Madison’s Ian’s Pizza happy to spread the dough around

The cynic in me (who are we kidding, that’s every part of me except my inner child, which at this point has been all but drowned in a small bathtub of $3.99 Trader Joe’s wine) often looks for the worst in situations. It’s a lousy habit, and I’m trying to change it – one mindful breath at a time.

Even on days when I somehow manage a glass-half-full attitude, it’s a glass half full of baby seal tears and regret. But today, I’m going to depart from my litany of grievances in order to focus on some good news.

It’s common these days to hear about workers in the food service and retail industries struggling to get by – without insurance, without a living wage, and with few prospects. It’s almost become the New Normal. People who work these jobs have to settle for less, we’re told. What are you going to do? It’s a fact of life. Avert your eyes and move on.

But not everyone accepts this. Case in point: Ian’s Pizza of Madison.

Ian’s got some (virtual) ink a couple of weeks ago in the Huffington Post after it was reported that Papa John’s CEO John Schattner said Obamacare could force his pizza chain to raise prices. Since Ian’s already offers its employees health care, HuffPo writer Nate Hindman speculated that Obamacare could help level the playing field for Ian’s and other small businesses that offer benefits and struggle to compete with larger, national competitors. (In the interest of fairness, here’s Schattner’s response to the widespread criticism of his chain. Interestingly, Schattner says Papa John’s will open hundreds of stores over the next two years while hiring 5,000 people, so maybe Obamacare isn’t the boogeyman it’s been made out to be.)

I recently emailed Ian’s co-owner Nick Martin, who was quoted in the HuffPo article, and asked him about the potential for Obamacare to make Ian’s pizza more price-competitive. In his response, he downplayed the effect of the legislation on prices at the big chains:

“I don’t think Obamacare is going to be the big equalizer that everyone is claiming it might be,” wrote Martin. “Even when we look at the case of Papa John’s, they are only talking about raising prices 4 to 14 cents per pie. That’s a 1% price raise at best. … Big chains like Papa John’s have huge buying power and economies of scale that we can’t touch. And this is [where] we have to differentiate ourselves from these types of chains (and other small businesses have to do the same).

“You have to seek a different business model. We do this by sourcing high-quality, local food, as well as supporting eco-sustainability, and of course, providing for our people. We rely on the consumer to realize these differences in the way we do business and to choose to seek us out over our competitors.”

So while it’s not necessarily all about price-competitiveness, says Martin, employee benefits are still key.

So why has Ian’s consistently offered health care coverage to its employees when so many of its competitors haven’t? According to Martin, it was a personal decision by one of Ian’s founders, who “grew up in and out of health care coverage” and wanted to make sure people in his company would never have to worry about health care. As any business owner knows, that’s a significant investment, particularly these days. At the same time, says Martin, offering employee benefits was a shrewd business decision.

“Every business has the decision about what to do with profits and what areas to invest in,” wrote Martin. “We have chosen to make our people our highest-priority investment. This has allowed us to employ and retain a higher caliber of employee. We have very high expectations for our employees. … However, our employees consistently rise above these expectations, and it makes a huge difference to the culture of our businesses.”

In addition to health care, the company offers profit-sharing and 401(k) matching, which create even more expense. Still, says Martin, Ian’s has no regrets.

“It is an investment that pays for itself without question. And for those that doubt it, we can put the culture and metrics aside and look at pure financials. Look at employee retention alone. It can cost $2,000 to upwards of $8,000 to turn over a single employee. That’s a lot of health care! When you can put your people first, and feel like they are working as part of a larger team and that their performance is rewarded and appreciated, you can hang on to that employee for a much longer time. The greatest examples of this that I have seen are the numerous UW grads we have employed through their college careers that have chosen to turn down higher-paying jobs and come work for our company full time after graduating.”

You might be saying, well, that’s fine for a small, locally owned pizza chain in liberal Madison, but what about the retail sector? The big-box stores have made a race to the bottom in wages a permanent part of the employment landscape, haven’t they?

Well, consider Costco, another (national) good news story. A recent Internet meme declared that Costco’s CEO “Pays his employees $17/hour on average, plus benefits, earns less than $500K, [and] refuses Wall Street demands to cut employee salaries and benefits.” Well, that’s not quite true. Some of that information is outdated. James Sinegal, the man pictured in the widely circulated graphic, made far more than $500,000 per year in total compensation in 2011, and he’s no longer CEO of the company. But the company does pay its workers higher wages than its competitors do, and the reason is the corporate culture Sinegal established as Costco’s co-founder and longtime CEO.

According to the 2005 New York Times profile that was the likely origin of the recent Internet meme:

“[Sinegal] rejects Wall Street’s assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street’s profit demands.

“Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees, he said. And Costco’s customers, who are more affluent than other warehouse store shoppers, stay loyal because they like that low prices do not come at the workers’ expense.”

Sounds a lot like Ian’s strategy, writ large[r].

Now, granted, not everyone can afford to pay more for pizza or retail merchandise. Money is still tight for a lot of people. But Ian’s and Costco prove that low wages and no benefits are not an inevitability – that plenty of people will seek out such businesses, and that their employees will frequently show them more loyalty.

It’s a heartwarming story, particularly in this economic climate, and is the kind of good news that can make even a confirmed cynic (like me) take notice.

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