Zingerman's Deli Serves Up Employee Engagement — and a Killer Reuben
by Lilly O’Donnell
In Ann Arbor, Michigan, complete transparency and employee empowerment have turned a small corner deli into a $60-million collection of community-driven businesses.
When a dishwasher at Zingerman’s Roadhouse pointed out that customers were throwing away a lot of french fries, the restaurant cut the portion in half and instead offered free refills, cutting costs by thousands of dollars per year. It was a simple solution that saved money, cut food waste and made customers happier (who doesn’t love a free refill?). At most restaurants, a dishwasher wouldn’t necessarily be in a position to offer opinions about food portions, but the Roadhouse, part of Ann Arbor, Michigan-based specialty food company Zingerman’s, isn’t most restaurants. The entire company is run using the open-book management (OBM) system, in which everyone in the organization participates in running the business — from reviewing the financials to making big (and small) decisions.
“With a few exceptions of private issues that needs to be dealt with, all of our formal meetings are open to anyone in the company who wants to be there,” says Zingerman’s CEO Ari Weinzweig.
When Weinzweig and partner Paul Saginaw opened Zingerman’s Deli in 1982, their goal was to create a great traditional Jewish deli and specialty food shop. Little did they know that over the next quarter-century, they would build a local institution celebrated in Ann Arbor, with fans around the world, that would expand to the Zingerman’s Community of Businesses (ZCoB), 10 food-related entities and ancillary companies that embrace OBM and focus on driving success in the local community.
At the original Zingerman’s Deli location in Downtown Ann Arbor, weekend morning lines regularly stretch down the block and around the corner, as loyal locals, hungry college students and tourists alike cue up to sample gourmet goods and chow down on legendary pastrami sandwiches. Employees saunter down the line offering free samples and chatting customers up about new arrivals. Food critics from far and wide have sung the praises of their slow-cooked meats, and President Obama even stopped in a few years back. Zingerman’s also became known to movie fans around the world after its starring turn as Jason Segel’s Ann Arbor workplace in 2012’s “The Five-Year Engagement.”
The company has since added the BBQ-focused Zingerman’s Roadhouse, fresh breads at Zingerman’s Bakehouse, cheeses at Zingerman’s Creamery, a coffee shop, catering company, mail-order business, 42-acre farm, and even a consulting company to train other business owners on the “Zingerman’s model.” In 2003, Inc. magazine named Zingerman’s “The Coolest Small Company in America,” and today, ZCoB employs 600 people and generates roughly $60 million in annual sales.
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At around the same time Zingerman’s was opening its doors back in 1982, Jack Stack and 12 co-workers closed a leveraged buyout of SRC, a failing engine shop in Springfield, Missouri. The origins of OBM were formed as Stack, in a move that was even more revolutionary then than it is today, created meticulous quantitative reports of company and individual performance and shared that data with employees so they could all understand the impact of every decision and work together to save the company. The move worked, and SRC’s sales grew 40 percent annually shortly after the buyout.
Stack wrote about OBM’s success at SRC in the 1992 book “The Great Game of Business,” and later developed an entire suite of training and resources supporting the OBM methodology. According to a 2010 article in HR Magazine, managers from more than 4,000 companies have engaged in the training, and research from Denison Consulting found that companies using the method had more productive and more positive cultures, and scored 35 percentage points higher, on average, across culture indexes including teamwork and customer focus.
To some, the idea of complete transparency may seem daunting, but according to Weinzweig, it’s the traditional, closed-door method that doesn’t make sense. As he sees it, “Anyone throughout any organization is making hundreds or thousands of decisions every day, but they’re missing a lot of information,” he says. “There’s a lot of wisdom that everyone brings to the table, so when you exclude 80 or 90 percent of the people, you’re going to diminish the quality.”
“Who knows what the customers want,” Weinzweig adds, “the owners, or the people serving the customer?”
Weinzweig notes that in addition to tapping into the on-the-ground knowledge of the workforce, the open-book method also gives employees a greater sense of ownership of the company, making them more accountable and invested in its success and better equipped to ensure that success.
“Open book creates an organizational culture of respect for each individual and their capacity to contribute to the success of the business,” adds Gauri Thergaonkar, a community builder for Zingerman’s training program, ZingTrain. “I love working for a place that values what I bring to the table and better yet, expects me to bring it to the table.”
Of course, no matter how great a system is, it’s easier said than done to completely change the way people were taught to think about business. “People at all levels need to really commit to the system and stick with it diligently for at least six months — and more like a year or two — before it sinks in enough to really work,” Weinzweig points out. “Not everybody comes [to every meeting],” he says, “but the difference between choosing not to participate, and not being allowed to, is night and day.” Even when employees don’t actively participate in decision-making, the fact that they are trusted to do so goes a long way toward fostering a positive work culture.
When asked about the OBM approach, Billie Lee, a Zingerman’s web developer, says “It’s incredibly empowering. It helps front-line staff think like owners and make smart choices every single day that will make our company more successful.”
This success is borne out in Zingerman’s substantial product line, profits and headcount — Zingerman’s ranks in the top 10 percent of all firms practicing OBM, which is a critical part of their ZingTrain offering. A two-day course titled “Open Book Management: Zingerman’s Approach to Bringing Finance to the Front Line!” teaches business leaders how to integrate the philosophy at their own firms.
“Once in a while, I wonder what it would be like to work for a traditional company that clearly defined roles and kept information in silos,” Lee says. “It would be so easy, and I wouldn’t have to worry about anything except what was right in front of me. But I don’t think I could ever go back. Ignorance is bliss, but knowledge is power.”