Amazon and Whole Foods: A Clash of Corporate Cultures

A recent Harvard case study explores the challenges of Amazon’s acquisition of Whole Foods.  In short, the case illustrates the turbulence created by trying to impose one management culture onto another organization, and asks should Amazon have approached the acquisition differently?

Amazon’s success has been driven by data-driven standardization, speed, and low cost.  

Whole Foods, on the other hand, has been guided by personal touch and empowerment.  Individual stores and employees would make decisions about products with an emphasis on quality, health, and local focus. Employees (known as team members) built close relationships with customers and innovated many creative solutions to cater to their needs.  Whole Food’s decentralization resulted in great inefficiencies and high prices, and it was hoped that Amazon’s data-driven mindset would enable Whole Foods to scale up while keeping its employee-empowered culture.

The acquisition has not been an easy one with customers and employees venting their anger.  Employees have been frustrated by having to do paperwork instead of helping customers, while also being stressed by new performance merits.  Last year, Whole Foods dropped from Fortune’s best companies to work for list for the first time in two decades.

According to the case study authors, “part of the issue is realizing the limits of standardization, even for a company that has perfected data-driven management.”  It is not totally clear that data will be a perfect substitute for human judgment.  They continue: “[Data-driven management] might work in a digital platform, where you have tons of data on customer history you can use to drive a recommendation engine, but in a store environment, there is a lot of learning that takes place from employees interacting with customers that can be very localized and specific.”  In other words, employees gain a lot of tacit knowledge that is not easily captured in data and performance metrics.

What might Amazon have done differently?

• Structured empowerment: A management approach whereby a company standardizes operations, but allows flexibility for employees to make their own choices in key areas where having a high-touch with customers matters.
• Different performance measures: A focus more on results rather than processes, i.e. holding employees accountable for goals, but giving them more flexibility on how they were achieved.

One of the great myths of our time is that data will be all things to all people.  Ideally, data and human judgment will complement one another.

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