Corporate Culture & Money: Strange Bedfellows? Not at Patagonia!

Sure Pixar, Patagonia, and Google all have cool corporate cultures, but they also know that corporate culture matters to bottom line performance.

Each of these companies approaches culture differently (like each family has a unique personality). Yet they all realize that nurturing your people creates people who are for your business. It’s a simple equation that is unfortunately over-thought, over-analyzed, and over-complicated by too many organizations.

Corporate Culture and Profitability are NOT Mutually Exclusive

Today, we shine the spotlight on Patagonia, an organization long-admired for their commitment to social responsibility and a global brand, whose culture is an expression of the founder’s unique personality.

In an age when change is rapid fire and complex, people are the heartbeat of any business. At Patagonia, read on to see 3 culture success practices that make the difference to their bottom line:

1. How their CEO sets the tone for the culture
2. Small companies can make a BIG difference
3. Believing you can MAKE MONEY and do GOOD

Culture Success Practice #1: How leadership sets the tone for the culture

Patagonia has long been synonymous with great outdoor clothing AND social responsibility. Their founder, Yvon Chouinard said “I wanted to distance myself as far as possible from those pasty-faced corpses in suits I saw in airline-magazine ads” in his 2005 autobiography, “Let My People Go Surfing.”

“If I had to be a businessman, I was going to do it on my own terms.”

Chouinard was known for his “MBA” approach—”management by absence.” He often travels for months, fishing or climbing. When he comes to the office, his daily uniform is jeans and a Patagonia button-down shirt. He has no computer at his desk, but rather an Etch A Sketch where co-workers can leave friendly messages. When he greets employees in the halls, he will ask about their recent climbing feats, or invite them to surf at his house the next time the waves are rolling.

This approach is being carried forward by the CEO Casey Sheahan, who works closely with Yvon and Malinda to keep the company (now at $600 million and growing) feeling like a family-style organization. “I sit down with the employees in intimate settings and talk through what we’re doing, where we’re going. We try to keep it very casual, informative, no secrets.”

Aligning people to clear direction is a key culture success factor:  Why?  Research shows that organizations who hear frequently and regularly from their CEO and leadership team) about direction (both where we are headed and how we’re doing) grow up to 4 times faster in market share and profitability.

Culture Success Practice #2: Small companies can make a BIG difference

Chouinard’s approach to leadership has been motivated mostly by providing an example – and a road map – for future entrepreneurs. “I never even wanted to be in business,” he says. “But I hang onto Patagonia because it’s my resource to do something good. It’s a way to demonstrate that corporations can lead examined lives.”

That mission is expressed well in Chouinard’s book, “The Responsible Company,” providing detailed checklists for making money without inflicting undue societal harm.

For a maker of fashion fleece-ware (which might be about as exciting as selling soap!) Patagonia is gaining the attention of mega-corporations, who increasingly view stewardship of their communities and customers as essential as stewardship of the bottom line. Chouinard has even partnered with Walmart to advise them on reducing packaging and water use in its supply chains.

Since 1985 Patagonia has given 1 percent of revenue (sales, not profit), totaling $41.5 million, to grassroots environmental organizations. Over the years 1,400 other companies have joined them worldwide in the “1% for the Planet” initiative, which Chouinard believes is “an Earth tax.”

But when Chouinard counseled Walmart on sustainability, the behemoth learned they actually saved money through environmental initiatives, like reduced packaging and water consumption. “We are very focused on lowering prices for our customers,” says Fox. “There were some investments we needed to make at the beginning, but the returns were quick enough that it came back in a reasonable time frame.”

Levi Strauss—with more than 10 times the annual revenue of Patagonia has worked for 18 months to redesign their processes resulting in a savings of 45 million gallons of water, as well as the energy it would have cost to heat that water.

It’s not just about altruistic business practices. “The business savings costs are real,” says Michael Kobori, Levi’s V.P. of social and environmental sustainability.

Companies who stand for values beyond just making money, succeed in attracting more loyal customers and employees. No research needed on this one; almost every human being wants to be part of something good and meaningful, at the core.

Culture Success Practice #3:  Believing you can MAKE MONEY and do GOOD

Having a mission for social responsibility today is good brand management in an age when the internet exposes everything. Customers are increasingly aware of organizations’ social ethics, as are employees.  To do this well requires that the internal culture reflect the same brand principles you are touting to your customers.

In November 2011 on Black Friday—when most retailers are opening at 4 AM to maximize revenues leading into the Christmas season—Patagonia bought a full-page ad in the New York Times with the headline “Don’t Buy This Jacket.” The fleece jacket ad copy was followed in minute detail: How much water was wasted and carbon emitted in the course of its construction.

“I’ve never seen a company tell customers to buy less of its product,” marvels Harvard Business School professor Forest Reinhardt. “It’s a fascinating initiative. Yvon has the confidence to pull it off.”

In fact, Chouinard says the ad boosted Patagonia sales; he claims it was NOT through increased purchases from existing customers, but mostly through customers who would have bought cheaper products from competitors. Patagonia somehow created a rare perception of quality and do-gooder aura that certain people believe is worth a higher price.

And more importantly, Patagonia goes beyond shrewd selling practices to creating a workplace that reflects doing the right thing as well:

• Flex-time policies famously allow workers to come and go based on when waves are high at the nearby surf point … or whatever else they have to do – as long as deadlines are met.

• There’s a yoga room available any time of day (I walked in on the head menswear designer meditating there at around 11 a.m. on a Tuesday.)

• At the prodding of Chouinard’s wife, Malinda, Patagonia was one of the first companies in California to provide on-site, subsidized day care.

• Even the chief bean counter, COO and CFO Rose Marcario, seems spiritually fulfilled. In previous jobs at other companies, she says, “I might have looked for ways to defer taxes in the Cayman Islands. Here, we are proud to pay our fair share of taxes. It’s a different philosophy. My life is more integrated with my work because I’m trying to stay true to the same values in both.”

Companies who create a work-life balance get more from employees:  Most skeptics would question whether such practices could work at a giant, publicly listed corporation (think Google!) or it’s only possible if you have a premium pricing model. (if you believe that, read our recent blog about Costco and their founder’s philosophy on taking care of their people).

But Chouinard, like other savvy leaders today knows that a more fulfilling, happier workplace attracts and retains better workers, who in turn design superior products and think of smarter strategies.

Stories excerpted from:

http://online.wsj.com/article/SB10001424052702303513404577352221465986612.html

http://www.businessweek.com/articles/2013-08-08/casey-sheahan-ceo-patagonia