A CEO tells how the lessons he learned climbing mountains helped him turn around a company.
A CEO tells how the lessons he learned climbing mountains helped him turn around a company.
The acts of climbing a mountain and running a business sound worlds apart. But they have more in common than you might imagine
In 1980 I had a climbing experience that played a huge role in teaching me how to build Black Diamond Equipment Ltd., a five-year-old company that makes, designs, and distributes climbing, mountaineering, and backcountry-skiing equipment. Technical climbing, which I had begun doing in 1970, had become a focal point of my existence, appealing to my rebelliousness and my need for greater challenges. I played out that quest to the extreme by taking on treacherous "first ascents" of the highest mountains from Alaska to Chamonix to Peru.
In that 1980 trip, two close climbing associates and I went to Alaska to attempt the first "Alpine-style ascent" of the technically very difficult 7,000-foot south face of Mount Hunter, a sister peak to Mount McKinley. Alpine-style climbing is very different from traditional climbing -- it means taking only what you can carry on your back rather than establishing camps, fixed ropes, and contingency caches. It is the climbing equivalent of entrepreneurship.
Our plan was to climb the face to a half-mile-long ridge, climb that to the summit plateau, cross that for two miles, and then climb down a two-mile ridge to descend the other side of the mountain. I had spent two years training for the climb and selling my two partners on what an outrageous exploit it would be.
To make a long story short, the route proved to be more than difficult. We faced horrendously stormy cold weather. On the third day, we climbed late into the night, over rotten fins of vertical ice and through a blizzard, until at 2 a.m. the slope relented and we managed to escape the storm by creating a small snow hole we could all fit into. At that point we were committed. The overhanging and vertical rock we had climbed could not be rappelled because the rotten fins of ice would not hold anchors, nor could we climb down the rock. From that point on we knew the only way to live was to complete the ascent successfully. Rescue in these mountains on a route like this would not be possible. So we had to focus our energy on achieving what we had set out to accomplish.
I had 6 days' worth of frugal food rationing; my rations were cut in half on day 4 and ran out on day 8. My down sleeping bag became wet and froze into useless sheets of nylon with a couple of frozen bricks of down. And in the face of unrelenting bad weather and tough climbing, we all became badly frostbitten. Regardless, we managed the climb, the traverse, and the descent, and by the end of day 14 we reached the prearranged pickup spot. We were emaciated, frostbitten, and totally exhausted, but proud and excited beyond description.
Do I consider us lucky to have survived the climb? No. I believe we were unlucky to have had such severe weather combined with some gear breakage. To this day I believe that Alpinists, like entrepreneurs, are not risk takers: you train and plan and prepare for your activity and deal with contingencies when they arise. (You take an extremely leveraged deal such as the Macy's buyout, which is based on a plan that assumes every single thing will go right and has no margin of error, and I'll show you risk.)
I learned a few other things from that climb. First of all, you can't know what a climb like that will be without actually doing it. Everything else is just training. Second, if you decide there are no alternatives and you absolutely commit yourself to something, it is amazing how you can not only keep going way beyond what you thought you could do but also convince yourself and others that you can do anything. Third, though you must keep sight of the bigger picture, you can't dwell on it once you have started, except at specific times. It's better to be detached from the big picture and keep your mind focused on what you have set out to do that day. That way you can't be overwhelmed. Finally, you can't forget about the well-being and status of your partners. They may need your physical and mental support -- and you, theirs.
Those lessons served me extremely well during the five years of climbing the mountain that is Black Diamond, now a 200-employee company with more than $20 million in revenues.
Black Diamond grew out of the Chapter 11 remains of the Chouinard Equipment Co. That company was founded by Yvon Chouinard in the late 1960s and became known as America's leading climbing-equipment company. It eventually evolved into a wholly owned subsidiary of the highly successful Lost Arrow/Patagonia Corp., which itself had grown out of the equipment company. In fact, as Patagonia grew, Yvon Chouinard lost interest in the equipment company. By 1982 annual sales had dropped to just about a million dollars, all but six employees had been hired by Patagonia, and the company's reputation was tarnished and sliding.
Yvon hired me as marketing and sales manager late in the summer of 1982 and made me general manager the next year. In the next five years we managed to grow the company at an annual compounded rate of 33%, hitting $7 million by 1987. But by 1988 Yvon had decided to unload the business. A combination of product-liability lawsuits, brutal insurance premiums, disagreement over the direction the company was taking, and the operation's lack of profitability led him to file for Chapter 11 in early 1989 as a means to stem the losses and potentially facilitate a sale of the assets that would be free of liability for Lost Arrow/Patagonia or a buyer.
Initially, I had refrained from discussing purchasing the company because I was young, had limited means, and knew nothing about buying companies or assets of companies. Also, since Chouinard Equipment had been a subsidiary, the larger company had taken care of credit, finance, accounting, human-resources, management-information-systems, and legal functions, among others -- all of which I would have to learn.
Nevertheless, when it became clear that the company really would be liquidated, putting 60 people out of work and destroying an institution that had become part of the history of worldwide climbing, I reconsidered. I decided that, as before when I'd climbed Mount Hunter, I had trained about as much as I could, and that if I lacked expertise in certain areas, I could learn. And there is no better incentive to learn than pressure.
Our business version of Mount Hunter began when, after doing some research and contemplation in the face of that looming liquidation deadline, I typed up a letter of intent and gave it to Yvon with a check for $25,000. At that point I got serious, too, about selling to three other key managers the idea of teaming up with me.
The story of our turnaround is grueling. Basically, we created a new company called Black Diamond and led a management buyout using a vehicle similar to an employee stock ownership plan. Simultaneously, we enlisted the financial support of our suppliers, offshore distributors, and domestic retailers -- while keeping management and employees as the majority owners.
Our obstacles were profound. We needed to raise a million dollars of equity and obtain a $2.75-million credit line. We had to overcome the stigma of product-liability suits and Chouinard Equipment's Chapter 11 status. We had to assure loyal customers and partners that the new company would be as strong as the old one and that the new products would be comparable with the old ones. We had to build a new brand. We ended up having to move the company and its manufacturing equipment from California to Utah, take on significant debt, and show an immediate profit. On December 1, 1989, Black Diamond began operation, and we have grown steadily since.
The simple lessons of Mount Hunter have guided us. Perhaps the most crucial is that just as with climbing, when you're running a business you develop a sense of purpose that propels you forward. As climbers ourselves, our business mission was clear from the beginning: We knew that the equipment company had played a significant role in the development of mountain climbing by producing cutting-edge products. We all shared the belief that something with such a legacy couldn't fail. Then, as we became more involved in the venture, failure wasn't an option. I had borrowed against my home for the initial payment, jeopardizing the future of my two young children; similarly, many of our employees had put their scant life savings into the venture. That urgency somehow forced us to turn our problems into opportunities. As we solved each problem in turn, we learned how much we could do.
Now that we are healthy, respected, and growing, the question is, how do we become a great company? We don't have a great answer to that yet. But for us as climbers the joy of the business is in how we master the challenges we face as we ascend.* * *
Peter Metcalf is CEO and president of Black Diamond Equipment Ltd., in Salt Lake City.