Will employee owners make H-E-B even tougher to compete with?
H-E-B is the largest private employer in the state of Texas. It is also one of the few companies that can go toe-to-toe with the likes of Kroger and Walmart and come out ahead. The grocer has long touted the role its employees (partners, in H-E-B speak) play in its success and is now rewarding them by making them part owners in the business.
On Monday, H-E-B announced it is launching a new employee ownership plan that will grant stock to 55,000 of its workers. The plan will mean that employees, as a whole, will be given a 15 percent stake in the business. H-E-B has been 100 percent family-owned since Florence Butt invested $60 to open the C.C. Butt Grocery Store in Kerrville, TX in 1905.
According to H-E-B, in January eligible employees will receive stock valued at three percent of their salary, plus $100 in stock value for each year of continuous service they have completed with the company by the end of 2015. Going forward, yearly contributions to the stock plan will be made based on company performance. To be eligible, H-E-B employees must be at least 21, have completed at least one year of service, and worked at least 1,000 hours in a calendar year.
H-E-B partners on the occasion of the company’s 110th anniversary – Photo: H-E-B
"Our partners are the competitive edge that brings innovation, growth, and success to H-E-B," said Charles Butt, chairman and CEO of the company, in a statement. "This plan has been my dream for decades. It is a gift that recognizes our partners’ ongoing commitment to H-E-B. Our partners shaped our past, define our present, and will lead us into the future."
H-E-B’s latest commitment to its employees is likely to further help its recruitment and retention efforts. The company currently pays above market rates for hourly workers ($10.25 starting minimum) and has long been known as one of the best employers in the grocery channel.
According to reviews on Glassdoor, H-E-B earns a rating of 4.1 stars out of five. Eighty-five percent of reviewers say they would recommend working at the company to a friend and 97 percent approve of Mr. Butt.
By going the employee-ownership route, H-E-B joins a list of other successful chains including Hy-Vee, Publix and Winco.
Discussion Questions
Will H-E-B become even more successful as the result of making its employees part owners in the business? How will H-E-B’s decision affect other retailers competing for workers in Texas?
Poll
BrainTrust
Adrian Weidmann
Managing Director, StoreStream Metrics, LLC
As active shareholders, it will be interesting to monitor the progress of H-E-B in the market place. The announcement makes for good public relations fodder but the real value and its effect on customer service and experience will take time to unveil. Will those employees understand that their daily efforts and attention to the details that shoppers notice and value will translate to the increased value in their stock holdings? And are they holding enough stock to make a difference in their lives? On paper it should matter, but it’ll be interesting to see if, in practice, there is tangible evidence that their “ownership” makes a difference that is valued by their customers — in-store and in stock!
H-E-B is one of the few retailers with the ability to make employees part owners. I’m surprised they didn’t do it sooner. If you didn’t know better you would think H-E-B was already an ESOP like HyVee, Winco, Woodmans and Publix by the vibe the employees give. With an increasing minimum wage looking like it could become reality, H-E-B needed to find a way to keep employees happy without raising wages. It would really be a slap in the face to H-E-B employees if suddenly they saw lesser quality employees at competitors making the same as them. By giving H-E-B employees a stake in the business that pays dividends, it helps differentiate H-E-B employees to show they are major league, not minor league, when it comes to retail employees. H-E-B did not do this because they are a kind and benevolent employer. H-E-B did this to make sure their competition gets stuck with the “also rans” of retail employees. H-E-B also has a lot of pride and ego, which you need to be successful.
This will obviously help with recruitment and retention, and quality employees who have been around awhile (and know what’s where, etc.) will increase customer satisfaction. This is a strategic move more than a benevolent one (although there is some benevolence here — so many companies seem opposed to the idea of ESOPs on principle).
Great move, and this is one way manufacturing can become relevant in the USA again. A 15% stake as a whole is still significant enough for the employees to stay motivated, and having a slice of the pie, if possible, is a great way to go. Love the move, and it will pay off, and drastically reduce turnover.
It’ll take some work to get mileage out of this plan, but when coupled with the right recruiting and management messaging, this can be a very effective tool for H-E-B vs their competition.
The underlying story is how this will empower thousands of Hispanics in Texas. There is an American proverb “Don’t Mess with Texas.” In the grocery industry, H-E-B is a synonym for Texas. I cannot think of a single larger even in American history than has empowered so many Hispanics. This is a lot bigger than just H-E-B. Before H-E-B had an army of loyal employees. From here on our they will have a retail army of fanatics.
Once again H-E-B shows its leadership role. Easy route to combat WMT would have been to raise the minimum wage. H-E-B leapfrogs that with WINCO, etc. strategy. Bravo H-E-B!
Yes, this will place H-E-B in an even more enviable position for potential employees.
Happy employees = Happy customers. H-E-B is already a leader — giving their employees an ownership stake will only improve an already superior shopping experience