Building a Better Workplace: Living their values

By Deanne Stone

At Lundberg Family Farms, in California’s Sacramento Valley, the third-generation owners strive to be caring employers and good corporate citizens.

Albert Lundberg’s gift to his family just keeps on giving. A pioneer in sustainable farming who died in 1970, he passed on a legacy of respect for the land and a zest for experimentation to his sons, grandchildren and, now, great-grandchildren. Seventy-two years after Albert started growing rice in California’s Sacramento Valley, the family is still farming —and doing it their way. Embracing values transmitted from the first and second generations, the third generation has turned Lundberg Family Farms into an exemplary workplace and model of good corporate citizenship.

Today, Lundberg Family Farms is one of the U.S.’s largest growers of organic rice. With a workforce of 192 employees (excluding farm workers), it has 17,000 acres under cultivation and produces more than 150 rice products.

“Rice is our lives,” says Jessica Lundberg, Albert’s granddaughter. “We grow it, live it and love it.”

Contributing to the company’s success is the family ethos of continual improvement. Like their grandfather and fathers before them, the third-generation owners routinely ask, “Is there anything we could be doing differently? Anything we could be doing better?” Their relentless striving to improve all aspects of their business has earned Lundberg Family Farms numerous awards for agricultural stewardship and exceptional employee benefits. In 2008, it was selected as one of the top 15 small workplaces in the U.S. by the Wall Street Journal and Winning Workplaces, a non-profit organization in Evanston, Ill., that helps small and midsize companies create better work environments.

“These folks have clearly defined values about family, land, business and customers passed down from generation to generation,” says Jim Sabraw, a partner in Leadership One, business transition specialists working with family businesses and the executive director of the non-profit Capital Region Family Business Center in Sacramento, Calif., where the Lundbergs are members. “I’ve consulted with a lot of family businesses that have a disconnect between their stated values and practices,” Sabraw says. “There’s no disconnect in this family. They live their values, and it’s reflected in how they run their business and their relationships with employees and customers.”

Albert Lundberg inherited his corn farm in Nebraska from his parents, Swedish immigrants who came to the U.S. in the late 1800s when they heard that the government was giving away land. Albert and his wife, Frances, had four sons—Eldon, Wendell, Harlan and Homer—who helped out on the farm. All their hard work was undone by the drought and widespread mismanagement of land that devastated the Great Plains during the Dust Bowl years. Forced to abandon his farm, Albert relocated his family to California in 1937 and bought a 300-acre rice field in the little town of Richvale, 20 miles south of Chico.

With vivid memories of the destruction caused by shortsighted farming practices, Albert vowed to leave the soil of his rice fields in better shape than he found it. Far ahead of his time, he began rotating crops, planting cover crops and reducing use of chemical fertilizers and pesticides. He also stopped burning rice straw, the stubble left in the fields after harvest, in 1961—40 years before the practice was banned by the state of California. “That’s an example of my family making a decision because it was the right thing to do,” says Jessica, 34, Wendell’s daughter, who is the company’s nursery manager and board chair. “Burning straw residue was cheap and easy, but my family didn’t think it was good for the health of farm workers, wildlife or the environment.”

Going organic

When the Lundbergs moved to Richvale, they joined the local rice farmers’ cooperative, combining their harvest with other farmers’ and selling it overseas. By the early 1960s, the Lundberg brothers had switched exclusively to eco-farming (using chemicals only when necessary), while their neighbors still used conventional farming methods. The brothers’ decision to stop commingling their rice and to sell it directly to the public put them at odds with the co-op members. “They were good people, but they didn’t want to change,” says Wendell, 79. “They thought we were crazy and would go broke, for sure.”

Instead, their business got a boost from an unlikely group of entrepreneurs—a colony of refugees from New York who, fearing a nuclear attack, had selected Chico as the safest place in the country to live. They wanted to start a business selling rice cakes and needed a local farmer willing to grow rice without chemicals.

The Lundbergs started farming organically in 1968. The following year, they built their own rice mill for milling brown rice. “It was a big investment and big risk,” says Jessica, “but the bigger mills were unwilling to mill small amounts of brown rice, and they didn’t want to encourage competition.”

The brothers bought an old bread truck, filled the back with bags of milled rice stenciled with the Lundberg name, and hired a driver to stop at health-food stores along the coast from California to Washington. “We started getting orders from long-haired hippies who filled their VW buses with rice,” says Wendell. “They were wonderful people to do business with, and some went on to start natural foods companies.”

As the demand for organic brown rice products increased, the Lundbergs began developing their own line of foods under the Lundberg Family Farms brand. They started with rice cakes in 1980 and have since added flavored chips, pastas and cereals as well as flour and syrup made from organic and whole-grain rice. Because they cannot produce enough organic rice on their own, they currently contract with 30 family farms to supplement their crops. Today the company grows 17 varieties of rice, and it’s the job of Bryce, 48, Harlan’s son and the company’s vice president of agriculture, to see that it grows the right quantities and that bins are available in the proper sizes for storage of the different varieties.

While family farms vanish by the thousands every year in the U.S., Lundberg Family Farms has thrived. “One reason,” says Bryce, “is that we control every step of production from growing, drying and storing to packaging and distributing. That allows us to set our own prices. We’re also in a specialty market that caters to customers willing to pay a little more for quality organic products. To keep up those relationships, we visit our major customers after every harvest to talk about who we are and what goes into producing quality products.”

“That kind of personal contact is characteristic of the Lundbergs,” says consultant Jim Sabraw. “Building a brand of consumer products and getting exposure in the organic food industry takes perseverance, skill and patience. This family doesn’t make decisions lightly. They take the same disciplined approach whether deciding about a product or a new hire, and they include all the key people in the process.”

Values-based policies

The family identified four values that define its philosophy of doing business: integrity, respect, continual improvement and teamwork. They not only invoke these values whenever they must make tough decisions but also have printed them on cards so that new employees can refer to them for guidance.

Lundberg Family Farms has built its reputation on the purity of its organic products. Articles on the company’s website (www.lundberg.com) provide detailed descriptions of its farming practices, including the claim that genetically modified material is not used in Lundberg products. Vice president of administration Tim Schultz, 47, who is married to Homer’s daughter, Ingrid, recalls a situation a few years ago when the family discovered that a small amount of contaminated rice had gotten into a line of rice chips. “We [managers] asked ourselves, ‘What do our values tell us?,’” Schultz says. “The answer was obvious but costly. We pulled the product and destroyed $250,000 worth of inventory.”

Lundberg Family Farms started transferring leadership from the second to the third generation in 1987 when Grant, Eldon’s son, began working full-time. After completing a major reorganization and board expansion in 1998, the company named Grant, now 46, as CEO. The transition was completed in 2008 when Homer and Wendell followed their brothers in retiring from the board. “It was a smooth transition,” says Grant, “because our parents always included us in the business. Joining the business full-time seemed like a natural extension of our lives. When I was a kid my dad picked me up after school, and we worked in the fields together. No one had to tell me what kind of person he was or what was important to him; I could see it. I hope my generation can do as good a job of passing on values to our kids as our parents did to us.”

Currently, five of the 11 third-generation family members and two in-laws are active in the business, and eight of them serve on the all-family board. The 18 members of the fourth generation range in age from 21 to one. Those old enough to get work permits are invited to participate in the summer internship program, where work experiences include tasks such as working in the fields, packing rice cakes and accompanying salespeople on sales calls.

For a month during the summer, Lundberg Family Farms has a table at the local farmers’ market, enabling teenage family members to talk with customers about the family business. Different interns work at the market each week, sparking friendly competition among the cousins to see who sells the most products. In summer 2009, Emily, Harlan’s 16-year-old granddaughter, had the plum opportunity of following a research project on fertilizers at UC-Davis. “My grandfather’s always talked to me about his experiments,” says Emily, “but it was so exciting for me to go to the lab and see what the graduate students were doing.”

Lundberg’s efforts to be a good corporate citizen go beyond organic farming. The company’s investments in technology to reduce its carbon footprint earned Lundberg the EPA’s National Green Power Leadership Award. The company says solar installations provide 15% to 20% of its electrical use and the rest is offset by purchases of wind energy credits. “Our customers appreciate our efforts to be energy efficient,” says Grant, “and that reinforces our commitment to do more.”

‘I feel like a Lundberg’

Lundberg Family Farms has been lauded for the employee benefits it provides. Jessica says the family’s philosophy is simple. “We created a business we wanted to work in because we owned it,” she says, “and a business employees wanted to work in as if they owned it.” That means giving employees opportunities to move into management positions and a voice in how things are done. The “Above and Beyond” program offers $200 cash prizes each month for good ideas that are implemented. At “Meet the CEO” events, small groups of employees can discuss their concerns with Grant. These meetings were inspired by a ritual of the second generation. Each week the four brothers met in the local café to talk about the business. “Eldon was the chairman of the board,” says Wendell. “He wanted all of us to know what was going on and to bring new ideas we could try out.”

Most of Lundberg’s farm workers are year-round employees. They enjoy the same benefits and extras as other employees, including health insurance, bonuses, the employee assistance program, carpooling incentives, and participation in company-sponsored events such as the summer picnic, fishing trips and Christmas parties.

One beneficiary of Lundberg’s programs is Michelle Jackson, who was hired as a temporary worker when she was 60. Today, at age 67, she is the staffing coordinator in human resources and runs the company’s wellness program, which includes overseeing the employee garden. To induce employees to eat five servings of fresh fruits and vegetables daily, the company supplements harvests from the garden with weekly purchases of produce from an organic farm in Chico. The produce is bagged and handed to employees to take home.

To calculate employee bonuses, each year the company establishes target levels based on profit margin and assets deployed to achieve profits and food safety. “Over the past ten years,” says Tim Schultz, “bonuses have ranged between 4% and 12% of employees’ annual salaries, with an average of about 9%. We’ve seen a slowdown in our historic growth rate during the current economic downturn, but we continue to have positive financial results.”

The employee benefits translate into low turnover. Eighty employees have worked for the company for more than ten years; 22 of these have worked there for 20 years or more. “My greatest regret,” says Michelle Jackson, “is that I didn’t spend my whole career working here. From the bottom of my heart, I feel like a Lundberg and care about the company like a family member.”

That sentiment is exactly what the Lundberg family has worked to promote. “The company has our name on it,” says Jessica, “and that means a lot to us. Raising food is a noble occupation. We’re proud that the foods we produce are healthy, safe, and taste wonderful. But my family can’t take all the credit. The business wouldn’t be what it is today without the contributions of our hard-working and committed employees.”

Deanne Stone is a business writer based in Berkeley, Calif.

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Summer 2010

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