Our piece, Economic Reality Trumps Official Policy Every Time, wrestled with the disconnect between official policies businesses adopt and the incentive structures that often lead to different behavior than the policy seemed to require.
Richard Yudin, working with the very international Fyffes organization, has often contributed insightful work to the Pundit. You can take a look at some of his contributions here:
Why Don’t American Retailers Just Standardize On EurepGAP?
Pundit’s Mailbag — Fairtrade And Harsh Capitalism
EU’s Banana Policy Breaks WTO Rules
This particular Pundit piece led Richard to share some of the insights gained from setting up farm audit systems:
This is a vital piece. Without question, it is this “disconnect” between the buyer’s incentives and the proclaimed high principles of those interfacing with the stakeholders that is the main reason all the food safety programs are prone to fail, worldwide.
As an example, note the “damn the torpedoes” attitude displayed at Peanut Corporation of America (R.I.P.)…
Over my last ten years of setting up and running farm audit systems, I have learned that the main reason for failures is a poor management attitude.
If all the shop floor people are wearing boots, caps, gloves and tunics, and the boss wanders in to meet the visiting auditor wearing his Hugo Boss suit and Gucci loafers, the message conveyed is that the whole program is just a piece of theatre, and then the people actually handling the product stop paying attention to the rules, and contaminations happen.
Keep up that message, please!
— Richard Yudin
Fyffes Tropical Produce
Coral Gables, Florida
Richard, come on; it is common knowledge that one ought to meet auditors in Brioni suits, not Hugo Boss!
Seriously, we used to watch great presentations, even linked to one here that Frank Yiannis, now Vice President of Food Safety at Wal-Mart, but for many years Director of Safety & Health at Disney, used to give about developing a food safety culture.
Some of this is leading from the top with the kind of behavior you want mirrored in the organization.
We remember visiting the Hunts Point market as a boy and noting how ostentatious the Pundit Poppa would be if the Pundit Momma had requested — OK, insisted — that he bring home some cases of produce for some purpose or another. He made sure everyone saw him standing on line at the cashier booth and opening his wallet to buy the product.
There was no way that any employee was going to think it was OK to just walk out with a box.
So personal example is crucial.
Even harder, though, is finding ways to get the incentives right. Just recently a friend working at a Wal-Mart told us that the manager, frustrated at how slowly a crew was working, ordered everyone to clock out and then finish the work.
Now this violates lots of laws and, there is simply no question that all Wal-Mart policy strictly forbids such a thing.
When he was CEO of Wal-Mart, Lee Scott sometimes would say that the problem at Wal-Mart is that they were known for their exceptions. So one rogue manager such as this could cause so much trouble. Not only would there be fines and back pay but the workers go on “60 Minutes” and the reputational cost is great. So Wal-Mart doesn’t want this.
But there are dozens of smaller policies that lead up to this. For example the employees, in this case almost all poor immigrants, can have their hours cut or be assigned bad hours arbitrarily. So they are afraid to speak up.
And the manager, although certainly told not to do this, may have some incentives perhaps tied to the profitability of the store or to reducing labor hours. So, though told not to do it, he may have reason to do it.
This is a difficult dynamic to overcome. You need profits to pay bills, so you want to incentivize based on profits or things that lead to profits. Yet this type of incentive system can lead individuals to take short cuts.
Now if Wal-Mart can’t balance things enough to stop the rogue store manager we just mentioned, who is doing something clearly against the law and against policy, how much harder is it in food safety, where the buyer is not doing anything illegal — he is buying legal product — but he’s just not willing to pay extra to buy from the guy with the top food safety program? And the policy is often vague. Few are going to say, “Always buy from the one with the best food safety program — quality, service and cost mean nothing!”
Yet if one gets away from that absolutism, you enter a realm of judgment calls.
And within the allowable judgments, the financial incentives are almost always to place a priority on something other than safety.
It is the core food safety problem in the industry and one for which no fully satisfactory solution has been found.
Many thanks to Richard Yudin and Fyffes Tropical Produce for contributing to the industry dialog.