“You’ve gotta love the business.”*

Posted by jlubans on July 25, 2012  •  Leave comment (0)

20120725-sully1.jpeg

A new book by Captain Chesley “Sully” Sullenberger (with Douglas Century), Making a Difference: Stories of Vision and Courage from America’s Leaders, includes a chapter on Costco’s co-founder, Jim Sinegal. (Sinegal shuns interviews because of the media’s tendency to glorify the boss, but he willingly spoke with Sullenberger.) I was drawn to the interview because I like Costco's quality and prices and have heard, from time to time, that theirs is a different kind of organization, one that genuinely values customers and employees. As a Costco regular I have noticed over the years, just like Captain Sullenberger, that there is minimal staff turn-over. For some reason, the staff tends to stay; something highly unusual for the retail industry. Indeed, it was seeing the same staff over fifteen years of shopping at Zabar’s, the NYC food emporium, that triggered my interest in finding out why that was. (Chapter 14: A Zabarian Experience in Leading from the Middle.)

20120725-sinegal.jpeg
Caption: Jim Sinegal
Sinegal, who retired from Costco in 2011, spoke candidly with Sullenberger about his way of leading and how the Costco culture came into being.
Besides the tiny staff turnover – Costco has less than 10% while Wal-Mart has over 60% - there are other similarities to Zabar’s. Sinegal on pricing: “In traditional retail the thinking is, Gee, I’m selling this thing for ten bucks, I wonder if I can get eleven for it? The customer is never going to know the difference. We look at it and we say, Selling this thing for ten bucks, how do I get it to nine? And if nine, how get it to 8? We want a big gulf between Costco and other retailers.”

20120725-Klein.jpg
Caption: Murray Klein (1923-2007)
Murray Klein (a partner with Saul and Stanley Zabar and operations manager) was a driving force for taking Zabar’s from a small kosher-only establishment to a world-class food emporium. In the New York Times obituary one colleague said: “Where other vendors would look at a jar of mustard and think, ‘How much can I sell this for?’ Murray would think, ‘How little?’”
Quoting from my Zabar’s chapter, Mr. Klein’s “legend includes the celebrated caviar price war with Macy’s and his riding roughshod over sales reps during the Wild West era of kitchenware surpluses. More important was Mr. Klein’s being a stickler for quality – something never to be taken for granted, it was everyone’s job. He helped instill high standards – the same one’s Saul’s father valued. While no longer a partner (now deceased) his name is the organization’s shorthand for keeping high standards alive. When Saul and Stanley recently refused to sell lobster salad for four days because it did not taste right, that was like Mr. Klein. Scott Goldshine, a Zabar's floor manager, admiringly terms Mr. Klein, “one tough s.o.b” in demanding and getting the best quality and price from suppliers.”

20120725-sol price.jpg
Caption: Sol Price (1916-2009)
Jim Sinegal has his own Mr. Klein; in his case the legendary Sol Price, the heralded (by most) founder of the big box store concept. For Sinegal, Sol was the gold standard in running a business. Mr. Sinegal, who says he learned everything from Mr. Price, is clear about what it takes to make a business a success: “We have four things to do: “You’ve got to obey the law, you’ve got to take care of your customers, you’ve got to take care of your people, and respect your suppliers.”

Another similarity between Zabar’s and Costco is found in this quote from Mr. Sinegal: “Why should people in retail not be able to have health care for their kids and buy homes and send them to good schools?” Both businesses pay more and provide extensive benefits. In fact, “Costco’s pay is $17 per hour, 42% higher than its fiercest rival, Sam’s Club.” Stock analysts take Costco to task for paying more; one critic went so far as to say that it was better to be a Costco employee than a Costco stockholder! His analysis misses the obvious: there is higher productivity in an organization like Costco than in one like Sam’s Club. One study** found that “When turnover costs and productivity were reckoned, it was cheaper for Costco to pay people more.” At the time of that study 68,000 staff at Costco did the same number of sales as 103,000 staff at Sam’s. As Sinegal said to Sullenberger: “If you hire good people and provide them with good wages and good jobs and an opportunity for a career, then good things will happen in your business.“

There is at least one other similarity between the two retailers: Mr. Price, the boss, was known to pick up trash off the floor of the story; Sullenberger observes that Mr. Sinegal picks up trash off the floor, and I saw Saul Zabar picking up litter on the sidewalk outside Zabar’s at 80th and Broadway. On the upper west side of NYC where Saul’s brother, Eli, runs several high end stores, guess what I saw Eli doing when I came by to interview him? Picking up trash at the store’s entrance! When followers see leaders doing something like this, they are apt to model the behavior. The boss values (and acts!) a clean store. If you respect the boss, you probably will share that value.

The O’Toole and Lawler** study, mentioned above, was about two kinds of firms: Low Cost Operators (LCOs) and High Involvement Companies (HICs). LCOs shift the burden for health care, retirement, and education to others, pay low, and espouse Theory X leadership (Managers make all decisions. Workers cannot be trusted to do what is right). High Involvement Company managers share decision making with staff; they train staff for the big picture and expect understanding of the bottom line; HICs give workers decision making power in their responsibilities; and, HICs, in hard times, look for alternatives to layoffs; they retain staff as a resource in good times and in bad. (Costco, unlike many other retailers) has not lain off any full-time staff during the current economic depression.)

While both of these organizations do an outstanding job, neither Costco nor Zabar’s is a democracy. They are not perfect (e.g. I wish Costco had more American-made stuff) but they are far better than any of their competitors. Why is that so? When you consider how they are organized to get the job done and when you identify the cultural characteristics shared by Costco and by Zabar’s, you begin to define a superior service model for any organization.

NOTES:
* Jim Sinegal’s stated passion for the job (p.301) When he talks to student groups about career choices he emphasizes never take a job you dislike; it’ll do you harm.
** James O’Toole and Edward E. Lawler III, “The Choices Managers Make – Or Don’t.” The Conference Board Review, September/October 2006, v. 44 #5 pp 24-29.

Rego's

Posted by jlubans on June 01, 2010  •  Leave comment (3)

The Rego Fish Co.

Here is my evocative look at a small family business, once prosperous, now seemingly winding down, left behind technologically and with none of the octogenarian owner’s children wanting to come into the fish business.

This essay was originally an appendix to my book’s chapter 14 on Zabar’s, the quintessentially New York deli. But, soon after I completed the first draft of the manuscript, we made an editorial decision to limit appendices and such. Well, thanks to Web 2.0, here it is. The story takes place in January 2002 when Saul Zabar brought me along on a visit to one of his smoked fish suppliers, the Rego Fish Company.

Rego’s is in the Middle Village neighborhood of Queens. Saul told me that Rego’s is a “nice primitive operation”; its “gravity ovens” for smoking fish qualify it as an antique in this era of computerized ovens - an endangered antique it turns out. Founded and owned by Conrad Spizz, now in his mid-80s, the company is recovering from a failed partnership with a conglomerate of banker smoker-wannabes. A new venture, starting in January, leased Rego’s to Marshall’s, a Philadelphia smoked fish concern.

For Saul, besides the long relationship with Connie, it’s Rego’s gravity ovens that keep him coming back and wanting to help Rego’s stay in business. Gravity ovens, Saul is convinced, are the only kind to use for smoking sturgeon – a fish that computer driven ovens have yet to tame. Sturgeon, according to Saul, “likes slower moving air than what the computer sends in” in high tech ovens. Sturgeon cooks best with a human touch. An expert smoker, who monitors temperature, airflow, and the cooking color, produces the finest and priciest sturgeon. At the time of this story, according to Zabar’s online catalog, sturgeon was selling for $15.00 a half-pound. Today’s price is $33.

On the Way
As he has done for innumerable Wednesdays, Saul maneuvered his car from the Zabar’s garage on W. 80th, slipped past snarls of honking traffic, crossed from the West Side to the East Side and over a few bridges, into Queens and pulled up to the curb at Rego’s. The company is in a mixed business and residential neighborhood of small houses, many with post 9-11 American flags on display, some with Christmas decorations yet to be stored for next year. Across from us, the yard was crowded with faded plastic elves and reindeer. I wondered where (or if) they stored them – maybe the answer was obvious.

We entered Rego’s one-story brick building through its unimposing glass door. Conrad Spizz’s office is on the immediate right, a step or two in from the glass entry door. Conrad (or Connie to friends) sat at the far end of the narrow room, a walker on his left. He is partially recovered from a 1993 stroke. When I shook his hand, his other hand supported the one I grasped. Invoices littered his desk, an old Remington typewriter sat idle. Connie let me know right away that he’s an opera buff, for 49 years he’s had three family subscriptions to the Met.

A few photographs, opera and movie posters interrupt the dingy walls. A large yellowing poster, behind Connie, is a lively illustration of what looks like an operatic rendering of Kiss Me Kate. He told us the story behind the poster. Connie’s speech was stroke impaired, but I got the idea. This Kiss Me Kate, according to Connie, includes a drinking toast to oral sex. Connie got a kick out of telling what must be a story many times re-told.
Saul told him (and me) he couldn’t understand Connie’s slurred speech. No offense meant, just the way it was. Their relationship goes back decades. Saul would bring his kids along whenever he was buying fish and the kids would fold, as a pastime, hundreds of shipping boxes for Rego’s.

Connie’s ribald humor extends to interior decoration. The office light switch cover was a guy with the switch coming out of his pants. It was up.

Around the corner to the right from Connie’s office is a tiny retail store with one or two glass deli cases. It’s empty today. Saul told me the cash income was never reported, instead, it was a source for paying the undocumented workers in the store. The Feds and Connie don’t see eye to eye. He stopped smoking chubb – a type of fish - when the inspectors insisted he use a higher temperature. The new temperature made chubb unpalatable.

To the left, swinging double doors lead to the ovens. Saul and I headed there to taste the latest version of Rego’s smoked sturgeon.

In a dim light, two men (Mitchell Gardiner and an assistant, Leslie) stood near one of the operating ovens. Saul introduced us. “My great pleasure” said Mitchell to Saul Zabar, a verbal genuflection. Mitchell, a veteran fish smoker, knew who Saul was. He also happened to be one of the new partners in Rego’s. His life’s mantra: “I’m smokin’, I’m happy!” He also likes to talk.

The ovens are tall, bricked up from the floor to just below the ceiling each with an arched roof, like pottery kilns. There are five black doors, one with smoke seeping out. These are walk-in ovens. Unlit. Mitchell used a trouble light to see what was happening inside the oven. When I peered in I could see a series of sturgeon chunks hung from hooks on a series of crossbars, straddling the oven, a few inches below the curved ceiling.

There was a perceptible sizzling as the fish oil dripped onto a metal grill around the perimeter of the oven floor just visible in the shadows cast by the arc light. Adding flavor and heat, buckets of charcoal were randomly placed inside the oven. Gravity was at work, the air redolent from the dripping juices splashing onto the metal grill. The rows of sturgeon chunks were turning a pale gold. The walls and grills are baked-on black, black from decades of smoke and oil.

Oven temperature matters, Mitchell explained. It’s best to start high to seal in juice, and then lower the heat to finish it without rendering the fish. If the temperature is too low at the start you wind up with dry fish.

Getting down to business, Mitchell asked Saul how he liked the sturgeon Rego’s sent him a couple days ago. “It’s OK”, something he says to people who have good stuff. Saul did want the tailpieces cut longer. Mitchell explained the short tails in the sample were a fluke; Leslie was already cutting them the requested Zabar’s length.

On another business point, Saul and Mitchell concurred, “You can’t make money selling sturgeon”. That was probably not just barter palaver. Sturgeon’s raw cost is high, permitting only a fractional retail mark-up – otherwise it becomes too expensive. Their talk turned to Rego’s price for smoked salmon, starting at $7.00 then to $7.50, settling on $7.25, and splitting the difference. I couldn’t tell if Saul was pleased or not. (A month later Saul still was not satisfied with the taste of Rego’s salmon and had not placed an order.)

Leslie had again opened the oven’s door, shining a light on the glistening fish chunks. The final step in smoking uses a bushel basket of “excelsior”. That’s the word for the fine curled softwood shavings that add the desired golden color to the pellicle (the very exterior of the skin), like thin sunlight at dawn. It’s important to use softwood, since it smolders, unlike hardwood that bursts into flame.

Leslie got feedback from Mitchell about how he had “ringed” the excelsior fire with sawdust on the oven’s floor; not the way to do it. Mitchell explained what was needed: don’t smother the excelsior with saw dust, just cover the center of the pile so air still comes into the excelsior and produces the right mix of flame and smoke.

Leslie, with asbestos lined gloves, hauled out the cross bars laden with sturgeon, and hung each bar on a nearby cooling rack. Mitchell selected and pulled off a large sturgeon chunk, still on its hook. We gladly accepted his offer and ate with our fingers on paper towels, celebrating the golden fish, like ancients around a smoke fire savoring a heavenly gift.

Afterwards, on our way out to say good-bye to Connie, Saul gave me a tour of the retail store– there’s no one around. We’re behind the deli case counter. Making himself at home, Saul opens a tray of herring and pulls out a piece in a white cream sauce. He slices it on a piece of wax paper. We share it. I thank him and tell him I like it. It is fresher and has a milder flavor than I am used to.

Before we left, Connie wanted me to talk to his son; he’s on the phone. He’s called the son, an alum of the university where I was working. We reminisced about the campus and fund raising among the alumni.
__________
Rego’s survives, albeit under new ownership. Still in the Middle Village neighborhood, an Internet review published in 2009 terms the retail shop a “treasure” with excellent smoked fish and excellent prices. As for the Zabar’s connection, I’ve gained from Saul in the mid-2000s the impression that Rego’s would at best be an incidental supplier.

Connie died in 2007. Here is his New York Times obituary:
http://www.nytimes.com/2007/04/18/obituaries/18spizz.html

A question for the reader: At the literal level this is a story about a small company in the fish business. Beyond that level what does this story say to you?

Customer Service Secrets from Trader Joe’s

Posted by jlubans on February 27, 2013  •  Leave comment (0)

20130227-images.jpeg
Because of its tight-lipped ways, Trader Joe’s can make for the wrong kind of story, all about the covertness of its German owners. For example, this headline from a 2010 story in Fortune: “Inside the secret world of Trader Joe's
It’s true, TJs managers will not talk about the business side of the business, but the “crew” – as the staff are known - offers just about the best service in the retail grocery business. You’ll have a hard time “getting (TJs) kind of love at the Piggly Wiggly.”
A TJs crewmember interacts with you more like a person than a consumer in an economic equation. TJs staff appear to understand the fundamental truth about retail: if you help people find what they are looking for, and make them feel good in the process, they will spend money in your store AND they will come back. The money from the sales, the profits, then can be used to further enhance the enterprise for staff and customers.
When I called the nearby TJs in Chapel Hill, inquiring about a discontinued item, I was put straight thru to the store’s manager, Greg Forte. I told him about my dismay in the absence of TJs stone-ground Southern Grits. When would the product be back? He expressed surprise and said something like “I love those grits!” But in the time it takes to check a computer inventory, he confirmed the sad news. Both of us commiserated about the situation. However, when I asked him if I could come by and interview him about their excellent customer service, his tone became wary. He’d have to check with headquarters. I offered to write a letter explaining my interest, who I was, and how I worked, but he said no, that’s not necessary. He’d get back to me in a week. Not.
So, as you can see, TJs strength is not in talking about the organization but in doing service better than most other food stores. I had the good fortune to interview Saul Zabar co-owner of Zabar’s, New York’s delightful food shop at 79th and Broadway. Over several months, Saul showed me the business, gave me back office and kitchen tours, allowed me to accompany him more than once on his weekly tasting of hundreds of pounds of smoked salmon at a Zabar’s vendor in Brooklyn, and he gave me full access to a dozen or more staff to ask any question I wanted. It made for an insightful story about the complex world of a retail business. It’s in the book:
Chapter 14: A Zabarian Experience
But, TJs, and its German owners, think differently from Saul – perhaps for their own right reasons. Still, you can derive much about a business by how you are treated. TJs staff have an obvious interest in what the customer thinks. Is this a trained-in empathy? Or, maybe that empathy is in the corporate DNA, an inherited gene from TJs California culture that the new German owners have the smarts not to re-engineer.
Well, just how does an organization establish a uniform friendliness toward its clients? Somehow, TJs staff can be spontaneous and not worry about getting yanked by corporate policy. As much as I like Costco, the staff on the floor invariably avoid eye contact with customers. If the customer makes the effort and asks a question, the response is usually positive, but it’s up to me to take the initiative. Yeah, I know Costco’s "great", but eye contact or a friendly nod is the exception, not the rule. Why is that?
TJs apparent policy is to look people in the eye and ask how to help. Better, the policy seems to say, if you see someone who might need help, you help. You stop re-stocking the shelf and help the customer find what she is looking for. Or, if the store does not have it – most TJs have a limited line of products, e.g. one type of lip balm, no more - you confirm that and express your regrets. You do not leave the customer wandering around (like I have done numerous times at Costco) hoping for serendipity to come to my rescue. When I asked a staffer in TJs dairy area about where a vegetable might be – I’d looked and looked in the produce area - he stopped his inventory of the cheese bins, without a hint of “I’m busy” - and walked me to a shelf in produce. It was the same shelf I had scrutinized. There was the product. He pulled it out and showed it to me. Sale made!
At TJs there’s a detente in the barrier between staff and customer, and there’s no enforced impersonality; apparently it is OK to be yourself. (Much like the individuality permitted staff at SWA.) There’s a much mis-guided concept in too many organizations that staff must present the same face to every customer. Those plastic smiles seem to be saying, “We are impartial, we are fair, we are consistent, just like the robotized “Your call is very important to us.” It’s a different message that the client receives: We may empathize with you, but we know our limits; we know the narrow boundaries of what we can and cannot do; I do not have permission to help you beyond point x, regardless of the national advertising that “if something’s not right we’ll fix it!”
Think back about a great interaction between you and an employee. What happened? I remember thirstily looking for a water fountain at Frankfurt’s vast-desert-of-an-airport. When I asked someone behind the service desk at Lufthansa for the nearest one, she said there were not any water fountains, then left her desk, unlocked a door, went inside, retrieved and gave me a bottle of water! Did I like that?
I was pushing one of TJs tiny grocery carts – with several bottles of wine and olive oil rolling around – when one of the “crew” observed me and made some comment about the party I must be having. Then she asked if I could use a box for the bottles. Actually, she did not ask me, she got the box and put the bottles in it so I could continue do my shopping.
On another visit, I saw a couple staff restocking the shelves. (Consider that this would be an obvious inefficiency to any retail expert. Why not stock only when the store is closed? Imagine the savings from a minimum wage stocking crew that can focus on the job at hand? Instead, TJs re-stocks during the day, while the customer is there. A stocker is a ready target for questions that take him away from his job and add to the retail labor cost. Actually, restocking during the day is a highly efficient way to get staff out on the floor to help people find what they need (or to try something new!).
But back to the re-stocking staffers. A little boy, three or four, imitating two TJ staff, was also re-stocking a bottom shelf. This was fun for the little boy. Work as fun. Imagine that.
It’s remarkable to me that the staff were OK with the little boy’s playful interest instead of telling the parent their insurance does not permit children playing with the merchandise.
I wonder what TJs policy manual looks like? Is it hundreds of pages of detailed direction or is it one page with the simple statement, “Help the customer.” I cannot confirm that, I can only admire how TJs helps their customers (of all ages and economic circumstances*).
The Fortune article concludes that TJs good staff benefits package makes for the good customer relations. I’d say it helps, but good pay is hardly the only reason. It’s in the corporate culture. It’s what is transmitted and demonstrated daily to every staff member. The rules can be bent – what’s the harm in the little boy playing at re-stocking? And, yes, when someone asks for help, you do stop what you are doing and help.
Back in the day of library card catalogs, I recall the controversy over a card filer’s helping a library user find a book. It made perfect sense to me for a user to ask for help from someone who looked like a library worker. Yet there was considerable opposition from some staff. The filer might misguide the user! The filer’s job was to file not to assist, etc. All this was nonsense. A type of nonsense that the TJs organization has overcome in its expectations of each crewmember to help people to the best of their ability. If the Chapel Hill manager agrees to an interview I’d love to pass on something more substantial about TJs than my best guesses.

*However TJs customer base is largely white. Perhaps curiously, the Durham (where I live) Aldi store (owned by the same German family but run in an altogether different fashion) has a fair number of black customers.