Whole Foods Execs Flee After Amazon Takeover

The workplace culture at Amazon is famous for long hours, internecine squabbling and a ruthless emphasis on finishing projects on time, regardless of whatever complicating circumstances might arise (which is why it is perfect workplace for robots). At least that's what the New York Times claimed in a series about the company's workplace culture published a couple years back. Jeff Bezos was so enraged by the piece that it seems ever since the Amazon comms department has delivered every major scoop about the company's ever-expanding business empire to the Wall Street Journal, just to spite the Gray Lady.

The latest of these arrived today (again courtesy of WSJ, of course), although it is hardly a glowing review of the company's organizational process. In the latest example of how Amazon is upending Whole Foods' unique corporate culture, we learn that an exodus is underway at the purveyor of Millennial-targeting, organic goodness (once widely derided as "Whole Paycheck" before Bezos conjured up his cost-cutting magic).

WFM

In what is hardly an endorsement of the Bezos' management style, "more than a dozen" senior Whole Foods managers have already left the company since Amazon acquired the supermarket chain:

An executive exodus is under way at Whole Foods, as Amazon.com Inc. integrates the pioneering natural grocer into its retail empire. More than a dozen executives and senior managers have left since Amazon acquired Whole Foods last year, according to former employees and recruiters steering them to new jobs. People who have left include leaders of the bakery, produce, sustainability and local-foods divisions.

Some veterans have left even though higher-ups asked them to stay. Others say they were pushed out after the deal was announced but before it closed, as Whole Foods sought to tighten command.

Executives from Amazon and Whole Foods said that the two companies share a customer focus, are fitting together well and have made great strides in the merger in a short time. But the exodus has raised concerns among employees and suppliers that the distinctive approach that made Whole Foods a natural and organic powerhouse won’t endure under Amazon’s ownership.

This is hardly surprising. Earlier this year, WSJ reported that managers of individual Whole Foods' stores - who were once given wide latitude to experiment with new and local products - are on the verge of a mutiny due to Amazon's crackdown on store autonomy. And many small vendors - who can no longer afford to ship product in the quantities, and pay the onerous "consulting fees" demanded by Amazon - are threatening to walk. To be sure, WFM clarified that some of these additional costs were imposed before the merger.

Longtime WFM executives told WSJ that they bristled after being assigned to report to Amazon managers who were, in many cases, younger than their WFM subordinates. Also, Amazon's long-term plans for business integration (keep in mind, Amazon has said it has no plans to integrate WFM with its heavily automated Amazon Go stores) remain a mystery to some concerned WFM holdovers.

Still, some WFM employees defend Amazon's methods:

Some Whole Foods executives are urging their colleagues to be patient. They say Amazon can help the grocer make technology improvements, and new ownership has relieved the company of shareholder pressure to reverse falling sales. Some Whole Foods department managers described Amazon executives as respectful and eager to learn from the grocer’s decades of experience sourcing food and handling produce.

Some Whole Foods employees want Amazon executives to tackle the grocer’s problems more aggressively. Already, Amazon executives have questioned an inventory-management system that has left many Whole Foods stores short of some products, according to a person familiar with the discussions.

But other Whole Foods veterans have been frustrated by what they see as Amazon’s insular culture and penchant for secrecy, according to current and former employees. “There really hasn’t been very much communication,” one former executive said.

Some employees believe the brain drain is costing Whole Foods the "institutional knowledge" that helped it grow from one store in Austin, Texas to a countrywide behemoth. Some cited the two organizations’ fundamental differences on issues such as promoting and grooming talent, and whether to focus more on needs of customers or employees. One can guess on which side Bezos is. 

They have also noted pressure to put on a good face for Amazon executives, including among the rank and file during town hall meetings.

Meanwhile the clashing corporate cultures are alienating Whole Foods' bread and butter, so to say: its unique selection of vendors (without which Whole Foods is just another run off the mill supermarket).

Some suppliers said new hires at Whole Foods have been slow to master the chain’s techniques for sourcing and marketing healthful foods. Many executives who have left, meanwhile, are consulting for other natural-food companies and interviewing with other retailers, taking that knowledge to competitors.

“It makes it really difficult when you lose the institutional knowledge,” said Bill Caskey, co-founder of the food consultancy Pentallect Inc.

However, one aspect of the partnership is unimpeachable: thanks to Amazon's cutthroat, "revenue at any price" management, sales at the struggling grocery store have risen, at least for now.

Amazon has lowered prices at Whole Foods stores and listed the chain’s store-brand products on its website. Sales have grown, with Whole Foods’ main distributor, United Natural Foods Inc., reporting a 19% year-over-year jump in business to the chain last quarter.

At the end of the day, that's a tradeoff that we imagine Bezos will be more than willing to make. Now if only higher sales also resulted in greater profits...