ON THEIR OWN

WEST DES MOINES, Iowa -- Hy-Vee Food Stores here likes being an employee-owned company. ce owned by employees in a profit-sharing trust.Ronald D. Pearson, chairman, president and chief executive officer, told SN he sees no reason to make any changes in that approach."We don't want to expand the percentage owned by the employees because we don't want to give up more management control," he explained.Pearson

WEST DES MOINES, Iowa -- Hy-Vee Food Stores here likes being an employee-owned company.

ce owned by employees in a profit-sharing trust.

Ronald D. Pearson, chairman, president and chief executive officer, told SN he sees no reason to make any changes in that approach.

"We don't want to expand the percentage owned by the employees because we don't want to give up more management control," he explained.

Pearson said the trust is similar to an employee-owned stock plan, although the way it is valued by independent appraisers differs from an ESOP valuation.

Store managers own shares of stock in the company, but not any real estate, and each manager makes all his own decisions on buying, pricing, advertising, variety, mix and sets. "We encourage autonomy at all levels, and that creates a unique situation," Pearson said.

"One of our strengths is that each human being is unique, and managers do things that work for them that might not work for others. So even if we exchange successful ideas among managers, that doesn't mean everything will work at all stores, because one manager may not be as comfortable performing a task that way as another."

Despite their autonomy, store managers in larger cities tend to make price changes together and run common newspaper ads, although they don't have to, Pearson explained.

According to Pearson, it takes many years for individuals to become managers -- possibly 10 to 15 years after college, "which is longer than the industry average of under 10 years.

"But at Hy-Vee there's so much to learn -- each manager must know about advertising, pricing and merchandising, and he must be expert in all departments and food preparation."

Given the intense training that goes into becoming a Hy-Vee manager, the chain has almost no turnover, Pearson said.

Responding to critics, Pearson said, "Some people tell us we're too inbred, with no outside directors or input. But I'm on several boards of directors, and outside directors tend to interfere more than they contribute."

One disadvantage of employee ownership -- "although it's not a big problem," Pearson acknowledged -- is raising capital to grow. "If you are privately held and not profitable, it's hard to borrow money. But we are able to generate cash from our profits, with only occasionally needing to borrow money."