Lost in Patagonia

Profile of a socially responsible company, its founder, and the problems of focusing on ideology rather than profit.

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What ever happened to the company of the '80s?

At Patagonia, a visitor's first impression blurs myth and reality. Tucked behind the company's main building like a well-preserved shrine stands a corrugated-tin shed, in which Yvon Chouinard began, back in 1957, forging mountain-climbing hardware for his friends. It is thus a bit of a jolt to step from the imagined smoke and heat of the shed into the tastefully appointed adjacent retail store and realize that Patagonia no longer makes hardware of any kind. Chouinard Equipment declared Chapter 11 three years ago, when its liability premiums went through the roof, and was subsequently sold to a group of former Patagonia employees. Patagonia today designs and sells expensive clothing, much of it the kind you'd wear to a weekend barbecue in the backyard, not atop the Matterhorn at 20 below.

Image is a word that is liberally bandied about at Patagonia, and the concept serves as a key cog in the company's strategy. The Patagonian knack for building and burnishing image has created a business whose sales have soared from roughly $3 million in 1979 to $117 million in the latest fiscal year. Patagonia's catalog, the envy of the industry for its mix of lush layout and high production values, drives a thriving mail-order operation, while nine company stores and 1,200 dealers on three continents retail the company's products, which have become the apotheosis of outdoor chic.

Behind those big numbers stands Yvon Chouinard, Patagonia's founder. A mountain climber by calling and an entrepreneur, it appears, by accident, Chouinard has made building a company look easy. With Patagonia's sales as much as doubling yearly in the 1980s, Chouinard, you'd think, was a driven man with a shrewdly devised business plan. Not to hear him tell it. "I'm a craftsman who had a better idea of how to make things," he says. "It so happened people wanted them."

To Yvon Chouinard, business seems an afterthought; saving the world has become his primary mission. For him Patagonia exists to serve as a model for corporate responsibility. A company tour leads from the expansive day-care facility to the subsidized cafeteria, where employees, fresh from a noontime game of volleyball, load up on gourmet pizza, salad, and yogurt. Recently, the company conducted an audit of its raw materials and processes in an effort to be environmentally sound. And Chouinard has gone so far as to state that with traditional institutions faltering, organizations like Patagonia can inject meaning, purpose, and a sense of community into people's lives.

That notion dovetails with Chouinard's deeper aim -- to forge his company into a tool for social change. Patagonia began tithing in 1984, distributing 10% of pretax profits (now 1% of sales) to various causes. Chouinard labels the practice "our earth tax," adding that no one can wait for the government to impose a levy, because by then the planet will be beyond repair.

Chouinard's activism has earned the company reams of favorable press and turned its founder into a cult hero. But then last year reality intruded as sales fell flat, profit fell off a cliff, and the bank clamped down on the company's line of credit. Patagonia, expecting another fat year -- and continued immunity from the recession -- let inventory pile up, and eventually it had to be dumped below cost. Bodies followed. In July 1991 Patagonia, always known for "taking care of its own," laid off 120 people, or roughly 20% of its work force, sowing plenty of rancor in the disbelieving ranks.

In the wake of the disaster, Chouinard remains upbeat, saying the crisis forced the company to reduce its bloat, slow its growth, and return to its cultural roots. "We were on a suicide course," he says. "We were exceeding our limits, financially and mentally." In the future, Chouinard asserts, he will increase profit, even if sales are flat. He will limit supply, selling to those dealers "who get their preseason orders in first." Patagonia will use more local suppliers to pare costs, and it will tighten up on accounts receivable. The company will eschew environmentally blasphemous direct mail in favor of advertising to engender requests for its catalog.

But beyond Chouinard's optimistic assessment of Patagonia's future, one thing is clear about the company's past. Patagonia, like many companies steeped in image and a cult of personality, caught a big wave in the '80s, when easily smitten consumers had cash to throw at the latest trend. Growth came easy, but now Chouinard must engage in the rigor of steering a once-high-growth company through lean times. He must be a businessman as well as an environmentalist.

"Most people don't understand how very personal the nature of this business is to Chouinard, who is an outdoorsman and an activist," says Wayne Badovinus, president of Eddie Bauer, the Redmond, Wash., outdoor-clothing and -gear maker. "Now all of a sudden he finds himself dealing with hard issues relating to manufacturing and distribution that have nothing to do with the environment." Badovinus believes the '80s have ended for business. Protecting niches will replace the rush of top-line growth. Disciplined management will supplant what Badovinus labels "tribal rituals."

Patagonia, to be sure, is a culture rich in ritual, from management retreats into the wilderness to ponder long-term strategy, to surfing lunch breaks, to a stifling eco-orthodoxy that permeates the organization. Adds Badovinus: "A lot of people assume that these tribal rituals make a business better. But in the final analysis, clear measures of your progress -- sales and profits -- help guide you a lot more."

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