September 6, 2007
R&FF Retailer – How Hy-Vee Stays Young
Through a special arrangement, what follows is an excerpt of a current article from Refrigerated & Frozen
Foods Retailer magazine, presented here for discussion.
Many reasons can be offered for the continued success of Hy-Vee, including its employee ownership, its knack for staying ahead of trends and just good old-fashioned smart marketing. But one reason the 77-year old Midwest chain stands out is because Hy-Vee store directors have more autonomy than is usual in the supermarket industry.
Basically, according to Ron Taylor, Hy-Vee’s senior VP of corporate procurement and logistics, store managers are the CEOs of what goes on inside their four walls. This means they handle not only hiring and the day-to-day routine, but also the pricing and display and many of its own marketing programs. The autonomy, he said, allows for the power of localized marketing to be unleashed.
While Hy-Vee sets a typical planogram for the stores, individual managers can make changes that make the most sense for their own markets. Those changes aren’t enough to confuse customers, but they do allow flexibility in things such as category adjacencies and number of facings.
Store managers do have a few limits in setting pricing. Weekly ads are centrally priced, although store managers can set their own prices on three or four key front-page items via plate changes at the printer. Mr. Taylor said this flexibility is essential, given that Hy-Vee operates in so many markets, each with its own competitive factors and pricing models.
In some markets, promotionally hot pricing is vital. Wal-Mart is Hy-Vee’s primary competitor in most areas, but there is also stiff competition from strong regional chains: Omaha-based Baker’s (now part of Kroger); Associated Grocers, Kansas City (Price Chopper, Hen House and Sun Fresh); and Dahl’s, right in Hy-Vee’s back yard in Des Moines.
Hy-Vee operates mostly on a hi-lo basis, with a short list of EDLP items. About a year ago, for example, it shifted to EDLP on half-gallon and five-quart ice cream from major vendors. The change was good for both sales and profitability, Mr. Taylor said.
Almost without exception, store managers are homegrown at Hy-Vee, although a few come from the outside, provided they go through the company’s training program. Nearly all corporate officers, excluding financial and legal personnel, have come up through the store level.
Former chairman and CEO Ron Pearson (now the chairman emeritus) started out as a stock boy, and Mr. Taylor himself began working at a Hy-Vee store while a senior in high school, sorting bottles and cans. He later worked his way through Northwest Missouri State University with the company as well.
“When I graduated from college, I started looking around for something but decided that what I had at Hy-Vee was better than anything else I’d seen. So I decided to give it a shot as a career, and here I am, 32 years later,” he said. “No regrets.”
Discussion Questions: What do you think of the autonomy Hy-Vee provides its store managers, even over pricing, displays and marketing? What are the advantages and disadvantages of such as strategy?
BrainTrust
Recent Discussions
Discussion Questions
Poll
Hy-Vee can recruit and retain skilled managers because their average store volume is over $20 million, and their supply chain strategy enhances their margins. (Hy-Vee owns its own bank, floral distributor, construction company, drug distributor, etc.) When you can afford to pay for experienced skilled managers, why not give them reasonable authority?
It’s most heartening to read how Hy-Vee keeps a “loose-tight” leash on its able crew of store managers. Across the industry, insistence on centralized control trend has tended to stifle local creativity and competency. Store-specific planograms generated from new-age consumer insights place an enormous implementation burden on stores that is rarely fulfilled.
Store managers don’t get much respect these days. They are buried in minutia. They need both the autonomy to set priorities and tune local strategy and the tools that support decision-making and filter non-productive work. By prescribing less and trusting more, Hy-Vee lets store managers zero in on what works in their communities. More importantly, it lets them care about the outcome of their efforts.
This obviously works. A store manager at Hy-Vee is equal to a vice president at most grocery companies in both knowledge and compensation.
As a supplier, the first time that you work with a Hy-Vee store manager you are struck by how different they are from most. They are very knowledgeable, passionate about their job and have the authority to make decisions. They don’t have to call their boss or office regarding every little thing. They know their customers and market very well and are proud to be a part of it. It makes you forget that they are a large chain but their low prices helps remind you. Hy-Vee has a great formula of management and they have also done a fantastic job of protecting it and strengthening it over time.
At lot has already been said but here are three thoughts about Hy-Vee.
1. It’s the only full service high quality shopping experience in some of the markets it serves.
2. Hy-Vee doesn’t try to be Wal-Mart.
3. The retail chain goes out of its way to carry the right assortment for its target market, even when that is not dictated by IRI, the major suppliers, and category captains.
Good job, Hy Vee!
Dilbert said it best–and Hy-Vee lives and profits by the statement–80% is to hire and train great people and 20% is leave them alone and let them do their job.
In a recent study, thousands of people were asked what motivates them and the answers were quite interesting.
1. Great boss and good co-workers;
2. Interesting work;
3. Opportunity to grow and learn;
4. Work life balance.
Hy-Vee has been offering those things to their employees and managers for a long time. Not only does this make them a tough competitor when it comes to customers but it also helps to give them a very strong, loyal workforce.
When you have a “rewarding sense of ownership” in your store you do what you know you got to do to make the combination of your store, your assortments, your displays, your services and your pricing appealing to your customers. That’s the rocket science of retailing.
Whether you call it “small team leadership” or something else, the basic skill of managing a semi-autonomous unit is best learned by being part of such a unit and observing competent leaders in action. That is how the military does it (in the field anyway), and the model is emulated in sports and business every day. Hy-Vee gets it and they get it right. In a world where we speak incessantly of “sustainable competitive advantage,” we ultimately find that the only truly sustainable advantage is the capacity to constantly innovate and change. I won’t get the quote exactly right, but it’s something like “Innovate, Adapt and Overcome.” Someone with more military savvy than me, correct me.
The key to Hy-Vee’s success is their local control of the stores. Nobody can match their level of customer service or desire to know their customers. In 1992, we moved from NJ to Omaha. One of our first experiences with them is when we left a bag of groceries at the store. Noticing the missing bag and being from NJ we thought they were gone but still decided to call the store. They had the bag and would not let us come and pick them up, they insisted on delivering them personally to our home. (Yes, it shocked us since this was service we never would have experienced in NJ.) One simple action by a store employee has given them well over a $100,000 in business from our household alone.
The current Hy-Vee management model is a result of decades of refinement and dedication to the fundamental principles of smart store management. There was a time when you could classify all chain grocers as either local- or central-controlled. Now, precious few local-controlled chains remain. Maybe the protection of the heartland helped Hy-Vee.
This strategy is important because it makes it very difficult for other chains to understand and respond and it puts Hy-Vee stores on a similar playing field with local independents. Decisions about pricing are only a piece of the total picture. Hiring is probably the biggest contributor to perpetuating the success.
At the risk of sounding on the endangered list, I’ll add that many years ago, the store manager job was a respected position in the community. Parents often encouraged their kids to try to get a job at the neighborhood store in hopes that these community leaders could teach them something about work ethics. Plus the pay was good for everyone, from bagger to store manager.
That’s what Hy-Vee has preserved and refined along the way. It’s simply a focus on long term strategy that prevents short term challenges from becoming distractions.
Instilling “ownership” to store managers is a good strategy overall. It can result in a greater focus on “local” and the community surrounding the store. A store manager can then develop a team which has this greater sense of ownership and local focus.
On the other hand, it takes training and experience to do it well. If not, it could result in a lack of consistency in a local market and bad decisions by an inexperienced store manager.
In my experience, most store managers would like greater autonomy and fewer dictates from corporate. This practice seems to have served Hy-Vee very well.
More Discussions
Has Same-Day Delivery Become an Expectation Across Retail?
Are expectations around retail delivery speed in flux?OpenAI Names the Infrastructure Standard for Agentic Commerce
Will OpenAI or Google (or another entity) set the gold standard for agentic commerce?Is Five Below Poised For Even Greater Growth?
Five Below is hitting serious growth numbers. Can this trend continue?
Hy-Vee can recruit and retain skilled managers because their average store volume is over $20 million, and their supply chain strategy enhances their margins. (Hy-Vee owns its own bank, floral distributor, construction company, drug distributor, etc.) When you can afford to pay for experienced skilled managers, why not give them reasonable authority?
It’s most heartening to read how Hy-Vee keeps a “loose-tight” leash on its able crew of store managers. Across the industry, insistence on centralized control trend has tended to stifle local creativity and competency. Store-specific planograms generated from new-age consumer insights place an enormous implementation burden on stores that is rarely fulfilled.
Store managers don’t get much respect these days. They are buried in minutia. They need both the autonomy to set priorities and tune local strategy and the tools that support decision-making and filter non-productive work. By prescribing less and trusting more, Hy-Vee lets store managers zero in on what works in their communities. More importantly, it lets them care about the outcome of their efforts.
This obviously works. A store manager at Hy-Vee is equal to a vice president at most grocery companies in both knowledge and compensation.
As a supplier, the first time that you work with a Hy-Vee store manager you are struck by how different they are from most. They are very knowledgeable, passionate about their job and have the authority to make decisions. They don’t have to call their boss or office regarding every little thing. They know their customers and market very well and are proud to be a part of it. It makes you forget that they are a large chain but their low prices helps remind you. Hy-Vee has a great formula of management and they have also done a fantastic job of protecting it and strengthening it over time.
At lot has already been said but here are three thoughts about Hy-Vee.
1. It’s the only full service high quality shopping experience in some of the markets it serves.
2. Hy-Vee doesn’t try to be Wal-Mart.
3. The retail chain goes out of its way to carry the right assortment for its target market, even when that is not dictated by IRI, the major suppliers, and category captains.
Good job, Hy Vee!
Dilbert said it best–and Hy-Vee lives and profits by the statement–80% is to hire and train great people and 20% is leave them alone and let them do their job.
In a recent study, thousands of people were asked what motivates them and the answers were quite interesting.
1. Great boss and good co-workers;
2. Interesting work;
3. Opportunity to grow and learn;
4. Work life balance.
Hy-Vee has been offering those things to their employees and managers for a long time. Not only does this make them a tough competitor when it comes to customers but it also helps to give them a very strong, loyal workforce.
When you have a “rewarding sense of ownership” in your store you do what you know you got to do to make the combination of your store, your assortments, your displays, your services and your pricing appealing to your customers. That’s the rocket science of retailing.
Whether you call it “small team leadership” or something else, the basic skill of managing a semi-autonomous unit is best learned by being part of such a unit and observing competent leaders in action. That is how the military does it (in the field anyway), and the model is emulated in sports and business every day. Hy-Vee gets it and they get it right. In a world where we speak incessantly of “sustainable competitive advantage,” we ultimately find that the only truly sustainable advantage is the capacity to constantly innovate and change. I won’t get the quote exactly right, but it’s something like “Innovate, Adapt and Overcome.” Someone with more military savvy than me, correct me.
The key to Hy-Vee’s success is their local control of the stores. Nobody can match their level of customer service or desire to know their customers. In 1992, we moved from NJ to Omaha. One of our first experiences with them is when we left a bag of groceries at the store. Noticing the missing bag and being from NJ we thought they were gone but still decided to call the store. They had the bag and would not let us come and pick them up, they insisted on delivering them personally to our home. (Yes, it shocked us since this was service we never would have experienced in NJ.) One simple action by a store employee has given them well over a $100,000 in business from our household alone.
The current Hy-Vee management model is a result of decades of refinement and dedication to the fundamental principles of smart store management. There was a time when you could classify all chain grocers as either local- or central-controlled. Now, precious few local-controlled chains remain. Maybe the protection of the heartland helped Hy-Vee.
This strategy is important because it makes it very difficult for other chains to understand and respond and it puts Hy-Vee stores on a similar playing field with local independents. Decisions about pricing are only a piece of the total picture. Hiring is probably the biggest contributor to perpetuating the success.
At the risk of sounding on the endangered list, I’ll add that many years ago, the store manager job was a respected position in the community. Parents often encouraged their kids to try to get a job at the neighborhood store in hopes that these community leaders could teach them something about work ethics. Plus the pay was good for everyone, from bagger to store manager.
That’s what Hy-Vee has preserved and refined along the way. It’s simply a focus on long term strategy that prevents short term challenges from becoming distractions.
Instilling “ownership” to store managers is a good strategy overall. It can result in a greater focus on “local” and the community surrounding the store. A store manager can then develop a team which has this greater sense of ownership and local focus.
On the other hand, it takes training and experience to do it well. If not, it could result in a lack of consistency in a local market and bad decisions by an inexperienced store manager.
In my experience, most store managers would like greater autonomy and fewer dictates from corporate. This practice seems to have served Hy-Vee very well.