"Really all we wanted was a great corned beef sandwich," Saginaw told MiBiz during an interview in Grand Rapids, where Saginaw was attending the Business Alliance for Local Living Economies annual conference in mid-May. "We didn't grow up in foodie families."
Zingerman's is an Ann Arbor institution that's spawned a "community" of local food-related businesses, but intentionally, the company carefully avoids copying itself and steadfastly refuses to move beyond its home base.
Saginaw said Zingerman's success — measured by its longevity, its 500 employees and its nearly $40 million in sales — stems from the company staying true to its core guiding principles.
The founders met while working at a restaurant in Ann Arbor. Over time, they developed a kindred interest in fine foods. Upset that they had to drive to Detroit or another larger city to get a decent sandwich and to find the foods they read about, they started researching what it would take to start a restaurant and artisanal grocery. Eventually, a space came open in Ann Arbor's Kerrytown neighborhood, and Saginaw put a $20,000 second mortgage on his house to get the business off the ground in March 1982.
"We wanted to gather the finest artisan-made foods from around the world and then have — smashed down in the middle of it — this busy, bustling sandwich shop," he said. "That was the innovation back then when you were doing both things."
For their model to work, however, they needed to find a way to familiarize customers with the specialty items they stocked since goat cheeses and balsamic vinegars were new items — not to mention expensive items — for most people. The company also knew that it needed to avoid being stuffy, hence all the "whimsical" signs and displays in the deli. The founders decided to offer "outstanding food" with unparalleled service and simultaneously make the customer feel valued.
People will pay a premium for that kind of experience, Saginaw said.
"People might change in a heartbeat where they try to get lunch, but to make a change on where they're going to buy their groceries, that's harder," he said. "So we thought we'd have them queue up and order these sandwiches. While they're in line, we're going to ply them with all these samples and have food falling off the shelves on them and introduce them to these things."
When Saginaw and Weinzweig were getting started, they didn't have any real examples for the kind of service they wanted to provide. There were no books on customer service, he said, so they had to outline the Zingerman's way, which would become the company's strategic differentiator.
"We made the strategic decision to deliver food with an extra-high level of service," Saginaw said. "We also discovered that it creates a much better workplace, a more appreciative workplace, and you extend that service from your customers to your staff and to your community ... and also to your planet."
Over the first decade, Zingerman's began to grow, eventually hiring about 85 people to work at the deli. The business was humming along and had garnered local and national attention, he said.
But Saginaw began to notice some "puzzling and troubling" trends. While the company was being recognized as being a "cool" and innovative place to work, Saginaw saw a management team mired in disagreement and bureaucracy and entrenched in a mindset of risk avoidance, he said.
"I wanted it more like when we were a startup and there was no hierarchy — it was flat," Saginaw said. "I wanted the people that worked for us to live in the community, raise families, send kids to school — (to) have a good life. I wanted a robust benefits package. That required growth."
The management team hatched a plan to foster growth and yet be true to the company's guiding principles of never expanding by copying the deli concept elsewhere. It would do that by providing "opportunities for ownership in the brand to the people that worked for us who were entrepreneurial and had passion for a given product or service and could come up with a compelling business plan and vision," Saginaw said.
That was the birth of the so-called Zingerman's Community of Businesses. None of the individual businesses would replicate the other businesses under the Zingerman's umbrella, but all the businesses would be customers and suppliers within that community.
Despite lawyers' and accountants' pleas to the contrary, the company brought on partners to run the individual businesses. Today, the company has 16 partners, all of whom started as employees. Saginaw said Zingerman's advisers told the management team to just give people a sense of ownership, not actual ownership.
"I didn't want them to have a sense of ownership — they already had one. I wanted them to have ownership," he said.
The difference is that an employee with a sense of ownership still expects the actual owners to take care of a problem, while employees with ownership actually help fix the problems, he said.
It also helped that the partners all developed a sense of trust around a shared vision.
"I believe everybody comes to work and wants to do a good job," he said. "But it also has to be very clear what doing a good job looks like. We have very clear, documented expectations. We have norms. We have a code of behavior and it works when things are going well and when things are tough."
Working through those expectations and norms requires a great deal of employee training, he said. While other companies were quick to lay off good employees and to end training programs in the depths of the recession, Zingerman's became "more obsessed" with providing employees the tools they needed to better serve customers. The company found ways to hire the best people for the company even if there were no open positions, he said.
Zingerman's also takes a novel view of making money. While most companies are all about the profit, Saginaw said Zingerman's philosophy buys into the idea of "having enough." The company has a 5.1 percent bottom line across the organization and shares the rest with the employees.
"That way of doing business, that paradigm that we use: That's not disconnected from the success that we have. We define success as not necessarily profitability. We have to be profitable to stay in business, but we have to be extraordinary. We have to be great. We have to be giving the best possible food with the best possible service or we're not successful," Saginaw said.
At its core, the company is built on the idea of being nice to people and telling the truth, he said. Some companies don't get that because they don't have good models or get too caught up in material possessions, he said.
"There's this drive to say that you have to consume in order to be happy. ...We're this consumption-driven economy. (But we need to be a) consumer-empowered economy," he said. "We're trying to get people to understand that philanthropy (is) the dollars you spend every day (at local businesses) — not the check you write at the end of the year."
While he recognizes that idea flies in the face of many capitalists and economists, Saginaw believes the endless pursuit of more consumption and more money is not sustainable. His board of directors-level involvement in BALLE — which is affiliated with Local First in West Michigan — is trying to help drive that conversation. Good companies don't have to be measured by fat checks to the owners and shareholders, he said. They should be measured by what they do to help people and the communities in which they operate.
"If you are anywhere in the Middle Class and if you're not worried where your next meal is coming from or where you're going to sleep at night, having a lot more money is not going to have a significant impact on your wellbeing and your happiness and your joy," Saginaw said. "Really, I think what people long for are a sense of community, a sense of safety, beautiful public spaces and clean air and fresh water. You don't have to have all the other trappings. That's filling some void that just can't be filled."