• Trader Joe’s is roughly the same size as Whole Foods. It is owned by Germany’s Albrecht family but still managed by its founder.

• The company is very selective about where it puts new stores. It’s only adding five locations this year. It looks at demographics to choose sites in places that fit its distribution infrastructure.

• Trader Joe’s offers a limited selection of products. Typical grocery stores carry 50,000 SKUs; Trader Joe’s sells about 4,000, about 80% of which bear the store brand. “With greater turnover on a smaller number of items,” Fortune writes, “Trader Joe’s can buy large quantities and secure deep discounts. And it makes the whole business—from stocking shelves to checking out customers—much simpler.”

• Trader Joe’s pays its suppliers on time without the extra charges for advertising, coupons, or slotting fees that other supermarkets charge.

• The company buys directly from manufacturers that ship straight to Trader Joe’s distribution centers, which ship daily to stores. The stores don’t carry much inventory so ordering must be precise.

• Store managers can make low six-figure incomes while full-time employees can start at half that, and Trader Joe’s annually contributes 15.4% of employee’s gross income to tax-deferred retirement accounts.

• Trader Joe’s is becoming more corporate. As a former employee observed, “You have to grow up at some point. You have to start following rules. You have to start putting in checks and balances.”

It’s becoming more systematic in its approaches within a culture that has been very successful. As the article notes, “A Trader Joe’s brings with it good jobs, and its presence in your community is like an affirmation that you and your neighbors are worldly and smart.”

So that’s why they put a Trader Joe’s in my hometown.

To read more about successful cultures, click on these articles:

• A Baldrige Leader
• What Great Organizations Achieve
• Zappos and a Sustainable Culture
• Guided by Your Culture
• Sustaining the Culture
• 2009 Baldrige Award Winners

Now an unlikely company has brought in trainers from the Ritz to show their dealers how to create a consistent sales experience and create loyal customers. The company? Cadillac.

According to an article in Bloomberg Businessweek, “Cadillac has copied Ritz’s pocket-sized ‘Credo’ cards, which explain how customers should be treated.” Cadillac service managers now have greater flexibility to “wow” customers. One dealer in the Chicago area gave employees $300 to $500 in “wow” money, which may be an iffy proposition if the employees haven’t been trained in how to dole out that money responsibly. The last I heard, new employees at the Ritz receive more than 250 hours of training in their first year of work, and a good part of that training is in customer service. Without the training, the “wow” money may just become, “Wow, look at all the money we wasted.”

It’s all about the culture and the management system. Companies that try to emulate one chunk of a world-class system without having the culture and the other key elements of the system in place may see short-term improvement, but it won’t last. The system will absorb the change and return to the way things used to be. It will snap back. You cannot change a culture—you cannot improve just customer service or just employee engagement—without changing the system.

Hopefully, Cadillac understands that since it has something else in common with Ritz-Carlton: It also won a Baldrige Award. Unfortunately, that was 20 years ago. My guess is that little remains of the leadership and management system of those glory days.

Click here to read the Bloomberg Businessweek article, “What Cadillac Is Learning from the Ritz,” by Jeff Green and David Welch, June 17, 2010.

To read more about Ritz-Carlton, click on these articles:

• Leaders in Customer Service
• World-Class Employee Orientation
• Ground Zero for Customer Service

It’s the third question asked by the Baldrige Criteria. Poudre Valley Health System focuses on its culture of engagement and innovation. Iredell-Statesville Schools is committed to a culture based on the principles and practices of performance excellence. The City of Coral Springs expresses its culture through four core values: customer focus, leadership, empowered employees, and continuous improvement.

The key characteristics of the cultures of these and other Baldrige Award winners are very similar.

Zappos went in a different direction, and its unusual culture is attracting a lot of interest, as Christopher Palmeri described in “Zappos Retails Its Culture” (BusinessWeek, December 30, 2009). Sixteen times a week, the online shoe retailer leads groups of 20 guests through its suburban Las Vegas headquarters. Last summer, Zappos started offering $4,000 seminars “on how to recreate the essence of its corporate culture.” It turns out that your culture can be a competitive—and financial—advantage.

Here’s an example of that culture. Zappos pays its call-center operators $11 an hour. No bonuses. No 401(k) matching funds. The CEO believes “the most productive employees work for the psychic gratification in helping others,” which sounds like a convenient rationale for not paying them what they’re worth, but they seem to buy into it.

On the plus side, Zappos’ customer service reps can spend as much time as they need helping a customer, which may include writing thank-you notes, sending flowers, or directing customers to rivals when Zappos is out of stock. Since Zappos has been recognized for customer satisfaction, this approach appears to work.

As Zappos grew, it formalized the culture by identifying its key characteristics, which it defined in 10 core values:

1. Deliver Wow through Service
2. Be Passionate and Determined
3. Embrace and Drive Change
4. Build a Positive Team and Family Spirit
5. Do More with Less
6. Pursue Growth and Learning
7. Create Fun and a Little Weirdness
8. Build Open and Honest Relationships with Communication
9. Be Adventurous, Creative and Open-Minded
10. Be Humble

The company hires to these core values and 50% of every employee’s annual review is based on them. Considering they’re paid $11 an hour, customer service reps should get the highest rating on #5.

Two questions come to mind: Is such a culture sustainable? Can a culture created by an energetic startup serve a larger and growing company? Well, three questions: At what point is making a good living worth more than working in a cool place?

To read more about organizational culture, click on one of the following articles:

• The Priorities of Leadership
• Why Organizations Fail
• 4 Parts of True Sustainability

P.1a in the Organizational Profile asks fundamental questions about your operating environment. A few are easy to answer, such as what products and/or services you offer and how you deliver them. Others require more thought:

• What are the key characteristics of your organizational culture? You may not have thought much about this. For most organizations, culture is what happens when you’ve been around for awhile. Key characteristics others frequently mention include a focus on customers/patients/students, empowered employees with few levels of management, extensive use of teams, promoting innovation throughout the organization, valuing employee safety, and pursuing world-class quality and cycle time.

• What are your core competencies? How do they relate to your mission? Core competencies are your organization’s areas of greatest expertise that help you fulfill your mission and differentiate you from your competitors. If your core competencies don’t align with your mission, you’ve got a problem.

• What are the key factors that motivate your employees to engage in accomplishing your mission? Later, the Criteria ask how you determine these factors, so don’t just pull them out of a hat. High-performing organizations often pull their lists of key factors off employee surveys after systematically verifying that the factors addressed by the survey do, indeed, affect workforce engagement.

The Organizational Profile is the foundation upon which a Baldrige assessment is built. Everything that follows is supported by and linked to the information the Profile seeks.

You can read all of the questions in the Profile in the Criteria booklets, which are available online here.

To learn more about these questions, read:

• What Are Your Organization’s Core Competencies?
• The Baldrige Criteria
• Criteria Structure
• 10 Tips for Answering Criteria Questions

Every decision violated one or more of the stated objectives.

He then evaluated the decisions to see if he could figure out what objectives they served and he found that 92% of the decisions supported one objective: To maximize the wealth, security, and quality of life of the people who made the decisions.

If you think such behavior is limited to the business world, think again. Ackoff, who was a professor at Penn, was so bored at faculty meetings that he documented what they discussed for two years. The word “student” was mentioned once. According to Ackoff, “Teaching is the price the faculty must pay for the quality of life it wants.” He adds: “If you think this or any other university is dedicated to teaching students, you’re wrong. It’s about maximizing the quality of life of the faculty.”

Who does your organization serve?

To transform your organization, you must understand what the organization is pursuing, not what it says it’s pursuing, change those objectives, and design a new system to meet them. Ackoff quotes Peter Drucker, who said, “There’s a difference between doing things right and doing the right things.”

If you do the wrong things right, you will still fail.

You can watch Ackoff’s 30-minute speech at the end of an article on the Huffington Post here.

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I saw the parallels between Lean and Baldrige a few years ago when I contributed to a book on Lean called The Antidote: How to Transform your Business for the Extreme Challenges of the 21^st Century. The book’s authors, Anand Sharma and Gary Hourselt, are senior leaders at TBM Consulting Group, a global leader in business performance improvement and the effective implementation of Lean. In a section of the book that defines transformational management systems, Sharma and Hourselt seem to be describing a Baldrige organization:

They execute superbly. To integrate a new management system, an organization has to change. Roles and responsibilities change. Expectations change. The culture changes. To successfully manage this change, companies must execute their plans day after day, month after month, and year after year. This isn’t another “flavor of the month.” It’s not a short-term commitment.

Baldrige, like Lean, is more than just an improvement tool: It’s a way of thinking. Organizations are transformed by integrating the Baldrige model. They think and act differently and they, too, “execute superbly.”

Several Baldrige Award recipients use Lean to improve the quality and cycle time of their processes. It’s a good fit.