. The individual carries out the assigned tasks, based on their own skills and abilities, but limited by the task given to them. For example, a great writer cannot use the greatest skill if their sole assignment is to move traffic cones. This interplay is how the assigned tasks have an effect on the informal organization of the company. The politics and culture of the company are the interplay between personalities of the individuals and the perceived power dynamics based on assigned tasks, perceived skill, and utilization of said skills relative to their peers, among other dynamic interplays. Finally, the informal organizational dynamics have an effect on the official organizational dynamics, which ultimately produce organizational outputs. All of these factors are largely influenced by the status quo, or Inputs of the organizations – the ‘before’ to the output’s ‘after’. This largely consists of the environment, resources, and history of individuals, which make up the company. Company strategy also plays a prominent role, considering that strategy largely determines roles and tasks, which influence the other three factors of the organization, which determines the output.

The interplay between all of these factors is undoubtedly complex. Each factor plays a role in influencing the other factors. Figure 1.1 is an illustration of the model, which is clearer that a simple verbal explanation in its own right.

Whole Foods Market is a rare example of a company that truly implements the Congruence Model to achieve positive outputs. A vast majority of corporations revert to a hierarchal model of organization, and very seldom account for the lowest common denominator of employees. Minimum wage and the relative inability to create organizational change mark the current state of many positions within larger organizations. The cashier and the janitor are among these positions that have little to no voice outside of the assigned tasks. Whole Foods Market takes the idea that every individual on the team has the ability to positively contribute to the team. The following will analyze Whole Foods Organizational Structure, from inputs to outputs, through the lens of the empowered individual within the organization.

Before moving forward, we should first begin the analysis with the company goal in mind. The Mission Statement of Whole Foods Market is “to promote vitality and well-being for all individuals by offering the highest quality, least processed, most flavorful natural and naturally preserved foods available.” (Meador, Britton, Phillips, & Howery, 2008). In more specific terms, a statement released by Whole Foods in their 2012 Annual report sheds light on how success is determined by the organization:

“Our “bottom line” ultimately depends on our ability to satisfy all of our stakeholders. Our goal is to balance the needs and desires of our customers, team members, shareholders, suppliers, communities and the environment while creating value for all” (Flanagan, 2012).

Ultimately, customers and shareholders affect the bottom line. However, the other factors mentioned are important in that they affect customer perception of Whole Foods Market, which contributes to brand differentiation, a key factor in the success of Whole Foods market (Singewald, 2013). As a result of the company’s “Declaration of Interdependence”, organizational success, is directly related to individual and group success and all of which are quantitatively measured by:

“…customer satisfaction, team member happiness and excellence, return on capital investment, improvement in the state of the environment and local and larger community support.” (Declaration of Interdependence, 2014)

To measure these performance metrics, we will analyze surveys of customer satisfaction, team member happiness, stock performance, environmental impact, and community support.

Customer Satisfaction

Whole Foods consistently rises above the competition in terms of customer satisfaction, although 2014 marked a rare drop in customer satisfaction for the grocery retailer. The American Customer Satisfaction index (ASCI) reported in a press release that customer satisfaction for Whole Foods dropped 3% (78%) After enjoying a six years of increased customer satisfaction (Butsunturn & Piasecki, 2014). Relative to other grocers, Whole Foods still remains on the high end of competitive, with competitors Winn-Dixie, Safeway, and Supervalu clocking in with scores between 76% and 77%. Wal-Mart continues to lag behind at 72%, dropping from 2012 (Butsunturn & Piasecki, 2014; Linn, 2012).

Employee Satisfaction

Whole Foods Market currently ranks #44 on Fortune Magazine’s “Top 100 Companies to Work For” (Bessette, 2014). Additionally, Whole Foods has enjoyed a spot on the list on Fortune Magazine’s list since 1998, making the list every year since the its inception (Brady, 2010). Two thirds of the score is based on team member satisfaction, a specific goal of Whole Foods Market. The survey is based on the responses of 377 randomly selected employees ensuring the impartiality of the assessment. Reasons for team member happiness include full benefits packages, relatively high wages ($16.98 average hourly wage) and a 20% team member discount for shopping at Whole Foods (2010).

Stock Performance

Whole Foods believes that their balanced commitment to all facets of their business will ultimately lead to successful business, which will drive sales and promote investment. So far, this strategy has proven effective. Since 1995, the company has seen yearly increases in stock value from $1.73 per share in 1995 to the current $49.59 per share as of April 14, 2014 (Whole Foods Market Inc., 2014). The rise of Whole Foods stock did not come without turbulence, experiencing drops between 1997-1999, a meteoric collapse in stock value from $38.7 to $4.72 between 2005- 2008, and after recovering to $57.83 per share in 2013, a slight drop to its current standing of $49.49 per share (2014).

Environmental Initiatives and Community Support

Whole Foods Market implements a wide variety of initiatives that support their commitment to environmental sustainability. These actions can sometimes prove costly, but Whole Foods maintains a commitment to these actions, nonetheless. 100% of store energy use was ‘offset with wind energy credits’ (Green Mission, 2014). Numerous environmental partnerships with wildlife and oceanic preservation organizations, disaster relief initiatives, and energy reduction projects all contribute to Whole Foods’ mission for environmental consciousness (Green Mission Report, 2012)

Whole foods continue to demonstrate a commitment to the communities they in which they operate. Whole Foods has implemented charitable foundations such as the Whole Kids and Whole Planet foundations, and their community donations have exceeded their 5% goal every year since their inception (Caring for Communities, 2014).

Nadler and Tushman broke ground with their congruence model for organizational analysis. This model was the first attempt to demonstrate the true impact that each individual had on the success of an organization, beyond the simple organized tasks outlined by the employer. Almost 30 Years later, the commitment to team member satisfaction demonstrated by Whole Foods, along with further commitments to the environment and the community, proves that a company can in fact achieve success through holistic balance. This significant shift away from stockholder interests and total revenue is a breath of fresh air in the modern corporate atmosphere. The success of Whole Foods on all metrics, from employee satisfaction to stock value, demonstrate that this holistic approach to management is a true sustainable model, which will undoubtedly affect the future of corporate business for years to come.

(Figure 1 omitted for preview. Available via download)

References

Bessette, C. (2014, January 16). Whole Foods Market. CNNMoney. Retrieved from http://money.cnn.com/gallery/leadership/2014/01/16/best-companies-social-media-superstars.fortune/2.html

Butsunturn, C., & Piasecki, A. (2014, February 19). Press Release February 2014. Traditional retail stores more satisfying, while growing demand strains customer service for internet retail. Retrieved from http://www.theacsi.org/news-and-resources/press-releases/press-2014/press-release-february-2014

Caring for Communities. (2014, January 1). Whole Foods Market. Retrieved from http://www.wholefoodsmarket.com/mission-values/caring-communities

Declaration of Interdependence. (2014). Whole Foods Market. Retrieved from http://www.wholefoodsmarket.com/mission-values/core-values/declaration-interdependence

Flanagan, G. (2012, November 21). Whole Foods Market 2012 Annual Report. wholefoodsmarket.com. Retrieved from https://www.wholefoodsmarket.com/sites/default/files/media/Global/Company%20Info/PDFs/2012-WFM_Annual_Report.pdf

Gough, V. (2009, September 8). Part 3: Organizational change - which model should I use? TrainingZone.co.uk. Retrieved from http://www.trainingzone.co.uk/topic/leadership/organisational-change-which-model-should-i-use-part-three

Green Mission. (2014). Whole Foods Market. Retrieved from http://www.wholefoodsmarket.com/mission-values/environmental-stewardship/green-mission

Green Mission Report 2012. (2012, January 1). wholefoodsmarket.com. Retrieved from http://www.wholefoodsmarket.com/sites/default/files/media/Global/Core%20Value/2012GreenMissionReport_0.pdf

Linn, A. (2012, February 21). Whole Foods up, Wal-Mart down in customer satisfaction survey - TODAY.com. TODAY. Retrieved from http://www.today.com/money/whole-foods-wal-mart-down-customer-satisfaction-survey-6C9675743

Meador, D., Britton, M., Phillips, P., & Howery, A. (2008). Case analysis: Whole Foods Market. Retrieved from: http://pnphillip.asp.radford.edu/whole%20Foods%20Case.pdf

Nadler, D. A. & Tushman, M. L. (1980) A model for diagnosing organizational behavior. organizational dynamics, 9 (2), 35-51. Retrieved from EBSCO.

Singewald, G. (2013, May 17). Whole Foods: 3 Bold Moves. beta.fool.com. Retrieved from http://beta.fool.com/glenn328/2013/05/17/whole-foods-market-the-organic-wal-mart/34286/

Whole Foods Market, Inc. (2014, April 14). Morningstar.com. Retrieved from http://performance.morningstar.com/stock/performance-return.action?p=price_history_page&t=WFM