Reaching more than $100 million in annual revenue, Vital Farms has been able to create strikingly rapid growth while generating expanding profit margins and continually raising already high product standards. The ethical food company’s ability to execute effectively on multiple fronts starts with an exceptional management team that is empowering employees throughout the organization. We spoke with Vital Farms’ CEO, Russell Diez-Canseco, about the company’s management philosophies and practices.
SJF: What are some approaches to managing teams that resonate with you?
Vital Farms: The Vital Farms culture and management philosophy are rooted in the tenets of three books: Start with Why, Conscious Capitalism, and Good to Great, and are embodied in these three works’ central tenets.
First, let’s look at the book Start with Why. People don’t buy WHAT you do; they buy WHY you do it. When communicating from the inside out, the WHY is offered as the reason to buy and the WHATs serve as the tangible proof of that belief.
Next, Conscious Capitalism shows us that any venture is only sustainable if it is sustainable for all of its stakeholders – its employees, customers, suppliers, shareholders, and the communities in which it operates.
And Good to Great focuses on Disciplined People, Disciplined Thought and Disciplined Action as the common elements of companies that sustain great performance over time.
To put these together, our “Why” is to bring ethical food to the table. Furthermore, we are building a sustainable company, and we believe it can only be sustainable if it is also sustainable for all of its stakeholders. Therefore, we make decisions and measure success by evaluating the impact on each of our stakeholders. And our management philosophy is to view problems and opportunities first as “people problems and opportunities.” That is, we don’t jump in to solve the problem, but rather put the right people in the right seats on the bus in order to solve the problem.
“Our management philosophy is to view problems and opportunities first as ‘people problems and opportunities.’ That is, we don’t jump in to solve the problem, but rather put the right people in the right seats on the bus in order to solve the problem.”
SJF: In addition to putting the right people in the right seats, what has helped you manage rapid growth?
Vital Farms: We see that complexity has a way of sneaking its way into very growth-oriented organizations, i.e. organizations where the “customer is always right.” As an example, a few years ago we agreed to ship eggs in smaller case sizes in order to win a large customer that wanted to receive eggs in cases of nine dozen instead of the customary cases of fifteen dozen. Fast forward to when we have built our own egg packing facility – Egg Central Station – where we can visually inspect what’s working and what’s not. We saw that the biggest complexity for the plant was running different case sizes at the same time. Specifically, our taping mechanism took three extra seconds to recognize and adjust to the size of each case, and our operations slowed down. This is only one example, and the complexity adds up as we look at other exceptions we have made over the years. Fortunately, we recently were able to get the customer to agree to our standard case size. If I could go back and do something differently, I would have presented the long-term situation to the customer right off the bat. I would have said, “We want to help you have a successful launch and we recognize at first this means using a smaller case size. Can we all agree, however, that once we reach the point where enough volume has been created, we’ll switch to the more customary cases?”
Another practice is one that has helped us to bring multiple stakeholders into a collaborative problem-solving process. By default, we often find ourselves sitting in a conference room and brainstorming about an intractable problem – how to help a low-performing employee to improve, how we get a customer to change an arrangement, and so forth. But we have learned to go back to our stakeholder model. When we bring other parties in to help solve problems instead of dictating what they should do differently, and we treat the other parties with empathy, we get to better answers. It takes a lot of the stress out of what one might otherwise perceive to be a confrontation. This collaborative approach gets one out of a fixed-pie mentality and into a growth mindset, and magic happens. Bringing people in way earlier in a problem-solving process is disarming. It takes guts and can be risky, but we get to better answers.
SJF: It seems that Vital Farms values good management principles so much that it is willing to move good managers into areas where maybe they do not have a lot of experience. Can you talk about this?
Vital Farms: First, we definitely subscribe to the notion that it’s easier to teach a skill than a value or culture. So, we hire first for cultural fit and values, and second for experience and skills. In some cases we are happy to teach the skill if the person is an otherwise great fit. Second, in any fast-growing company, the needs of the business evolve over time, as do the skills and interests of the employees (we call them “crewmembers.”) We work hard to identify the needs of the business now and in the future, and to put the right people in the right positions so that both the company and the individual crewmembers are successful. When you combine those two factors – a focus on culture rather than skill and experience, and a recognition that things change – then it becomes clear, at least to us, that flexibility is critical to our continued success. We aren’t too hung up on titles, degrees, or years of experience. We are absolutely hung up on culture fit and ability to be successful in a role.
“When we bring other parties in to help solve problems instead of dictating what they should do differently, and we treat the other parties with empathy, we get to better answers. It takes a lot of the stress out of what one might otherwise perceive to be a confrontation. This collaborative approach gets one out of a fixed-pie mentality and into a growth mindset, and magic happens.”
A recent example of that flexibility was the promotion of our HR leader to become our operations leader, taking our egg packing center (“Egg Central Station”) into her span of care. On paper, it wasn’t an obvious choice. Many people counseled us to find a deeply experienced and accomplished “plant manager” to lead our state-of-the-art facility. What we found, however, was that, too often, those years of experience also meant years of inculturation to unlearn, as we do things a little differently than most. We also identified the real needs of our operation at the time. We had a strong group of functional leaders in place already, and we had access to best practices – so we didn’t feel we need to hire deep expertise. Rather, we needed a true servant leader to help forge that group into a leadership team, and to create the environment of trust and open communication that was needed to support all of our stakeholder commitments – from crewmember morale, to product quality, to driving continuous improvement initiatives. Our HR leader was exactly what we needed, and we convinced her to take a risk, and try something completely new for her. She has thrived in the role. The results in all areas, from hard numbers like costs, throughput, and crewmember turnover, to more subjective things like morale and a general sense of order, have all exceeded our expectations.
SJF: Why did Vital Farms decide to incorporate The Great Game of Business into the way the business is run? How is it going?
Vital Farms: My five years at Vital Farms have been the most fun, most fulfilling of my career. A year ago, I heard another Austin-area business leader talk about his company’s experience with The Great Game of Business, highlighting both significant financial results and improved employee engagement. The foundation is Open-Book Management – sharing financial information with all employees and giving them tools and incentives to drive measurable performance improvement. The concept is described in terms of a game: Great games have rules, someone keeps score, and the players have a stake in the outcome. When I heard about that, a light bulb went off for me. What made work so much fun for me was that, in a sense, it was a game to be played. I love building teams and solving problems to win in the marketplace. And I want every crew member at Vital Farms to have the opportunity to enjoy their jobs in this way, too. The Great Game of Business is a process and set of tools to do just that.
The early results have been positive. We are exceeding all of our financial objectives. More importantly, we have seen incredible engagement by our crewmembers. They are all learning how our business works, and how what they do can make a difference. Suddenly the creativity and ambition of 135 crewmembers has been unleashed in our business. They love solving problems, and seeing tangible results, especially when they get a stake in the outcome – in this case, a substantial bonus opportunity. It’s been fun and gratifying to watch.
SJF: I would imagine that some CEOs would hear about that concept and get nervous about sharing too much financial information throughout the organization. What are your thoughts on this issue?
Vital Farms: This question makes me think of Disney, a company with an amazing reputation for customer service and for creating unique cultural touchstones. For example, you will never see a cast member break character, ensuring seamlessness of experience when you enter the Magic Kingdom. Disney has been praised for launching a leadership training institute to help other companies understand how to achieve this level of customer experience. In the same way that Disney does not view sharing its practices broadly as giving away trade secrets, I, too, do not mind if other groups know our numbers. While others are trying to understand what and how we are doing something today, Vital Farms is improving every day. Success is not just based on sales capabilities or advertising; it goes back to starting with Why, then working to How, and ultimately getting to the What. Our numbers are that What, and if all one does is focus on is on the numbers, you are missing the much bigger, more important picture. What are you doing to connect employees to passion and purpose? Numbers are simply the outcome of everything else that we do. Also, there is an educational component to Open-Book Management. Our crew members come from diverse backgrounds and run the gamut in terms of educational experience, from high school graduates to MBAs. Some of our crew members have never taken a business course and do not know how to read a financial statement. We want to equip all crew members with tools to understand our performance, and we have found that teaching basic financial terminology and walking someone through the company math can help to set realistic expectations, offering a tangible example of exactly how much work goes into making a penny.
“It goes back to starting with Why, then working to How, and ultimately getting to the What. Our numbers are that What, and if all one does is focus on is on the numbers, you are missing the much bigger, more important picture. What are you doing to connect employees to passion and purpose? Numbers are simply the outcome of everything else that we do.”
And with a variable bonus plan in place that is based on performance, all of our crew members feel like they have a stake in the game and are cheering on the bottom line. They understand that there is an opportunity to receive a substantial bonus if Vital Farms is performing well and can thus tie the big picture back to what they accomplish on a day-to-day basis. This results in a heightened focus on performance throughout the organization. For example, we had one crew member notice that when the boxes of hair nets we provide were too full, more waste was being created as individuals were pulling multiple nets out at once. He suggested that, by filling the boxes only halfway, we could reduce waste, thus cutting back on costs. In business, there are few ‘silver bullets’ but many singles, double, and even triples – and our hitting them often matters.
SJF: What are some other cultural initiatives that seem to interest and motivate employees?
Vital Farms: We hold weekly crew lunches that bring together crew – at all levels – and foster relationships and sharing. Also, we try to have all crew members visit farms (and meet our farmers) soon after joining, to ground them in what it’s all about. It’s always fun to experience our crewmembers’ reactions when they see our farms – that moment when they realize how special this thing is that they’re a part of.
Photo: Russell Diez-Canseco talks with crewmembers at Vital Farms’ Egg Central Station