It's great to see a founder CEO (Hamdi Ulukaya) making a bold ethical move like this to support his employees. It's not flashy or earth shaking, but it's very real and it will definitely change many lives for the better.
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.
> 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.
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.
> 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.
Especially, if you get backpay later, or get at least more equity to make up for the pay.
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 think the key here is motivation. When cost cutting is the motivation, managers are told to remove X number of people from the department, even if they all perform their jobs well. This is more common than you think.
If you're careful about hiring and put in place the right incentives, then there doesn't have to be much dead weight. And if there's little to no dead weight, then I think it's very noble and honorable for a company to cut salaries across the board to avoid layoffs. It's certainly a lot more noble and honorable than a company that provides its CEO a salary that is 204x that of its average employee (https://www.glassdoor.com/research/ceo-pay-ratio/).
For some people and at certain times it's not that easy to find a good job immediately after quitting. If this had happened in 2001 good luck finding a job!
I strongly suspect that they did experience this sort of "evaporative cooling" of workforce quality when they made that decision (or quietly reversed the paycut with targeted "raises").
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.
How do you know they were dead weight? Why do you assume that getting rid of employees (who are still providing value to the company) is necessarily a better move, financially, than reducing pay?
Hell, for that matter, why do you assume that you wouldn't have been among those deemed "dead weight" and laid off?
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.
>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. 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.
Is there any evidence outsourcing hinders, rather than helps formation of local industries?
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.)
You could replace "US" in your argument with the county, state, region, continent or earth. Where do you draw the line? You want to see people of earth get jobs or people of americas or people of Nebraska? All man made lines on a map.
But the people of the world do exist within man-drawn squares, with vastly diverse internal situations. I don't think that it's obviously more ethical to employ someone in China for 12c an hour, over someone in Nebraska for $12. It's debatable, sure, but hardly a foregone conclusion.
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.
Well companies like GE, Cisco, IBM earn >50% of their revenue ex-US, so you would expect a corresponding outsourcing - offshoring is the correct phrase here - of jobs to countries where they get revenue.
I agree, however, I don't see the incentives that would motivate change to the current system.
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)
Interestingly, I recall reading a story suggesting that the CEO was on his way out of the company less than a year ago, when the whole Idaho plant expenditure looked like a failure.
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.
Honestly I'm surprised this doesn't happen more. While yes, it was a very kind gesture by Ulukaya to give his employees partial ownership, it also makes each of them much more involved in the long term success of the company. Putting a company on the stock market is selling it to people who are only interested in earnings for a few quarters at most, while employees will have interest in not only the growth of the company, but the sustainability of the operation.
At least that's my impression of employee owned businesses, it seems like a smart economic move.
Not to mention that hiring and training an employee is a significant investment. Losing a bunch of employees at once, probably each with some irreplaceable domain-specific knowledge, will cost the company in the long run.
> But unlike many of those tech companies, Mr. Ulukaya is giving his employees a piece of the company after its value is firmly established.
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.
>TPG has warrants to buy 20 percent or more of Chobani’s shares, depending on targets set in the original deal it struck. But that percentage would now be calculated from the 90 percent of the remaining shares, after the 10 percent given to the employees, essentially diluting TPG’s potential stake.
How did that happen? How would the 10 percent given to the employees not be included in the 20% of the TPG contract?
Thinking back to the fellow who gave all of his employees a raise to $70K, parts of that ended up going badly for him.
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.
I suspect that this is a much smarter way of rewarding employees than the minimum $70k salary.
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.
"The number of shares given to each person is based on tenure, so the longer an employee has been at the company, the bigger the stake."
which is nice compared to the usual class-based allocation.
Congrats, but I'm always blown away at the size of some companies. Do you really need 2000 people to make yogurt?
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.
Chobani is in several global markets and has multiple large-scale plants. 80% of their workforce are plant floor workers. I know this as I helped build an enterprise social platform for them a few years ago with a partner agency. [1]
Yes, in Australia we have a very good dairy industry (milk, cheese, yoghurt ...) and I was surprised to see lots of Chobani on the shelf. We already had about four local and NZ manufacturers of yoghurt, including 'traditional' or 'Greek style'.
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.
>It doesn't taste much different to the existing products, and costs more.
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.
Buyer beware however, I'd say 90% of the stuff out there is rubbish. Like you said it is "greek style" but it's thicker only as a result of adding thickening agents, and a far-cry of actual authentic greek yogurt, Dannon and Yoplait being the biggest offenders. Chobani is close, but I would say Fage is the absolute best.
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.
It should be slightly sweet - but only from the lactose in the milk.
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.
I guess I'm not much of a connoisseur of Greek yogurt. Admittedly I eat yogurt now and then, and even make it at home sometimes, but I'm not a huge consumer. But I don't find huge differences which maybe just means I don't actually have much of a taste for authentic versions. When Fage was about the only thing available, I bought it at Trader Joe's. Now I mostly buy Chobani but buy store brands as well.
You'd be shocked by how many employees some silicon valley startups have — and they're not even shipping physical products. 2000 is fairly reasonable for a national food product company.
Years ago, when I saw my company had The Blue Man Group on the books as a client and they employed ~400 people I was quite surprised. Then I got to thinking about the operation, the numerous business avenues of rights management, the touring, and then it started to make sense. Personally I'd rather work for a company that can afford to expand along with demand and maintain quality rather than siphon off cash and stuff it in an investor's pocket based on short-term mentalities.
Blue Man group is really a "franchise" operation. There are at least 12 productions going on around the world, and even on cruise ships! Because the men are "blue", they are interchangeable, too.
Logistics & Supply chain, QA and inspections, Sales and account operations, marketing, finance, corporate dev/biz dev. And at Chobani's scale, middle management for all of these categories. I can see 2000 people being realistic.
I'm actually a little surprised they're that small. That's not all that far out of the typical small and medium business (SMB) definition which tops out at 1,000 employees or so and they're a widely recognized brand--albeit within a fairly narrow niche.
(By contrast Proctor and Gamble has about 110,000 employees.)
To this point, Chobani had quality control issues a couple of years ago. So that's definitely an area that requires some people. And the marketing / PR folks to make it no longer top-of-mind for most people.
I'm sorry you're getting downvoted and I think it's undeserved.
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'm surprised you're being downvoted so heavily. I haven't done food manufacturing before but I've looked into it a few times (so I'm far from an expert but I at least know of a thing here and there). 2,000 seems pretty high to me.
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).
They apparently have two plants [1]. For each of those plants, you'll have management, production workers, loading dock people, QA, mechanics, facilities, etc. The company will have management at various levels, HR, marketing (advertising, promotion, branding, etc.), sales, purchasing, finance (AP, AR, tax, payroll, accounting, etc.), PR, customer support, etc. I don't know how this particular company breaks down but it's surprisingly easy to get to significant headcounts as companies scale.
Evaporated cane juice should mean a product like panela or rapadura [1] -- a dark brown unrefined (non centrifugal) sugar containing all of the molasses from the original sugar cane. Unfortunately, in the US, there is no legal constraint on how the term is used, and so when you see it on packaging, you should read it as "sugar", or, perhaps more optimistically, "brown sugar".
I'm just surprised that you're surprised that a large number of people are involved in the manufacturing and distribution of a physical good. If you think 2,000 employees is a lot, wait until you see how many employees a company like Ford has.
I think your mind is a little bit stuck in the SF bubble.
> 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.
I don't think it's that personal. I've had people point out to me before that my thinking was a bit divorced from reality, and it was really helpful to be told that in no uncertain terms. Actually, some of the very best advice or information that anyone has ever given me. Yes, it was tough to be on the end of a blunt message like that in that moment, but over time I've realized that it was definitely worth it.
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.
> a large number of people are involved in the manufacturing and distribution of a physical good.
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.
Yogurt (or any manufactured food product, really) is surprisingly high in complexity...
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.
I'm not a fan of the taste of texture but I don't think I'd call it "poison". Besides this is irrelevant to the conversation at hand as it's about the company's stock redistribution not its product.
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.