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Letter from the US: US grocer Wegmans and the secret sauce of family firms

By William Goodspeed

Employee engagement may be dismissed by some as paternalistic and weak, but it is the major weapon in a family business that public or private equity-backed firms struggle to replicate

North Americans are spoiled about many things, but luxurious international air travel isn't one of them. Even in business class, intercontinental flights on US carriers lack energy and pizzazz, something I didn't fully realise until my first trip with Virgin Atlantic Upper Class ten years ago. In light of Sir Richard Branson's marketing savvy, I expected something different, but completely underestimated the experience. The décor, seating, bar, and offerings were all attractive and distinct, but the most distinguishing feature was service: the employees oozed excitement and were genuinely interested in my comfort and happiness. Clearly, Virgin Atlantic excels at selecting people and stimulating them to provide exceptional service. As a result, I choose Virgin Atlantic whenever possible and rave about it when talking to others (and writing articles).

The link between employee engagement and customer satisfaction should be obvious — just think about personal experiences with airlines and restaurants for both positive and negative examples. But the relationship goes beyond customer happiness and extends to firm profitability: there is a very high correlation between employee engagement and financial success, even beyond service industries. Some executives struggle to believe this because employee engagement often costs more and seems 'touchy feely.' As I wrote in my last Letter from the US, this involves short-term financial sacrifice for long-term prosperity.

What does this all have to do with family companies? Plenty.

Family companies are strongly influenced by the values of their family owners, and a prevailing principle is loyalty to their people. It's not just an empty slogan on the wall, like in so many companies, but a fundamental belief that goes from owners to the board to executives and throughout the organisation. Some call it paternalistic and weak, but those who understand the power of motivated, engaged, and loyal organisations know far better.

There's no better example in American than Wegmans, a mid-sized grocery store chain headquartered in Rochester, New York. Wegmans has 87 stores and 44,000 employees. In an industry experiencing consolidation, cost reductions, and razor-thin margins, Wegmans thrives and recently garnered two impressive achievements: fourth in the US on the Forbes Best Places to Work list, ahead of hundreds of internationally well-known firms, and America's favourite grocery store, again ahead of many much larger and well-known companies.

The Wegmans' values about people are best summed up in an employee quote on its website:
“At Wegmans, you aren't just part of a team; you are part of a family. Employees enjoy coming to work with coworkers and management who share the same values and truly care about each other.”

To me, this is the essence of the power of family ownership. Public firms or those owned by private equity simply cannot replicate this.

When I ran Huber Engineered Woods, a sector within the family-owned J.M. Huber Corporation, we instilled this value in our people constantly. The palpable energy, creativity, and fun in the organisation were our secret weapon, and no competitor could dream of matching it (I used to joke that we could have emailed our strategy to competitors, and they wouldn't have been able to copy us). Lo and behold, we consistently had top-tier employee engagement surveys, world-class customer net promoter scores, and superior profitability (versus much larger firms).

Employee engagement - it's the secret sauce of family firms.

William Goodspeed is an American business executive with extensive experience in family businesses. A member of the Huber family and longtime Huber executive, he serves on several family company firms, including Sheetz, ABARTA, Granger and Longo's. He also helps develop next-generation family members for future leadership.