Organizational Outputs at Whole Foods Market

Introduction

Whole Foods Market is one of the preeminent organic food retailers in the United States. The Nadler-Tushman Congruence Model provides an effective framework for The Excellence Consulting Group (XCG) to analyze the organization and assess its outputs to determine how the firm's performance stacks up against its goals. The Nadler-Tushman Congruence Model examines outputs by looking at three levels: the organizational, group, and individual levels. Examining these outputs also allows an assessment of the overall congruence achieved by the firm.

Organizational Level Outputs

At an organizational level, there are numerous outputs. As Whole Foods Market is a retailer of organic healthy food, the first and most apparent output is the sale of the firm's products to its customers. This output represents the primary purpose of the organization, with the firm acting as an intermediary between food producers—such as farmers and food manufacturers—and the customer. Whole Foods Market actively manages its supply chain, carefully examining upstream suppliers for high-quality organic and healthy products, including potential suppliers for the firm's own-brand products. The company's shops sell in excess of 2,400 product lines across its 403 worldwide stores, of which 384 are in the United States (Wu, 2014).

The way that products are sold also creates a different type of output: the perception of an experience the firm provides for shoppers. The strong ethical stance of the firm allows shoppers to feel good about their purchases, which supports the psychosocial aspects of buyer decision-making and the creation of brand loyalty and associations (Kotler et al., 2013). The experience has been enhanced by the firm through the provision of additional services, such as wine bars, and in some newer stores there is even a putting green (Wu, 2014). Older stores are also being revitalized to enhance the customer experience.

Another major output for firms quoted on the stock market is financial performance. In the financial year ending in 2014, the firm had sales of $14,194 million, up from $12,917 million in the preceding year, and net income before tax of $579 million, up from $551 million in 2013. While this represented an increase in absolute amount, it was a slight decrease in profit margin, falling to 6.66% in 2014 from 6.92% in 2013. However, even with this decrease, the firm still provided an impressive profit output, with the industry average being 2.33% (MSN Money, 2014). For shareholders, earnings per share proved another important measure; the diluted earnings per share increased from 1.28 in 2012 to 1.48 in 2013 and 1.57 in 2014, supported by both reduced shares outstanding and increased sales. In 2014, the firm paid out dividends of $0.48 per share, equating to an annual projected yield of 1.07%—the output paid directly to stockholders. The majority of earnings are reinvested as the company pursues an aggressive growth strategy, expanding by an average of 40 stores per year, with new store creation representing another form of output and a stated target of 1,000 stores across the United States (Wu, 2014; Whole Foods Market, 2014).

2014 was a record year for Whole Foods Market, and outputs have been increasing consistently over the last five years, with sales growth averaging 12.6% per annum compared to 9.15% for the industry average, and net income increasing by 31.6% per annum compared to 6.97% for the industry average (MSN Money, 2014). Overall, the firm has shown significant growth over five years, providing very satisfactory outcomes for most investors, with the share price in 2009 being $13.61 and the opening price on December 22, 2014, being $48.80 (MSN Money, 2014). The outputs in 2003 suffered from decline, especially as the organization engaged in price cutting to become more competitive (Wu, 2014), but the subsequent increase in overall sales has allowed the share price to rebound and the organization to recover.

While the sale of groceries and financial outputs may be defined as primary outputs, other types of output should also be considered. One type of output that supports sales is communication output, primarily through marketing and public relations exercises. The organization seeks to support healthy food decisions by both customers and employees through the provision of information, as seen in the organization's mission and value statements as well as marketing messages. The marketing strategy has successfully differentiated the firm, creating an image associated with healthy, high-quality, organic groceries—noted as facilitating a high level of loyalty within its consumer base (Whole Foods Market, 2014).

Organizational outputs also manifest in the local communities where the firm operates, with specific strategies including partnerships with local suppliers alongside large national supply chains. The company undertakes contracts with smaller suppliers, such as local farms or smaller producers, to supply a limited number of stores, supporting local businesses as part of organizational strategy. Local communities are also supported through corporate social responsibility approaches, including the donation of approximately 5% of after-tax profits to charitable causes, the provision of loans to fair trade and local producers, and the development of foundations such as the Whole Planet Foundation and the Whole Cities Foundation (Whole Foods Market, 2014).

Group Level Outputs

At a group level, outputs are similar to those at the organizational level. When examining group-level outputs, the firm must be considered at a smaller scale, looking at different departments or individual stores within the organization. Group-level outputs are arguably extremely important to the firm's success, especially in areas such as marketing. The firm has a renowned low corporate marketing budget, which averages less than 1% of the organization's revenues (Whole Foods Market, 2014). The firm's success with such a low budget reflects the efforts made at the individual store level, including public relations exercises supporting local communities, social marketing of different stores on platforms such as Facebook, and the efforts of employees in stores to provide high levels of service and knowledge to customers (Whole Foods Market, 2014). For example, the Whole Foods Market store in Charlotte, Utah, has its own Facebook presence with in excess of 14,000 fans, and the Brooklyn location has in excess of 37,000 fans. These pages provide an efficient way for the organization to interact with local shoppers and serve as marketing resources. Additionally, employees undertake community-support actions, frequently hosting tastings and events in stores. One example was the provision of support at a local level, such as the 564 grants provided under the Whole Kids Foundation in 2012 to fund salad bars in schools to promote healthy living (Whole Foods Market, 2014).

In group-level output terms, important organizational departments also impact the efficiency and effectiveness of the firm. The marketing department itself supports the use of social media marketing, with more than 1.6 million fans for the corporate Facebook page, in addition to being active on other social networks such as Twitter. The human resources department also generates important outputs, helping to gain the support and loyalty of employees and positioning the firm frequently on listings of the best companies to work for, including the Fortune 500 list of 100 best companies since 1998 (Wu, 2014). Employee programs include a total health immersion program as well as programs providing discounts on items to support good health, encouraging high levels of wellness among the employee base, with in excess of 16,000 workers participating in these programs (Whole Foods Market, 2014). The outputs of these programs include healthy employees, lower levels of absenteeism, and significant reductions in employee medical care costs (Whole Foods Market, 2014). This also supports financial outputs at the organizational level.

At an individual level, programs such as the total health immersion program provided for employees may offer both physical and psychological benefits to participants, improving overall well-being (Ogden, 2012).