Zingerman's Boss Outlines Strategy of 'Sharing Lavishly'
The original Zingerman’s Deli in Ann Arbor, Michigan, which was built as a grocery in 1902 and is on the historic register.
The founders of Zingerman’s Deli and its sister companies were frustrated. They had switched to practices known as open book management in 2002, and added a gain-sharing program in which every employee shared in a pot of profits on a regular basis, but the company’s employees were slow to adapt to the new way of life.
“Open book, it just wasn’t gaining traction,” said Paul Saginaw, co-founder of the Ann Arbor, Michigan-based family of 10 companies under the name Zingerman’s, who spoke at the Restaurant Finance & Development Conference in Las Vegas Wednesday.
Then one day Saginaw walked through the kitchen and saw a 16-year-old dishwasher go to the recycling bin and fish out a Hellman’s mayonnaise jar. He showed it to the cook and said, “You didn’t take the spatula and get all the mayonnaise out of that, and that’s my gain-sharing check in there,” Saginaw recalled, and bit by bit results of the program started to show. “Profitability starting rising and gain-sharing started rising,” Saginaw said.
Zingerman’s has been in business for 34 years, with 10 companies, $64 million in revenue, more than 700 employees and 22 managing partners. Saginaw and his business partner, Art Weinzweig, decided not to replicate the success of their original store, Zingerman’s Deli, but rather to create unique businesses under the Zingerman’s name—including Zingerman’s Creamery, Zingerman’s Bakehouse and Zingerman’s Candy Manufactory.
Another effort at Zingerman’s was called Wage UP, and this was launched before the nationwide movement toward higher minimum wages. “We didn’t do this for altruism. It makes us feel good, but there’s also a compelling business reason to do it,” Saginaw said. When front-line employees make more, their lives become more financially stable and so does their work.
In 2011 at the deli sales were $11.5 million, Saginaw said. In 2016 they were $17.2 million. Meanwhile, the entry-level wage in 2011 was $7.50 per hour. Today’s it’s $11. In 2011 the front of the house labor cost was 15.88 percent; in 2016 it was 14.63 percent. And turnover went from 65 percent to 48 percent. “They’re less stressed and they become more productive,” Saginaw said about his staff members.
He shared much more about his inspiring vision for his workplace at the conference, including the need for leaders to create a compelling strategy that employees can believe in. The talk was called: The Zingerman’s Paradox: How sharing lavishly leaves you with more.