Is creating the ideal workplace hazardous to your business' health? The founders of Hanna Andersson are finding out.
Is creating the ideal workplace hazardous to your business's health? The founders of once-idyllic Hanna Andersson are finding out
On a dim April morning last year, word was traveling fast. Daphne Clement and everyone else in the phone room at Hanna Andersson had been watching in taut silence from their stations as coworkers filed nervously past. One by one, those marked for redundancy were summoned alphabetically to a supervisor's office. "Thank goodness I was a C," says Clement. "The tension was so high, I don't think I could have waited all day." If timing softened the blow, the suddenly unemployed customer-service rep realized it only in hindsight. "When they came to get me, I was on a call with a customer," recalls the 47-year-old single mother. "I thought I would fall apart right there."
Perhaps she should have seen it coming. In the weeks prior, even during the busiest days of the spring season, when the call center of Hanna Andersson, a mail-order company based in Portland, Oreg., should have been a din of phones ringing and keys clacking and orders being processed, there had been long, silent lapses. Yet Clement, who had earned high praise in her review only weeks before, says she had had no warning. Like her colleagues, she had come to feel quite secure in the embrace of her high-minded employer. "The benefits were just incredible," she says, "and it was such a wonderful, New Age place to work that you didn't worry about hanging onto your job."
Even when managers had talked of reducing expenses until sales rebounded -- and they took pains to keep everyone informed -- she trusted. When they'd talked of reducing hours and sharing the pain, she agreed. When they'd talked of layoffs for poor performers, she felt pity for those who would be downsized, but she didn't dissent. Then the talk turned to simple layoffs. Unqualified layoffs. And all she felt was betrayal.
"We cut quickly. We cut deeply. We did it without warning," explains company president Mary Roberts. "When it came to handling bad news, we did not have a lot of experience. So we did it completely by the book.
"It was the most traumatic thing that had ever happened in the history of the company."
In a direct-mail company, where the rhythms of business are measured by the season, it becomes apparent within weeks of mailing a catalog if the rest of the quarter will be spent singing the blues. "You open your doors only a few times a year, with the mailing of each catalog, and if the sales don't come in, it gets pretty serious pretty quickly," Roberts says. Since you're unable to change merchandise or adjust pricing or correct mistakes until the next time out, "all you can do is control the damage," she says. So when sales were running 20% below projections in March of 1993, the managers at Hanna Andersson knew the spring was already irrevocably lost. There was nothing to do but cut every cost they could.
At the end of that first week in April, 20 employees, 10% of the direct-labor force, had been relieved of their duties, with promises that they would be called back when -- and if -- business picked up. Clement, who hadn't been working at the company long enough to qualify for unemployment benefits and lacked any other income to provide for herself and her then six-year-old daughter, doesn't recall much of what happened after she took the news. "I tried to rise to the occasion, but I was in shock." She remembers that her supervisor wept. "But I don't know what I said." She remembers that as she drove home, in a miserable rain, she was shaking all over.
it might have been just another day at the office for many anxious jobholders, but for those in the employ of Hanna Andersson, it was historic. At the company Gun and Tom Denhart had founded almost a decade before, they had known mostly heady growth and plentiful profits. Bootstrapped, just as in the storybooks, out of the founders' garage, Hanna Andersson had managed to top $40 million in sales without losing the character of a small family-run shop. The company's success and the owners' generosity had made almost every job at the company a tenured position. Even if Hanna Andersson was the largest direct-mail marketer of children's apparel in the country, a decision so mercilessly corporate as a layoff scarcely had been imagined, much less unleashed. "You'd think the world had ended," says Roberts.
This, after all, was an award-winning workplace revered for its family-leave practices, its child-care subsidies, its charitable giving, its participatory management, its flextime, its sick time, and even its lunchtime. (It subsidizes light gourmet fare in the employee cafeteria.) In the 70-year-old former bicycle factory the Denharts had purchased, restored, and tastefully appointed with Swedish antiques to accommodate their growing business, employees passed their shifts, empowered by management, ensconced in large, ergonomically correct offices, and knee-deep in benefits.
The company paid half of all child-care costs for its employees, most of whom were parents lured by the uncommon largesse. It granted part-timers and seasonal workers working 30-hour weeks full benefits. It even paid for their parking. There were cash bonuses, profit sharing, tuition reimbursement, and steep discounts on the handsome, high-priced clothing the company sold. Says human-resources vice-president Gretchen Fields, "We had this very maternalistic approach to employees. They expected to be taken care of."
Indeed, there was little that Hanna's employees were denied by their doting employer. Except, as Daphne Clement and others found out, the most important perk of all: job security.
The beneficence didn't stop with employees. The company pledged a part of its earnings, donating 5% of pretax profits to local charities. With those profits often exceeding a couple million dollars a year, the custom yielded six-figure gifts in which everyone took pride: the founders, the employees, the customers, the recipients. Perhaps nothing better represented the happy alliance the owners had struck between altruism and self-interest than an initiative they called the Hannadown program. Customers could return their used Hanna-wear in exchange for a 20% discount on their next order. The clothes were then redistributed to needy children across the country. The program not only reinforced the company's message about the quality and durability of its product but also endeared the company to customers, who already harbored a cultlike devotion to its products. Everybody won: kids got clothes, customers got deals, the company got incremental sales. The Denharts were doing the right thing all the way to the bank.
