Feedback Loops and Organizational Learning at Whole Foods

Introduction

To remain competitive and responsive to internal and external pressures, firms need to observe and monitor the outcomes of their activities (Mintzberg et al., 2011). Feedback loops explain the way in which processes may be maintained or changed. Like all businesses, Whole Foods Market cannot avoid the presence of feedback loops. When these loops are recognized, they can provide a useful source of data that a firm may use to maintain and improve performance. The aim of this report is to review the two different types of feedback loop, and then examine specific examples of each found at Whole Foods Market.

Types of Feedback Loops

There are two types of feedback loop: the first is a reinforcing loop and the second is a balancing loop. Each operates differently with reference to cause and effect (Bellinger, 2004). Reinforcing feedback loops, as the name indicates, are loops that reinforce existing patterns of behavior, either amplifying or magnifying outcomes by reinforcing attitudes and/or activity patterns, so the outcome is exacerbated as the loop repeats (Bellinger, 2004). Reinforcing loops may have positive or negative outcomes (Bellinger, 2004). For example, a lack of discipline in the workplace may result in negative employee behavior; if employees see their peers escape any form of discipline, they too may choose to indulge in negative behavior — a negative reinforcing cycle. If the situation were reversed and employees were working hard, and peers saw colleagues gaining benefits and rewards for that effort, they might emulate the behavior, creating a positive reinforcing cycle. In each case, the cause is the outcome of the first loop, and the effect is the way in which the pattern changes.

A balancing feedback loop is one in which the same patterns are maintained as the loop repeats (Bellinger, 2004). Just as with reinforcing loops, balancing loops may also be positive or negative (Bellinger, 2004). For example, balancing loops may provide resistance to change — a negative outcome for an organization — or alternatively they may support the maintenance of high standards, which would represent a positive balancing loop.

Both types of loop may provide useful input for an organization that wishes to improve. There is no singular definition of organizational learning; the literature generally indicates that it occurs when individuals within an organization learn and collectively apply knowledge in ways that produce improvement. Organizational learning can include learning from mistakes, and involves utilizing feedback as a source of information to review and improve operations or actions. It may also be linked to double-loop rather than single-loop learning (Argyris and Schon, 1996). Vassalou (2001) argues that the concept incorporates know-how and know-why. Senge (2006) takes the concept further with the idea of the learning organization, in which learning takes place on an ongoing and continual basis and forms part of the culture. With organizational learning more broadly, the process may not be as deeply ingrained in the culture or as holistically applied.

Reinforcing Feedback Loop: Gainsharing at Whole Foods

There are many reinforcing feedback loops at Whole Foods Market. The reward strategy utilized by the firm is a good example of a positive reinforcing feedback loop. The organization operates a rewards system referred to as "gainsharing," which is linked directly to employee remuneration (Whole Foods Market, 2015). The gainsharing program provides a basis for productivity-related pay, allowing employees to benefit from strong productivity performance. All employees participate in the scheme and receive a bonus every other month, with bonuses calculated on their own team's productivity. Each employee receives a proportional share of the bonus allocated to their team based on the hours they work (Whole Foods Market, 2015).

The program offers significant potential for learning, as the loop itself is relatively short, with bonuses calculated and awarded every two months. Employees as individuals may notice ways to increase productivity and team performance and make suggestions that benefit themselves and others. Likewise, management may pursue innovation and improvements in order to enhance team performance. Just as strategies that may improve productivity are pursued, learning may also take place with reference to practices that did not work, since those are unlikely to be repeated.

In the retail environment, each store operates as a team, so teamwork is encouraged, which can facilitate the potential for peer learning. The structure of bonus allocation also creates the potential for peer pressure to influence employees who may be perceived as inefficient or not contributing their share. The outcome aligns with motivational theory, providing financial rewards that address the lower-order needs in Maslow's hierarchy of needs, as well as a basis for motivation in terms of expectancy theory (Buchanan & Huczynski, 2010). The tangible results of the positive reinforcing loop for employees are visible in their wages — with an employee working 40 hours a week benefiting from an additional $1,788 in their 2013 pay — and for the company it has resulted in lower labor costs through more self-managing teams (Whole Foods Market, 2015).

The reinforcing feedback loop is very positive, and it is accompanied by other reinforcing feedback loops that interact, such as performance appraisals. One additional learning opportunity that could support organizational learning would be the implementation of an employee survey to gather feedback about how employees feel, as well as their views and ideas on the organization and its operations. This could also become a positive feedback loop: as employees participate and see their input being utilized, they may be more encouraged to participate further in the future, providing more knowledge that could drive additional improvements.

Conclusion

Whole Foods Market appears to take a proactive approach towards organizational learning, seeking out opportunities not only to learn but to provide support for ongoing learning processes at both team and organizational level. The two examples of reinforcing and balancing loops demonstrate some of the processes already in place: gainsharing provides ongoing opportunities to learn and improve, while the inventory balancing loop, though it may appear mundane, is nonetheless essential to the efficient operation of the organization and supports its competitive advantage in fresh, quality food. However, even with learning already taking place, there remain additional opportunities for further improvement. In both of the feedback loop examples discussed, potential sources of improvement were identified that may help to strengthen the feedback loops the company has already designed.

References

Argyris, C., & Schon, D. (1996). On organizational learning: A theory of action perspective. Addison-Wesley.

Bellinger, G. (2004). The way of systems. Retrieved from http://www.systems-thinking.org/theWay/theWay.htm

Buchanan, D., & Huczynski, A. (2010). Organisational behaviour. FT/Prentice Hall.

Kotler, P., & Keller, K. (2011). Marketing management. Prentice Hall.

Mintzberg, H., Ahlstrand, B., & Lampel, J. B. (2011). Strategy safari: The complete guide through the wilds of strategic management. Financial Times/Prentice Hall.

Senge, P. (2006). The fifth discipline: The art and practice of the learning organization. Random House Business.

Vassalou, L. (2001). The learning organization in health-care services: Theory and practice. Journal of European Industrial Training, 25(6/7), 354.

Whole Foods Market. (2015). About our benefits. Retrieved from http://www.wholefoodsmarket.com/careers/about-our-benefits