10 Ideas For Our Bank We Got From Wegmans

Learning from non-banks
LEARNING FROM NON-BANKS

Last week we tagged along with The Bank of Charles Town (BCT) crew who, like us, are heavy believers in “cultural tours.” BCT used a series of these tours to kick off their strategic planning season with the purpose of grabbing ideas that could spark creative thinking. Almost every time we debate if it makes sense to put the crush of our To-Do List on hold for a day and spend time at an unrelated industry. Fortunately, every time we come back from one of these tours, we have a list of tested ideas that end up saving us countless hours. We distilled the ten best ideas that we are considering putting into action.

 

Why Wegmans?

 

In case you are not familiar with the grocery chain, it is perhaps our favorite shopping experience. Don’t take our word for it - Wegmans has ranked number one (ahead of Publix and Trader Joe’s) for the past three years by the Market Force Survey of 13,000 shoppers. More importantly, it is ranked in the Top 100 Best Companies To Work For (ranked #3 behind Hilton and Salesforce) by Fortune Magazine and has for the past 22 years, one of only three companies in America that can make that claim. The Company excels in almost every major grocery store metric, and its Buffalo Chicken Wing Soup is life-changing.  

 

Various pictures of the Wegmans' Tour

How The Grocery and Banking Industry Are Similar

 

While the grocery and banking industry are vastly different, it is important to recognize the similarities for the sake of this analysis. Both are highly customer-focused businesses that rely on employees for the bulk of their brand experience. Like banking, one of the keys to success in the grocery business is the ability to hire, retain and manage employees. The level and sensitivity to the variable cost of labor are about the same.

 

While the grocery industry has more product “lost leaders” where margins are hyper-thin, the product mix of low margin to higher-margin products is about the same for a shop like Wegmans which is one of their keys to success.

Because of this cost structure and customer dynamic, it is no surprise that the breakeven on a new market and a breakeven on a new branch, are about the same in a “normal” interest rate environment. All this adds up to the conclusion that what accounts for the bulk of Wegmans’ success is how it hires and treats its employees.  

 

Our Top Ten Ideas

 

Celebrations and Competitions: Wegmans keeps things fun. Where a bank might have a celebration a couple of times a year, Wegmans’ stores are celebrating something every week. Maybe it is the most fundraising, the most cheese sold or record traffic, whatever it is, management goes out of their way on a daily basis to catch their teams doing things right and then reinforcing that behavior with a celebration. The Company also augments that by seasonal competitions such as the fastest checker, the fastest bagger, and more. The culmination of the above not only provides a steady stream of energy to keep employees engaged, but also serve up a variety of teaching moments to reinforce company values and lessons. When is the last time your bank celebrated a win or created an event for engagement?

 

Show Total Compensation: Wegmans figured out something that almost every bank overlooks – talk total compensation to a new hire and show them the future. In banking, we tend just to talk salary and we keep items like benefits and bonuses vague. One key to their hiring success is to show both the base salary, but total compensation together. Wegmans has some of the best benefits in the industry which acts as a fabulous retention tool but could hurt them if the prospect didn’t understand the full comparison. By showing a total compensation number along with a base salary number, Wegmans’ can do a better job at recruiting.

 

Intern/Associate Program: The Company aggressively recruits college students and keeps them coming back year after year by offering $1,500 in tuition assistance if they work over some 250 hours per year. Not just targeted at summer but holidays when the students return home which helps not only provide needed assistance for Wegmans during the busiest of times but also keeps the student engaged and learning throughout the year.  The result - Wegmans has a college student retention rate year-over-year at about ten times greater than banks plus hires on a larger percentage of these students into permanent positions. 

 

Various pictures of our Wegmans' tour

Cross-train: Like banking, grocery chains often have an issue with “silo-fication.”  To get people out of just thinking about their departments, Wegmans not only has a training program that rotates management candidates, but cross-training into different departments is required for almost all positions. In banking, the percentage of employees that have stayed in their departments their entire career is around 70%. At Wegmans, that number is closer to 0%. While having knowledge of different departmental skills is important in case you have to fill in (which often happens as a way to more efficiently manage labor costs), what cross-training really does is give managers a deeper appreciation of what they are managing while giving managers empathy for the problems each department is facing.

 

Margin Management by Product Mix: Wegmans’ management is crystal clear on product margins and knows which mix to push. Margins on everyday products like milk are kept low to get traffic into the store. Meanwhile, the Company expertly cross-markets ready-to-eat meals and specialty products where larger profit margins are to be had. As a result, Wegmans’ enjoys higher than average margins compared to many chains. Contrasts that with bankers that don’t know the margins of even their most basic product such as a retail checking account.

 

Unique Products: Wegmans understands how easy it is for their grocery store to be commoditized and like any other chain. This is why they go out of their way to not only bring unique products to their customers but help build demand. For example, last month was their annual Hatch Chili month. They bring in the New Mexico treat and make a variety of recipes every week while using the event as a backdrop to tell stories and educate the customer base as to the history, heat/sweet balance, varietals and growing. The result – each store pulls in customers from a larger geographic area that drives past multiple other stores so they can stock up and freeze the famous Hatch Chili. The move not only increases sales and provides a level of service the supports wider margins, but provides a differentiating product to come to Wegmans before Teeter Brothers.

 

Management By KPIs: “Revenue is for the Company and is a byproduct of making the customer happy,” we were told. Further, “Each department manager has a set of KPIs where the customer is first.” While banks manage overall net interest margin, efficiency and cost of funds, customer-forward companies like Wegmans track and evaluate on KPIs where the customer lives are made better. For example, “Front of House” managers have a key performance indicator (KPI) that strives for getting groceries from storage to curbside for pick-up orders in under five minutes. It is no surprise that the average is three minutes since it is managed and track and online pick-up satisfaction is high.

 

Employee Minded Management Goals: Every manager is evaluated along five lines – Department sales, contribution to overall store performance, employee retention, diversity, and employee development. When three and a half (the contribution piece often revolves around the employee engagement in other departments) goals of five are around the employee, it is no wonder why Wegmans has an enviable 3% turnover rate compared to the industry’s 30%. Wegmans supplements those goals with also always having two employees per store whose additional job it is to represent the employee. These “employee advocates” are to ensure the voice of the employee is heard in every major decision, and there is a clear channel to raise staff problems directly to senior management. As we travel around to different banks, hiring talent is often the number one challenge yet few banks make hiring, development, and retention the goal of every manager and instead leave the bulk of the work to Human Resources.

 

Hiring: This one has caught on with banks over the last ten years, but Wegmans was always on the forefront of ignoring skill and aptitude when hiring and basing 90% of the hiring decision on attitude and culture.  Wegmans has such a strong training program that they figure they can train anyone on how to run a store, but you can never train someone to care about the customer or to have grit.

 

The $10,000 Questions: For a high-end grocer, each customer has a cumulative lifetime profit value of about $10,000. To keep the customer coming back, Wegmans trains on two important questions – one for the customer and one for the employee. For the customer, the question that everyone is trained to ask throughout the store is derivations of “Did you find everything you wanted?” That questions not only makes sure the customer is satisfied but is the perfect opening for engagement in order to have a conversation with the customer to make sure their expectations are being exceeded. For the employee, managers will often ask, “Is that how you wanted that customer interaction to go?” The question sparks a constant stream of self-assessment and forces the employee to have more intent with their interaction with the customer guiding them to a place of satisfaction.