The Trust Manifesto

Man, there are an uncountable number of trust stories having to do
with Stew Leonard’s. Stew Leonard, Sr. founded a dairy store in Norwalk,
CT in 1969. I think it carried only 8 products when it first opened …
including milk, butter, eggs, and white bread. Right from the
start, it was a fun place to go. You could watch the milk being bottled
right there, and there were animated animals, and then eventually
real animals. It was alot more like Disneyland than a grocery store.
It grew organically. For 35 years, it has seemed different every time
one goes there. Sometimes the change is small; the aisles are rearranged,
or there is an outdoor ice cream stand. Sometimes the change is huge;
Stew buys an adjacent restaurant and completely knocks it down to
make more parking for his store.

Stew is a creative marketer. He has distinctive plastic bags for carrying
groceries, and he also turned the design into a t-shirt. He used to offer
people gift certificates or 12 free ice cream cones to send in photos of
themselves in interesting places with the bags and shirts. The bulletin
board was bursting with photos: Great Wall of China with a Stew’s bag,
Eiffel Tower with a Stew’s bag, Dubai Airport with a Stew’s bag. There
was even a doctored one of Neil Armstrong on the moon holding a Stew’s
bag (this was way before Photoshop was invented, so someone spent
more than 12 ice cream cones worth of their time creating that.)

Here was my photo, taken on the roof of the World Trade Center.

In time, Stew’s became the World’s Largest Dairy Store, and Stew becomes
a bit famous. He becomes friends with Frank Purdue of Purdue
chickens, Paul Newman (who sells alot of food besides being an actor),
and President Reagan. He is written about in bestselling business
books such as In Search of Excellence. There are television shows
and magazine articles about him and his business philosophy. Behind
the store is a Mercedes with the license plate MOOOO.

I was not super motivated in high school, but I wasn’t a hoodlum either.
The one time I actually skipped school, I went to Stew Leonard’s, which
was a 20 minute drive from my school. My friend Joel drove. On the
way out of the store, we ran into … my mother! That was not very
cool. She should have been angry, but was not. Thanks, mom.

Stew’s abounds in trust … for the customer, and for the employees.
When you go into any of his stores, there is a three-ton granite rock
out front with this engraved in it: “Rule #1 — The Customer is
Always Right; Rule #2 – If the Customer is Ever Wrong, Re-Read
Rule #1.”

Their stated management philosophy is: “Take good care of your
people and they in turn will take good care of your customers.” And
this is not just lip service … they just won Fortune magazine’s “100
Best Companies to Work For” for the fifth year in a row. They invest
a great deal in outside training for their employees, such as Dale
Carnegie courses, which is certainly unusual in an industry where
there is probably high turnover.

One of my friends worked there years ago. This friend was not
always telling the truth, and it was hard to know what to believe
when talking to him (he never lied to me, exactly, but let’s just
say he had a different understanding of the world than most people).
One day, he said to me … “Stew has 40 cash registers, but a few of
them are not hooked up to the computer.” This was a preposterous
accusation. Stew, with friends at 1600 Pennsylvania Avenue, would
never do that! He often said that he resisted the temptation to open
more stores because he would lose the ability to oversee the stores
and control every aspect of the customer experience. If he wanted
to make more money, he could have opened more Stew Leonard’s
stores, since it was a tried and true successful formula. He didn’t
need to avoid taxes, which is what it sounded like he was doing.

Well, it turned out to be true, and Stew was sentenced to five years
in prison. The store did not close; it was taken over by Stew’s
children, and it is thriving. New stores were opened in Danbury
and Yonkers, and they seem hugely successful.

I don’t think there was much of a sales dip when Stew went to jail.
If anything, the place seems bigger now. Tax evasion is one of those
crimes that most people are not passionate about. A few people
probably considered him even more of a folk hero for getting away
with it for a while. But at one point, there was a scandal where
his scales were shown to be coming up short. People went nuts
over that, because this time, Stew was stealing directly from them
instead of the big old wasteful government. It is a much less serious
crime (and maybe it was even unintentional), but that’s the thing
that seemed to piss off the most people.

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Here’s how the second wealthiest American manages, according to
an article in the November 12-13, 2005 Wall Street Journal.
(There is a weekend edition now, hence the schizophrenic publication date.)

None of [Buffett's] conversations were lengthy. He spent most
of the time listening, not advising. “A few of the Berkshire CEOs
think that if they talk to you, you’ll tell them what to do,”
Mr. Buffett says. A prerequisite to a Berkshire purchase of any company is
trusting that company’s managers to make decisions, he says.

Buffett’s philosophy makes infinite sense, but is not ubiquitous. Maybe
that is a factor in why he is so wealthy and others are not. Shouldn’t
trusting be a prerequisite for hiring or promoting anyone? Why would
you put someone in a role like that unless you trusted them to make
decisions? Admitedly, some roles require different amounts of trust.
Pouring ice cream cones is different from being a bodyguard for a
governor. But for any given job, it seems as though the people should
be trusted a priori. And yet companies spend all kinds of time and
money to have so called “checks and balances”.

Buffett continues:

Charlie and I are the managing partners of Berkshire. But
we subcontract all of the heavy lifting in this business to
the managers of our subsidiaries. In fact, we delegate almost
to the point of abdication: Though Berkshire has about 180,000
employees, only 17 of these are at headquarters.

Charlie and I mainly attend to capital allocation and the care
and feeding of our key managers. Most of these managers are
happiest when they are left alone to run their businesses, and
that is customarily just how we leave them. That puts them in
charge of all operating decisions and of dispatching the excess
cash they generate to headquarters.

Most of our managers are independently wealthy, and it’s
therefore up to us to create a climate that encourages them
to choose working with Berkshire over golfing or fishing. This
leaves us needing to treat them fairly and in the manner that
we would wish to be treated if our positions were reversed.”

I would say that until they get close to retirement age, most
employees do not have the choice between their employer and
“golfing or fishing”, (although if I did, I’d probably choose my
job over golfing or fishing, which I find tedious). But all employees
do have the choice between their current employer and some
other one, whether they like to think so or not, and therefore
at least a subset of Buffett’s philosophy needs to be considered
in virtually any work situation.

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I once worked for one of the largest employers on earth. Like many large companies,
they had an employee assistance program, where if you are having trouble outside of
work you can call a third party hotline and get referals for whatever services you need.
These sorts of programs always have assurances of complete confidentiality, and that’s
often given as the reason for it being run by a neutral party.

My story goes back almost 20 years, when you had to get insurance claim forms from
a rack or filing cabinet. There was no web or PDF files in that ancient time, boys
and girls. I went to the human resources department, where these forms were kept,
to get a form for something mundane like a tooth cleaning, probably. While there, the
highest ranking human resources official at our location yelled to another member
of the department “Hey, guess who called the employee assistance hotline?” and then
blurted out the name of one of our coworkers.

I was totally shocked. I have never had occasion to call such a hotline, but if I ever
start abusing substances and beating my dog (and you know I would do the second part
to get back at all the canines who have bitten me), I will try to find help on my own, in the
Yellow Pages, and not call a “confidential” hotline where I work.

My other observation is that the company had the wrong person in the human
resources job. It is not a great role for a gossipy person. And if someone was
hell bent on gossiping, they should not be so stupid as to yell the information
across a room when outsiders are present.

With stone age thinking in human resources, you would probably not be
surprised if I told you that the highest ranking 1,000 people in the company
were all white and all men. (I don’t mean that white men are stone age thinkers,
but that stone age thinkers would only hire people exactly like themselves.)
I just checked their website, and in late 2005, it is pretty much the same at the
top, except they now have one woman running procurement. Women enjoy
shopping more than men, I guess the thinking goes.

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