In Mondin's two years at Patagonia annual sales would rocket from $24 million to $96 million. Interpreting that growth for Patagonia's bankers, who had been reduced to taking a lot of the company's numbers on faith, fell to Mondin. "Before I got there, financial statements were late to the bank. The bank did not know where it stood with Patagonia." When Mondin told the company's bankers he'd have good numbers to them in six months, they laughed. No one had generated timely and accurate figures out of Patagonia.
Mondin had previously worked with two companies that had gone through bankruptcy. That made him cautious, especially when it came to hiring. "I wanted to make sure Patagonia was run efficiently, so that we would never have to lay off a lot of people," says Mondin. Chouinard, on the other hand, was notorious for hiring people on impulse -- people he met surfing or fishing, people he believed could bring an unfettered, intuitive feel to the company. Mondin recalls the month that annual payroll costs suddenly shot up by $300,000. "I was livid," he recalls. "I wanted to know where all these people were coming from. I could never get at why these people were hired. Some guy would come in. They'd give him a psychological test and say, 'Yeah, he's the right person for Patagonia,' but that person had no business being there. Yvon is a very creative person, but there are certain things he should have let his professionals run."
After two years Mondin returned to Seattle and another job. "Our banker was not happy when he learned I was leaving," Mondin recalls. "He said, 'Do you want me to go to Yvon and tell him to pay you more?' "
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Ramping Up and Siphoning Off
It's convenient to think of the excesses of the '80s as afflictions peculiar to such noted sinkholes of greed as Wall Street and the savings-and-loan industry. But by the late '80s, even Patagonia was hearing the decade's siren song. "The number we kept hearing was $250 million," says a former officer at the company, referring to a revenue figure Chouinard wanted to reach on the theory that the more money the company made, the more it could give away under its tithing program. Chouinard subsequently hired three managers with more traditional business backgrounds to ramp up the company's growth. Pat O'Donnell, the president of Keystone, a large ski resort owned by Ralston Purina, became CEO in 1988. O'Donnell, in turn, hired Bill Bussiere from Gotcha, a $200-million West Coast apparel company, as the new CFO. Mark Eubanks came from Marshall Field to run the catalog operation.
But then Chouinard, with his penchant for hiring gifted people on the spur of the moment, brought in top designers and set them up in separate -- and competing -- product lines. There was even talk of giving these designers their own separate labels -- in effect, creating stand-alone businesses under the magical Patagonia umbrella.
Chouinard's blank check force-fed a lot of already healthy egos. "Pretty soon these designers had built their own fiefdoms," says O'Donnell. "They would come in and say, 'I need a car; I've got to have a secretary. I've got to fly to Hong Kong tomorrow.' And everyone would say, 'No problem. That guy's going to go out and build huge sales for us.' So pretty soon we had 12 little companies inside Patagonia, and they were all in a ramp-up phase. Ramp up was the big phrase around there then. We would sit there in management meetings and cringe each time a new designer was hired."
Like Mondin before them, O'Donnell and Bussiere urged Chouinard to stop hiring -- to no avail. Between March 1989 and March 1991 the payroll grew by 40%. Patagonia had become, says O'Donnell, "a very incestuous organization. Friends of friends were hired. People said, 'This guy's a Patagonia person. We can't let this dirt bag go. Otherwise, the competition will get him.' "
"A lot of people who were hired had surfed with Yvon, or they were friends of his wife," adds Bill Bussiere. "We were dealing with people who had absolutely no business being there." He recalls proposing a hiring freeze in September 1990. "That was thrown right out the window. I was told, 'That's not how we do things at Patagonia.' "
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The Mantra of Quality
The urge to hire the best designers mirrors a strong Chouinard bias and speaks to the essential Patagonia ethic. Randy Harward, the company's director of product quality, says that ever since Chouinard started making climbing equipment, back in the late '50s, cost wasn't much of an issue. "Yvon figured if he made good tools, people would pay for them. That's what made him successful." The company has continued to embrace that notion over the years, always holding out quality as the Patagonia mantra.
But to observers like Mondin, such a strong focus on quality ignores other business considerations. "I remember when we'd get shirts back with the buttons fallen off. Yvon would be ripped. You wouldn't want to be around him when those shirts came in," recalls Mondin. "He's a tyrant on that stuff -- to the point of saying, 'I don't care what it costs, as long as the buttons don't fall off,' even if that meant sales went from 10,000 to 5,000 units. What was important to him was that the 5,000 units out there be fantastic."
Bob Woodward, who publishes "Specialty News," a newsletter that covers the outdoor-apparel industry, sees Patagonia's reputation for quality as linked to another company focus -- building its image. "Patagonia's reputation for quality is to some extent a myth," says Woodward. "There are better manufacturers who charge lower prices." He recalls going to a recent industry trade show and seeing a certain Patagonia shirt selling at wholesale for $27. A competitor's, at least equal in quality and design, cost $15.
