Interview with Julius Walls, Jr., CEO, Greyston Bakery

Sep 3, 2009

Greyston Bakery was started on the premise of bringing the unemployed into the workforce. In fact the company's motto is, "We don't hire people to bake brownies, we bake brownies to hire people."

JULIA KENNEDY: Welcome to the Carnegie Council's Global Ethics Forum. I'm Julia Kennedy.

I recently sat down with Julius Walls, Jr. He is CEO of Greyston Bakery in Yonkers, New York, and coauthor of the book Mission, Inc.

You may not have heard of Greyston's baked goods, but if you're a fan of Ben & Jerry's ice cream, you've probably eaten their brownies. The bakery was started on the premise of bringing the unemployed into the workforce. In fact, the company's motto is, "We don't hire people to bake brownies; we bake brownies to hire people."

Since becoming CEO of Greyston in 2000, Julius Walls has continued the tradition of extensive worker training. With a background in accounting and entrepreneurship, he has also put a more rigorous focus on the bottom line of the business.

Walls began by telling me about the founding of Greyston Bakery.

JULIUS WALLS: The first notion of Greyston was to provide an income for the Zen Buddhist community that started Greyston. But quickly, Bernie Glassman, the founder, who was a Zen Buddhist teacher/priest, wanted to marry his spirituality with social action, and so he moved the bakery from its founding in Riverdale, New York, up to Yonkers, New York, bought an old pasta factory, and started producing cakes and pastries and all sorts of items. Then that grew into making other items, like bread.

Then one day fairly early on in our history—we've been around now 26 years—five years in or so, they met Ben Cohen and Jerry Greenfield. Bernie met Ben. They had a conversation about what each of them did. Bernie said, "I run a bakery," and Ben said, "I run an ice cream place. Can we do anything together?"

That's how the relationship began. We've been making brownies for Ben & Jerry's for 20, 21 years.

JULIA KENNEDY: Wow. Then how did you become involved with the organization?

JULIUS WALLS: Seventeen years or so ago, I called on the organization, because I worked for a chocolate company, to sell them chocolate chips for their cookies and such. Actually, Greyston told me no. I was very disappointed—I don't take "no" very easily—and continued to try to sell them product.

Shortly thereafter, I was given an opportunity to bring vendors to the White House. This was for Hillary Clinton's first public event, the Easter Egg Roll of 1993, I think is the exact year. In doing that, I did look up more information about Greyston and learned a little bit more about it and found out what the mission was and who was working here, and was very intrigued.

So I stayed involved with them. A couple of years after that, I was asked to come on board as director of marketing, as a consultant. But within two weeks, I was working full-time and just fell in love with it. A couple of years after that, they asked me to come on as CEO.

JULIA KENNEDY: What was your plan of action when you took over as CEO? It was kind of a turning point in Greyston's history, wasn't it?

JULIUS WALLS: Yes. Greyston had been here and had been established before I got here. It had been in existence about 12 years, but they'd struggled financially and struggled to find a reconciliation between its mission and its margin. So when I got here, we started to talk a little bit more about the bottom line and we started asking people to deliver on performance, regardless of the mission. In fact, it was my opinion that the mission was better met by holding people accountable and giving them an opportunity to be successful and expecting them to be successful and driving their self-esteem around being employees, and ones that could be successful.

I felt we couldn't replicate this business, not as a business being a bakery, but the idea of hiring people whom others have discarded or find unemployable would be best accomplished if we were successful. So we pushed towards that and started holding people accountable, but started also doing more in the way of training.

We instituted an apprenticeship process. We instituted what we call open hiring, which is giving the first person an opportunity of employment, regardless of their background, not doing an interviewing process. All an interviewing process does is tell you who can interview better, not whether or not they're going to perform better. We started putting some of these things into place, and as we did that, we started to achieve some higher levels of success.

JULIA KENNEDY: Was Greyston Bakery always a for-profit company?

JULIUS WALLS: Greyston was always a for-profit company. In 1997, it was formally put under the umbrella of the Greyston Foundation, which I believe was created in 1992. But it was always a for-profit and it was always owned by a nonprofit, the first nonprofit being the Zen Community of New York and then the Greyston Foundation.

JULIA KENNEDY: I see. How do most of your employees find out about you and come to you?

JULIUS WALLS: Most of our employees find out word-of-mouth. We don't do any advertising for entry level. We are known in the community. When I first got here, we were known as a training program. We weren't even a training program back then, but that's what people thought of us as, a nonprofit training program. And there's nothing wrong with that. It's just not what we are. We are a business that provides regular employment as opposed to a training program, where you are going to come and work for a short while and be placed somewhere else.

I think that inspires a different level of ownership by the employee, if they think they're only going to be here for 60 or 90 days for training versus, "Hey, if I come here, do well, become a part of the team so that the business is doing well, then I have an opportunity to make a future for myself here."

One of the statements in our mission statement talks about having an opportunity for employment, but it goes on to say "and an opportunity for advancement." So while we have 60 employees here, of those 60 employees, only eight of us did not start at entry level. All of the other employees started at entry level. Our production supervisors started at entry level.

That presents its own set of challenges, but it does present opportunities that some of our employees might not be able to point to if they were working somewhere else. They have a chance to strive—"Hey, if I do this, if I apply myself, if I learn, I have a chance to benefit." I think that's one of the huge issues in communities of poverty and low income, that the community can't point to, "If I do all the right things, here's what I'm going to get out of it." They don't see the opportunity for success. What we're trying to do is demonstrate to our employees that that opportunity for success does exist here.

JULIA KENNEDY: Tell me a little bit more about the apprenticeship that you offer new employees here at Greyston.

JULIUS WALLS: When I got here, they had a probationary period. When you hired someone, they were on probation. And I don't like the term "probation." I don't like it for a couple of reasons, not the least of which is because some of our employees are on probation, and we didn't want to discuss that or have their employment associated with the notion of what probation is, which is the fact that someone is watching you to see if you will succeed or fail.

An apprenticeship is a timeframe in which you are coming on board to learn. The idea is looking towards success. An apprenticeship is looking towards success and learning and growing and being supervised and supported towards that growth.

The apprenticeship started out as a 90-day period. Now it has grown to being a year-long period. We do a two- to three-hour training every two weeks, which includes a formal review of their performance in the areas of attitude and productivity and punctuality and attendance—a very strict, straightforward, and direct model, where they understand where they stand, so they don't have to guess at it, and then giving the support to be successful. But they also understand how they're going to be held accountable, what the expectations are, so they don't have to guess at it.

One of my personal management philosophies is what I call the Three Cs: clarity, consistency, and compassion. We're clear about what we expect, we will consistently apply it, and we'll do everything with compassion in mind.

We also believe that being consistent is, in fact, compassionate. Moving the dial every once in a while depending on whether we like or don't like someone is not the way to be compassionate to someone. So we're fairly consistent in what we do and, again, we're very clear about what we do.

Now the apprenticeship has taken on a model of reward. So it's reward, responsibility, and recognition.

I'm big on these three letters. It makes things easy to remember.

We're saying we will reward an employee who shows personal responsibility and we will recognize them as well. So as they do what they're supposed to do, we will recognize and reward them for that. That has moved away from a more punitive model, where, "If you don't do this, this is what's going to happen to you." We're starting to talk a little bit more about, "Here's a bonus." After 90 days, we provide a $50 bonus as they perform over 90 days, and if they do very well, they can get a $100 bonus. After a year, they can get a $100 bonus, in addition to each quarterly bonus. But also if they do very well, they can get a $500 bonus.

We recognize them by putting their names up on our bulletin board every quarter. Every month somebody's name goes up, but we put them on a monthly basis about how they're doing on a quarterly basis—so trying to recognize our employees and reward them with recognition and then actual financial reward.

JULIA KENNEDY: Where do you gather together your ideas, your management ideas? This seems a really unique business and labor model.

JULIUS WALLS: A lot of these ideas have grown out through conversations here. I've been a focal point for those things, but I don't come up with them on my own. We have a very good management team. We try to involve our employees in these conversations.

I used to operate the apprenticeship directly. One of the things I would do at the conclusion when someone graduated was I would ask them two questions: One, speak to your fellow employees with some advice. Tell them what you think they should be focused on during their apprenticeship. So they are hearing it from somebody who has now made it through, who's successful, who has succeeded in graduating.

Two, tell me what you think Greyston should do differently in the apprenticeship.

So we have that dialogue. A lot of the things that we do in our apprenticeship have grown over time.

More recently, we've engaged different groups to study and look at what we're doing and give us feedback. We've had a group from Yale come through to actually evaluate things and give us feedback. They looked at our apprenticeship program and said it comes off as a little too punitive. They're the ones who gave us some ideas of how we could make it a more reward-driven apprenticeship. We, quite frankly, didn't eliminate any of the ways in which we held people accountable, but we started stressing the rewards and added to those rewards.

So we're open and looking and listening, from all places—internally, employees, management; externally, bringing in groups—and then sharing with the society and community at large and looking at what's happening and what works well and how we can bring those best practices to Greyston.

JULIA KENNEDY: Going back to this rewards system, what did you see change as you implemented it?

JULIUS WALLS: The most recent change actually was just implemented in 2009, so we haven't seen a whole lot of data.

The energy has shifted, I think. People are eager and discussing what's possible. As we've done it over time, we've seen that happen in a larger scale. Our employees, when I first got here, used to talk a lot about not being able to eat, where they were going to live—all of those major crises. Those are huge issues that you need to deal with. I'm a huge fan of Maslow's hierarchy and the notion of taking care of basic needs first. It's not as if my employees aren't dealing still with basic needs, but they are looking forward.

In one of the studies that we did, we find that 68 percent of our employees were looking forward in their education, in doing something to add to their skill set, which was really incredible. Some of it is simply going back and getting their GED. But some of it is adding a skill set. A couple of our employees now are engaged in and excited about taking forklift training. Some of them were designated by us because of what we think they should be doing for the organization, but some were volunteers who said, "I want to learn this. I want to add this to my skill set."

We've done food-safety training, getting certified for it, so that they can take that certificate. We're seeing employees getting eager to add to their skill set. That's just exciting. That brings a level of growth and excitement to the organization that otherwise would be absent.

Then, with all of that, what we've seen is our financial performance improve. We've seen our margins grow, our productivity grow. When I first got here, we had 30 or so employees producing somewhere around a million pounds. We now have 60 employees—so twice as many employees—producing four times as much product.

JULIA KENNEDY: What do you see when you look at other organizations and their approach to labor? Do you think there needs to be more emphasis, in general, on labor and fair labor standards?

JULIUS WALLS: Absolutely. I do think there needs to be a greater emphasis. But I also see it happening. I see society moving forward and recognizing the importance of the employee in the workplace. Greyston wasn't the first to do progressive things; we just do our thing. I definitely think there needs to be more of an emphasis. We as a society, as a business community, need to understand all of the stakeholders, and not just the shareholders, that are involved in a business—the employees. We place a great emphasis at Greyston on employees.

We also place an emphasis on the community and our impact on the community. We are very conscious of our environmental impact in the community. We're very conscious of our social impact in the community, as well as our economic impact.

So looking at economics, we think in terms of who we are buying from and how we are buying from them, from a local community. I'm not yet at the point of being able to examine their political or environmental or other impacts that those companies are having. But we do think very consciously about buying local when we can.

There's a sugar refinery that's local. Since there is one here, we do place an emphasis on trying to buy from that one. Will we buy from them at a loss? No. Will we put an emphasis on buying from them, give them every opportunity to win that contract, including simply matching? Yes.

So we pay attention to those things. We wish other businesses would pay more attention to them, especially in the area of employment. We've seen a growth in that.

We've seen more interest in that. But what other organizations will say is - they'll look at their costs. We talk about our costs as well, but we look at it as an investment, an investment in the community and that investment, in fact, paying off to us in terms of how we perform. We think we have a more loyal employee, even at entry level.

If you compare entry-level employees one to another, I think our employees are more loyal, because they understand the opportunity that they have and they understand the impact that this organization has.

JULIA KENNEDY: One of the chapters of your book, Mission, Inc., is called "Do-Gooders Versus Good Doers." What's the difference?

JULIUS WALLS: A do-gooder is someone who's trying to do good in the world. That's different than someone who can do good work. We were trying to distinguish between people who are well-intentioned versus productive people.

You have people in the business world who are nice people, but not necessarily productive people. I think everyone already understands the other contrast between a person who goes to work and is a productive business person, but not necessarily someone who is nice. We're talking about people who are nice, but not necessarily good business people.

In nonprofit-run businesses, you wind up with a lot of nice people, but they're not necessarily productive, and a business cannot afford to have them on as well. And we don't think you have to make a choice. We think you can find someone who wants to do good and who can do well.

JULIA KENNEDY: As an organization that's doing good and doing well, a big piece of that, I would imagine, is marketing. You have been featured in The Oprah Magazine, Seventeen magazine, on the Rachel Ray Show. Why is marketing such a key part to keeping this business going?

JULIUS WALLS: It is because we're a business, no different than any other business. In fact, we have a section in the book that talks about why businesses fail. We say all traditional businesses and we list the ten reasons or so why they fail. Then we list the ten reasons why a nonprofit-owned or a social-enterprise business will fail. And they're the exact same reasons, according to us. We wanted to lay it out so people would get a visual that it's the same thing.

The Greyston Bakery is a business. We need to market our business as much as any other business has to. So, yes, while we have a unique story, we're going to take advantage of that unique story and bring our story to the marketplace so that people can understand—"Hey, I want to understand what that Do-Goodie brownie is"—so people want to buy from us. So we use our story.

Any business will look for its advantage and its edge in the marketplace. That happens to be one that we have, and so we're going to exploit that.

JULIA KENNEDY: You mentioned the Do-Goodie brownie, which is your latest product. Tell me a little bit about how you came up with the idea, the name, and how it's doing.

JULIUS WALLS: We came up with the product as a result of being on 60 Minutes. We were on 60 Minutes in January 2004. When we were on 60 Minutes, we were not making this brownie yet; we were making cakes. We were a very good producer of gourmet cakes to be sold in the restaurants. We were going to expand our cake line.

We wind up on 60 Minutes. At the time, we had launched a Web site and we were selling our cakes on the Web site, but we didn't sell very many cakes. We didn't have a large name outside the New York market. Maybe we sold one—and I'm not exaggerating—one or two cakes a week. That's it. Then we get on 60 Minutes, and all of a sudden we're selling a lot of cakes.

Here's the catch. We were losing about $20 per cake that we were selling on the Web site—no big deal, selling one or two cakes a week. Why would you sell them and lose money? Because these were people who heard of Greyston and they wanted to be in a relationship. No big deal. They buy a cake, and we lost $20. We would call it an investment in a relationship. That person might turn out to be a donor to the Greyston Foundation. So it was a relationship issue.

Well, sell a few hundred or a few thousand cakes at a $20 loss, and now it starts to make a difference. So going on 60 Minutes was a fabulous, fabulous opportunity for Greyston, but we lost about $60,000 on selling cakes, because we were losing money every cake.

But what we found out there—we didn't just lose $60,000. We said it was an investment in learning for us. We studied and said, "What's going on here?" Consumers were saying, "We want to be in a relationship with the people that we buy from. We want to know what impact you're having."

So we said, "People want to be in a relationship with us. It's not cakes." We could not do those successfully on the Internet because of the cost to ship. That was the big thing. Our cakes were so delicate, we had to ship them next-day air, so that was pretty expensive.

Then we said, "What can we do? What are we known for? We make all the brownies for Ben & Jerry's ice cream. We're known for brownies." Those people who had heard of us had heard of us because of our relationship with Ben & Jerry's. Then we said that that relationship with Ben & Jerry's is a key asset for Greyston. How do we utilize that?

So we sat and talked to Ben & Jerry's, and they said they would be willing to support us in this. We said we wanted to launch a line of brownies.

So now we're going to launch a line of brownies. We have the expertise to produce brownies. That's what this building was built for, to make brownies. Now you need a name. We said, "We'll call it Greyston brownies."

What does Greyston mean? It doesn't mean anything in and of itself. You have to teach people what that means. Being very clear, we don't have the dollars to do that. I'm not a Kodak, who went out and convinced people what Kodak meant. Kodak means nothing, except it's the name of the camera company—or any of the other names out there that you read about. We don't have those kinds of marketing dollars.

So we said, when people hear the name, we want them to ask who we are: Who is Greyston? What are we doing? What is that company doing?

So we came up with the name "Do-Goodie." We say it's not just a goodie, but it's a Do-Goodie. I would say a fairly high percentage of people never catch that there's something else going on with the name. But there are those who are conscious and look at the name and say, "Oh, okay, they're doing something else. What are they doing?" Then they go to our Web site and they check us out. They go from being a consumer to being an advocate or an ambassador and starting to talk about what we're doing.

Then we also move to our tagline, which is, "Feed your conscience." So you still want to talk about food, because that's what it is—it's a brownie—but we also want to move them a little bit from just talking about food to saying there's something else going on there.

It's a great brownie. It's made with Belgian chocolate and butter, real butter, as opposed to vegetable oil. It's made with all natural ingredients. So it's a great brownie.

If it wasn't a great brownie, none of this would matter. People would rather donate a dollar to a charity than buy something for a dollar that's going towards charity that's low-quality.

They're buying a great brownie, the best brownie, I believe—and not just because I make it—the best brownie that you can buy. They're buying that brownie and supporting an organization that does the wonderful work that's being done here.

JULIA KENNEDY: And have you found that there is more traffic on your Web site?

JULIUS WALLS: It definitely has improved our traffic. There's no question about that. We've sold over 300,000 brownies, so there are 300,000 people out there—or probably fewer, because I'm going to assume that some are repeat buyers—there are some number of people who have now heard of Greyston, who had never heard of Greyston, because of the brownie, which is another piece of what we're trying to do.

If you look around, you see that a lot of businesses now have a message beyond simply the product message. All retail products should have a product message.

There's no question about that. There are those out there that don't, and they will never be successful. But now you see a lot of businesses that have something beyond simply the product message. That's what we have as well.

We've seen a tremendous increase in our Web site traffic, in our Web site business. We're also looking to expand the awareness of what else Greyston does.

JULIA KENNEDY: I want to actually ask you a little bit about the financial crisis as well. I read an article saying it has affected you quite a bit last year and will affect you again this year. Talk to me a little bit about that and how you're responding.

JULIUS WALLS: We're struggling, like other businesses have. The consumer market has just struggled. As a supermarket's business suffers, our business will suffer, and it will suffer first because the largest product that we produce is an ingredient that goes inside ice cream, that goes inside super-premium ice cream that's at the upper end of the price point. As that business struggles—and the struggles haven't been significant, but what it has done is put pressure on pricing and on cost. The growth is no longer like it was prior to the economic crisis.

Then we have launched a super-premium brownie. We have launched a top-end brownie product as well. We're seeing some issues around the level of growth and hitting the projections that we had out initially, and not being able to hit some of them.

But we still have launched from zero. We still continue to grow each and every day. A lot of that, obviously, is the fact that we're putting on new stores and new territories as we go along. But we've seen continual strong repeat sales. We're excited about that. And the retail community continues to support us.

JULIA KENNEDY: So what's the plan in the future? What would you like to see Greyston become in the next five to ten years?

JULIUS WALLS: A large retailer of the Do-Goodie product line. The Do-Goodie is not a brownie line. The brownie is where we first launched the Do-Goodie. If you look at our packaging, it doesn't say "Do-Goodie brownie line." It says "Do-Goodies," and then on the bottom it says "brownies." So Do-Goodie is our brand name that we're going to expand to incorporate a number of products.

This year, within the next 30 to 60 days—early fall—we will be launching gluten-free. So we'll have a line of two cookies, two cupcakes, a vanilla and a chocolate cupcake, a banana-nut muffin, and a banana loaf. Those six products we're launching this fall. It will be the Do-Goodie gluten-free line. Then it will list a bunch of items.

So my hope for Greyston going forward is that we will continue to expand our offerings and that would have a dual impact of being able to expand the business and what we're able to do here, employing more people, impacting more people in this community by operating the childcare center and the healthcare center and some of the other nonprofits that we have here, and then, in addition, continue to put forth the message that you can hire people and you can do good and do well. You don't have to compromise. You don't have to choose one or the other. You can do good and do well at the same time.

JULIA KENNEDY: Do you ever come up against a quandary about balancing the labor with your goals for the bottom line? Does that ever come in conflict for you?

JULIUS WALLS: It doesn't really. Does it ever come up in conversation? Yes, to be truthful. The conflict doesn't occur because I don't believe that I have to choose. I just believe I have to manage better. So the issue for me is, are we managing our business well? Are we taking care of the things that we need to take care of and operating the business? If not, are we hiring the wrong people? That has never come up as a conflict for me.

Again, it's a conversation. It's something that I think is a responsible thing to examine on some regular basis. And, yes, other people constantly throw the question in my face, so I have to look at it. So we take a look at it and say, are there better ways of doing what we do, from an employment point of view? And we do challenge ourselves to continue to push ourselves toward productivity.

I shared with you early on that we have moved from 5,000 pounds to 20,000, 25,000 pounds. That's with the same employment base. But that's training them better, that's providing them better equipment, that's providing a better manufacturing environment, and operating the business in a more efficient manner. It's not about whether we're hiring or not hiring the right people.

JULIA KENNEDY: Julius Walls, Jr., it's been a pleasure to have you. Thank you so much for being on Global Ethics Forum.

JULIUS WALLS: I appreciate it.

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