Archive for December, 2005

When the good guys win

What I like most about having real business people come talk to us is the reassurance that the good guys don’t have to lose. You can do good business without selling your soul. At the December intensive I got two great stories.

The first is from our Friday night speaker (you could have been there! Open to the public!) David Van Seters, founder of Small Potatoes Urban Delivery (SPUD). He talked about growing the company and how a grocery business has to operate on super thin profit margins. In their first, struggling phase, he worked with a number of business consultants and the one that really struck him was the one that said: “if you can’t tell me off the top of your head what the five key measurements are that you need to track, you don’t know what you’re doing.” He said identifying just those few was indeed key.

Because they define their primary business mission as spreading the practice of buying locally and building sustainable local food systems, their attitude about competitors was to be friendly. In that larger mission, they’re really co-conspiritors. At one point, a local competitor called them up and asked how they had added credit card processing to their website. David said he told them: who he had dealt with, what he thought they should look for in reasonable fees and what some challenges might be. Definately not out of the traditional business handbook. The payoff came a couple years later: in this tough business there was growing consolidation and when that particular competitor decided he was done he called SPUD first. They ultimately negotiated a merger/buyout. Score one for the good guys: in a new field with lots of little competitors, playing nice can position you well for the consolidation rounds.

I was also delighted this intensive to meet a long-time hero of mine: the developer of Crossroads Mall, Ron Sher. I’ve long admired Crossroads for being a creative community center: the food court is all small businesses, there’s an open-mike community stage, it’s very family friendly. Perhaps in part Ron has had to make lemonade out of lemons – he’s only 4 miles from Bellevue Square where developer Kemper Freeman makes everyone sign a non-compete clause in their lease that keeps them from opening another store within 5 miles. Still, it pays off for Crossroads which is a great place to be. So great that now that I live in downtown Seattle I won’t cross the bridge for Bellevue Square, but I will for Crossroads. Ron has continued that community focused ethic with Third Place Books in Lake Forest Park and Ravenna Third Place in Ravenna.

Ron’s story is about how it came to be that Crossroads has both a Michael’s Craft and Jo-Ann Fabrics, practically head-to-head. In my opinon, it’s great – it makes those two stores and Crossroads the go-to place when I need any kind of crafty bits. However, when Michaels first discussed signing a lease, a no-competitors clause was definately part of the bargain. Apparently that was only the beginning, because Michaels was so aggressive in their lease negotiation that Ron ended up walking away. I am beginning to believe that if you’re a win-win negotiator working with a win-lose negotiatior, that may be your best (and only) choice: walk away. Ron instead brought in a 2nd-tier craft store, I believe it was called Treasure Island. He offered them his lease, which he considered very fair, and they simply accepted it. Lo and behold, within a year, Michaels bought out Treasure Island and converted their stores. He ended up with both his Michaels store AND his lease terms. Not long after, Jo-Ann came calling and thus Crossroads became the ultimate craft destination.

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One of the movies recommended by fellow BGIers was: “The High Cost of Low Prices”. I ordered a copy and I’ll watch it over the holidays. In the meantime, I’ve caught a wave surfing on the now famous Wal-Mart memo about healthcare benefits. You can find the NYT article that brought it to national attention as well as a copy of the original memo here:


In the intial reporting, much attention was drawn to the suggestions for reducing employee obesity by making employees gather carts, as well as using that as a technique for discouraging unhealthy employees from applying or staying. However, that allowed us to be distracted from far more interesting information that backs up the claims that Wal-Mart underpays its employees and ends up supported by government.

Quotes from the memo:
“Wal-Mart has a significant percentage of Associates and their children on public assistance.”
“In total, 46 percent of Associates children are either on Medicaid or uninsured.”

It’s interesting that later in the memo when it discusses option for improving employee access to health insurance, the author notes that such changes will be expensive and so they’re doing rigorous testing to determine if it will “move the needle” on Wal-Mart’s reputation. That’s it, that seems to be the only consideration. So I guess reputation is a useful leverage point and that’s nice to know. Clearly any kind of absolute consideration for the well-being of employees doesn’t seem to factor in, perhaps because they don’t know how to connect it to the bottom line. It’s also disappointing that in discussing their unhealthy workforce, the solution is to attract a healthier one, rather than try to improve the health of the employees they have.

While the health care coverage they offer is expensive relative to what they pay and therefore many employees & dependents aren’t covered, a couple assertions from the memo support my belief that these days many people are working primarily for healthcare coverage:

“On average, Associates spend 8 percent of their income on healthcare (premiums plus deductibles plus out-of-pocket expenses) for themselves and their families, nearly twice the national average. […] In 2004, 38 percent of enrolled Associates spent more than 16 percent of the average Wal-Mart income on healthcare.”

and earlier:
“Most troubling, the least healthy, least productive Associates are more satisfied with their benefits than other segments and are interested in longer careers with Wal-Mart.”

Those two facts, that 1) the unhealthy people are the ones most interested in the jobs and 2) many employees spend a huge percentage (4 times the national average!) of their salary on the health benefits, combine for me to emphasize that access to health benefits is what currently attracts employees to Wal-Mart’s crappy jobs, and I believe in general to crappy jobs.

It’s not too late, take the Wal-Mart-free-Holiday Pledge!


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