At Chobani, Now It’s Not Just the Yogurt That’s Rich(nytimes.com) |
At Chobani, Now It’s Not Just the Yogurt That’s Rich(nytimes.com) |
This story reminds me tangentially of the time when Hewlett and Packard, when faced with a downturn at HP, decided to cut pay across the board so the company could avoid layoffs. Once HP recovered, I'm assuming they reinstated previous salary levels and then some. HP then benefited from a highly committed and skilled workforce who deeply respected their leaders and company.
Unfortunately, these stories reflect the (very rare) exception and not the rule. Today, we're much more likely to see CEOs and executive teams earning (multiple) millions in salary and options, all the while they are outsourcing jobs, implementing layoffs, converting full-time jobs to contract and part-time jobs, and so on. These CEOs are extracting as much wealth as they can, at the expense of their employees.
We desperately need more ethical, bold leaders like Ulukaya, Hewlett, and Packard who are going to shape the future of business; a future that is kinder, compassionate, and community-minded.
It mystifies me that cutting pay instead of getting rid of deadweight is seen as noble or honorable.
If I were working at HP, I would have quit the second they decided to cut my pay just so they could avoid needed firings.
I sympathize with your viewpoint, but I think it depends on whether you see dead weight. If you are on a great team with no dead weight, a pay cut to keep everyone together would be far more palatable.
Ditto for GM when they offered all union employees the same (formula for) buyout from their contracts -- the best ones take it and leave because they'd get the money and the new job; the poor performers know they can't last anywhere else and stay on.
Hell, for that matter, why do you assume that you wouldn't have been among those deemed "dead weight" and laid off?
From an ethical point of view, outsourcing is great. It provides jobs for people in poor countries.
I disagree. Even in today's global economy, the country in which a business is based seems to have a significant effect on its prospects. In 2014, 19% of US households with children were food insecure , and 46.8 million people were in poverty [1]. Given the widespread poverty right here in the US, is it ethical for US companies - that benefit to at least some degree from being based in the US - to export jobs to other countries?
[1] http://www.feedingamerica.org/hunger-in-america/impact-of-hu...
Where is the mass employee outrage and "voting with our feet" for the wage suppression some of our largest employers supported? We can all have high minded ideals but at the end of the day our options are often VERY limited, as few would willingly take a massive pay cut for their ideals, especially given the inherent commons problem in that many people would need to do so simultaneously for the powers that be to "Feel" it.
How do we actively motivate this change when most of the power and incentive dynamics are _not_ in the employee's favor? (I mean this as an honest question, I don't see any easy answers)
The turnaround is a nice reminder that running a business sometimes requires ignoring the people whose job is to second guess and critique your every move.
No way this happened.
At least that's my impression of employee owned businesses, it seems like a smart economic move.
I wonder how they set this up tax-wise. Stock grants are income, even before you sell. In tech companies, you typically get the stock when it's super cheap, so the tax hit is minimal. But here, since the value's pretty firmly established, the employee is potentially on the hook for quite a bit. And depending on the details of the grant, it may not be possible for employees to sell off their stock to pay taxes.
There are several ways to solve this. The employees could be getting options (set up so taxes are deferred until they exercise). Or the company could just eat the tax themselves. But kind of curious which route they took.
Just to be clear, RSUs are taxable as income at the value & tax year they vest, not the grant date.
Here is some background information - don't grt me wrong the move is great but as any great move there are a few more implications:
1) tpg loaned 750mn to bail out idaho plant to Ulukaya.
2) as part of the deal tpg has warrants against hamdi's own stock.
3) tpg try to oust hamdi once, the gidt cements his role as a ceo as employee love and support to him is boosted.
4) tpg's warrants are diluted since hamdi gave out 10% of his own stock. Essentially now the options can address 90% of hamdi's stock.
AGain a great chess move.
Your move tpg.
Edir: typos due to mobile.
How did that happen? How would the 10 percent given to the employees not be included in the 20% of the TPG contract?
From TFA: "He said that giving his employees a stake in the company’s success was among the terms he demanded when the deal with TPG was struck."
As a thought experiment, I wonder what might go well or poorly in this case?
The publicity is great. Employee loyalty from gratitude and vesting. It may afford a near-term competitive advantage from capabilities like increased willingness to work overtime or rallying together during an opportunity/crisis. Real information may flow more freely as employees feel a safety/pride of ownership and connection to management.
How will new employees feel about working alongside someone with much greater compensation? Existing employees may immediately face this - since shares were dolled out by tenure, employees with several years' tenure may see themselves as rich vs. newer folks and vice versa.
As vesting completes, experienced employees may depart as they become financially independent. Or perhaps the windfall will inspire lifetime loyalty.
Will there be problems at competitors, whose employees are marginally less satisfied, knowing their counterparts at Chobani are treated so well?
Overall an inspiring and kind program. I'm excited to see it play out.
Profit sharing and employee ownership aren't really new concepts. Lots of different companies have been providing such opportunities for a long time, especially for senior employees, so it's unlikely to be controversial.
Airplanes are big complex systems, so I get that, but yogurt?
Edit: Apparently I rubbed some folks the wrong way. I didn't mean to think I could do better, I just meant it's a wild thought that something so "simple" as yogurt could require so many people to make.
You guys probably know about "I, Pencil", but it's a good read if you haven't heard of it: http://www.econlib.org/library/Essays/rdPncl1.html
I wonder if it's a bubble or whether they can compete. It doesn't taste much different to the existing products, and costs more.
And how many employees would it take to distribute, market, package, ship, sell, QC, etc?
(By contrast Proctor and Gamble has about 110,000 employees.)
You asked an admittedly ignorant question, but it was somewhat interesting. It's a nice reminder that most of our economy still does depend heavily on the labor of many humans.
I would love to see a breakdown for their employees and what their roles are spread throughout the company. Also how many manufacturing locations they have (I thought it was just one).
[1] http://www.foodbusinessnews.net/articles/news_home/Business_...
Thats what working capital is for.
In any event, I wasn't maligning Chobani, just expressing my surprise.
Even if that equity is depressed in value for a bit. `Bailing-in' creditors is actually a common technique for financially struggling companies. Employees are a kind of creditors.
I've never seen any large company which didn't have at least some employees whose value was less than their salary. Frequently, such employees can even confer negative value.
Moreover, even if you don't have any deadweight, you do have an ordering of employees. Your top employees are the ones most able to find a job elsewhere and hence very unlikely to accept a pay cut.
> Hell, for that matter, why do you assume that you wouldn't have been among those deemed "dead weight" and laid off?
I don't. Even if I were supposedly in the "dead weight" I would rather be laid off, get severance, and find a new job which would pay me the salary I had negotiated previously. A pay cut is changing the terms on which I agreed to work and would frequently push the job below my BATNA.
That's pretty typical of branded product. And sometimes the difference is worth it and sometimes not.
The broader thing that I find pretty impressive is how Greek-style (i.e. thicker) yogurt has gone from this thing I could pickup at Trader Joe's or Whole Foods to being the dominant yogurt style at Walmart in just a few years.
Greek yogurt should be hardly sweet, extremely tart, and so thick it almost makes you thirsty -- as you can see where I am going, not something that fits the pallet that giant food has crafted for the average american (I.e fill everything with sugar) which is why I think Chobani has beaten Fage in the US, beacause of it's smoother consistency and slightly sweeter taste.
Anyway for anyone that wants to taste the real deal - take a gallon of milk (produced without antibiotics), boil, wait to cool to 48 C, add starter,wrap in a blanket, wait 1 day, put cloth on a mesh strainer, put the resulting yogurt in the strainer, wait.
DO NOT THROW AWAY the strained liquid - the so called acid whey. When chilled to the point of freezing it is great refreshing drink.
Your two arguments appear to be:
1. There is poverty in the US. Of course there is. But there is much worse and much more widespread poverty in nearly every other country in the world.
2. Companies "benefit to at least some degree from being based in the US." They also benefit to at least some degree from the economic participation of hundreds of other countries. Even if "that poor person in Asia hasn't done anything for me, so I'm gonna give my money to someone ten times richer" were moral (which it's not), it's not even true that that person has done nothing for you.
Yes, outsourcing employs poor people elsewhere, but at 1/100th the cost. So the overall transfer of wealth is reduced, and global wealth gap increased. Also, given the intricacies of economic development, it is debatable whether an influx of outsourced jobs and factories (which may feed workers, but hinder formation of local industries) is better for the poor of that country. Just pointing out that it's not so easy to make a claim that outsourcing is categorically better for poor people anywhere, all things considered.
As far as I remember, foreign direct investment has a pretty good track record in terms of helping countries develop. (As opposed to eg loans to businesses or government. Loans can plausibly lead to financial instability, when the hot money comes in and again when it leaves.)
In my own country of S. Korea, the greatest economic boon of the 60s and 70s was mobilization of our cheap labor to create and export ourselves goods like wigs and textiles, plywood, etc. This allowed local corporations to reap the margins, and the profits stayed within the country (chaebol are another matter...). With outsourcing, the profits go the multinational corporation, and none of the increased margins made possible by the cheap labor ever gets distributed to the country of the laborers.
I think your mind is a little bit stuck in the SF bubble.
I'm sure you meant no harm, but please don't make unfounded personal comments like that. They have a high probability of being taken ill and provoking defensive reactions. And they add no information, except perhaps information about the commenter's assumptions.
The reality of the situation is that there are at least thousands of different large-scale manufacturers worldwide across all possible industries that employ thousands of employees on up each. This is basically the history of the industrial/manufacturing revolution that we're talking about here. This should be common knowledge, and if it's not, the most helpful solution is to go learn more about it. NO OTHER industry is like software engineering, where all it can take is a dozen hackers to yield a billion dollar startup. Reacting in surprise that there exists a single manufacturing company of that scale in employee count, when in fact there are thousands, indicates that yes, you might be in a bubble.
Manufacturing per product is typically limited to few locations (likely 1 location for this company as far as I can tell). Yeah it's a lot of work but I'm curious as to what their make-up is as far as employees go. Reading up on a lot of logistics it seems like they could get away with 1,000 so I'm curious as to what those 2,000 do :)
> If you think 2,000 employees is a lot, wait until you see how many employees a company like Ford has
Seems like an apples to organges comparison. Ford does R&D on vehicles which include a vast amount of complex parts but they also do manufacturing all across the world, various offices to manage this and work with partners, dealer inspectors, etc. Ford has multiple products that all are incredibly high in complexity next to yogurt.
I'll echo the GP post - I'm a bit surprised at the amount of surprise. Maybe we need to be doing a better job of educating people about these things (or conversely, maybe we need to do a better job of sticking our heads outside our respective bubbles).
Obviously cars and yogurt are not directly comparable, but I'd wager they have similar dimensions of complexity - you have a lot of raw material provided by a lot of different vendors, all of which need to be managed and their output verified aggressively. Ford for example outsources the bulk of the parts for their vehicles, both R&D and manufacturing, and has to manage these same vendor relationships.
You have a lot of logistics when it comes to bringing a lot of different inputs together.
And then you have complex, precise manufacturing processes that not only have to be highly productive but also highly safe. There's a lot of human labor involved when it comes to compliance and safety, not to mention simply operating factories.
And then you have a lot of complexity in logistics to get the product to your customers - arguably Chobani is substantially more complex than any car company here, since there's a wider array and number of retailers than there are dealerships - and the relationship between supermarkets and manufacturer is more distant and harder to control than between dealerships and car brands.
All of this before we get into the administrative side of the company: marketing, sales, etc.
I'm surprised they can do it with as few as 2000 people.
S. Korea's development, for example, has shown that export oriented growth, where the margins between international prices and local labor costs are enjoyed by the exporters, is one of the most powerful ways for an economy to grow. Outsourcing, OTOH, is guaranteed to funnel those margins back to the multinational, with little but the pittance wages and some nominal tariffs left behind for the people of the country.
Greek yogurt is pleasantly neutral as a meaning, new but not exotic, boring and safe choice for everyday use. Marketing labneh will be a lot harder - if the audience starts to view some food as ethnic and/or exotic - they wont buy it as a staple. And lets not discount the possibility of social media @#$$-storm if you somehow misspell, mismarket or whatever.
Do you want to quadruple the sales of tahini in US - rename it as sesame butter.
From a community point of view, if there's a nontrivial chance of generating an angry subthread, then the expected value of such a comment is negative. You can change that into a positive by putting more care into how you express your point. It's hard, but doable; there are users here who are good at it.
I get everything you're saying and as I said I am not in the same industry but I've taken cursory looks and 2,000 still seems high to me. But I'm not saying they're doing it wrong and I have to be right, etc; I would just love a breakdown to get an idea for how they manage / use so many employees.
For instance Nabisco has a large factory that has 1,200 employees that handles the making, packaging and shipping out of about 320 million pounds of snack food a year. Granted they're a crazy huge company so not comparable but it shows what 1,200 people can do to some degree in food manufacturing but obviously there are huge differences there. It's hard to find a company of similar market size that I actually know of to compare employee counts.
Do you have any references for employee utilization / counts at various food manufacturers / distributors?
I too would love to see a breakdown of exactly how big each department of a given company is. I have no reason to suspect that they employ significantly more people than necessary though; the profit motive gives good reason to avoid doing that.
