Question

For the best Parmesan cheese for one’s chicken parmigiana recipe, one might try Wegmans, especially if one happens to live in the vicinity of Pittsford, New York. Cheese department manager Carol Kent will be happy to recommend the best brand because her job calls for knowing cheese as well as managing some 20 subordinates.

Wegmans Food Markets, a family-owned East Coast chain with over 80 outlets in six states, prides itself on its commitment to customers, and it shows. It consistently ranks near the top of the annual Consumer Reports survey of the best national and regional grocery stores.

Kent and the employees in her department also enjoy the best benefits package in the industry, including fully paid health insurance. And that includes part-timers, who make up about two-thirds of the company’s workforce of more than 37,000. At 15 to 17 percent of sales, for example, Wegmans’ labor costs are well above the 12 percent figure for most supermarkets.

Besides, employee turnover at Wegmans is about 6 percent—a mere fraction of an industry average that hovers around 19 percent (and can approach 100 percent for part-timers). And this is an industry in which total turnover costs have been known to outstrip total annual profits by 40 percent. Wegmans employees tend to be knowledgeable because about 20 percent of them have been with the company for at least years, and many have logged at least a quarter century.

Wegmans usually ranks high on Fortune magazine’s annual list of “100 Best Companies to Work For.” In addition to its healthcare package, Wegmans has been cited for such perks as fitness center discounts, compressed work weeks, telecommuting, and domestic-partner benefits (which extend to same-sex partners).

Finally, under the company’s Employee Scholarship Program, full-time workers can receive up to $2,200 a year for four years and part-timers up to $1,500. Since its inception in 1984, the program has handed out $80 million in scholarships to more than 24,000 employees.

Granted, Wegmans, which has remained in family hands since its founding in 1915, has an advantage in being as generous with its resources as its family of top executives wants to be. It doesn’t have to do everything with quarterly profits in mind, and the firm likes to point out that taking care of its employees is a long-standing priority.

Think It Over

1. Why does Wegman’s approach to compensation seem to work so well?

2. In your opinion, why don’t other grocery chains use the same compensation model as Wegman’s?

Answer 1

Answer: Wegman offers a compensation package to its workers that is unmatched in the industry and is well above the industry average. This enables the company to create a fair image at the marketplace and attract right talent and retain it. When the employees are well paid they get a sense of equity where they feel that their compensation matches with their efforts. This creates motivation and job satisfaction in the employees and is one of the reasons that the approach to compensation package at the company works well. The employees know that they will not get such benefits like fully paid health insurance, telecommuting and so on at other places. This creates a positive employer branding for Wegman and a competitive advantage in terms of compensation.

There may be two reasons why the other retailers are not using such packages. Firstly they do not realize that providing good compensation package can result in creating a good image of the company and can reduce costs from the high turnover rates. Secondly the other organizations are mainly focused on profit margins and see good compensation as a cost that reduces their profitability.