The story of how a new president was called in to help bring a manufacturing firm from the brink of failure.
Marmot Mountain's shoddy business practices carried the company to the brink of disaster. It took an outsider, Steve Crisafulli, to engineer a step-by-step retreat from the edge
When it comes to making outdoor clothing, no one has done it better than Marmot Mountain. When it comes to running a business, few have done it as badly and survived to tell about it.
From its beginnings, in 1974, Marmot established its reputation as a maker of the most technically sophisticated, most expensive outdoor clothing and sleeping bags available. "It was the best-designed performance clothing and equipment in the world," asserts founder Eric Reynolds. Mountaineers and outdoor enthusiasts cherished their Marmot gear, dragging it up to the world's highest peaks. But the legendary quality of Marmot's products stood in stark contrast to the miserable state of its business operations.
"It wasn't a business -- it was a cult," exclaims Steve Crisafulli. He had been chairman of Marmot's board for one year when the company was acquired by Odyssey International in 1991. The $350-million Hong Kong-based consortium of outdoor- and sports-apparel manufacturers included the North Face, Sierra Designs, Head, and other heavy hitters. When Odyssey appointed Crisafulli Marmot's president, the clothing-industry veteran discovered a company that "had no credit records, an unusable computer inventory system, and financial statements that were six months late. I had never before seen a company this screwed up from an operational standpoint."
Crisafulli was determined to transform Marmot into a profitable business. His strategy for that quixotic task sounded deceptively simple. "I have a theory," Crisafulli says, "that a small- to medium-size company can concentrate on only one or two things at time."
He set about fixing the broken company one painstaking problem at a time. But not long after he embarked on the corporate repair job, Marmot faced disaster: in January 1993 the Odyssey empire filed for Chapter 11 protection. Among the smaller and shakier of
Odyssey's holdings, Marmot was pushed to the brink, and many observers predicted that the scrappy company would simply perish.
Marmot's staff viewed the Odyssey bankruptcy, says John Cooley, a grizzled Himalayan mountaineer and Marmot's vice-president of marketing, as "a line in the sand. I suppose we were defending our own personal ideals about excellence. And now was the time to stand and fight."
Twenty months of Crisafulli's problem-solving regimen had convinced Marmot employees that the company could overcome its problems. So convinced were they that after six frantic months -- during which time their loan applications were rejected everywhere in the United States -- a group that included Marmot's entire management team ponied up $3.5 million and bought the company. What has happened since that July 1993 buyout has stunned the outdoor-goods industry. Marmot has outpaced competitors to become the third-largest-selling brand of outdoor clothing, after Patagonia and the North Face.* * *
The Cult of Marmot started in 1974 in the Colorado garage of Eric Reynolds. The 21-year-old mountaineer couldn't find outdoor gear tough enough to withstand the rigors of high-level mountaineering. He and his friends decided to make "bombproof" outerwear and sleeping bags themselves. "We were fanatically dedicated to high performance and craftsmanship, and we found that there was a market for our single-minded zeal," he recounts.
Reynolds and two partners invested a total of $3,000, and Marmot Mountain Works was born. They set up shop in Grand Junction, Colo., a midsize Rocky Mountain town. It was the right place, they figured, because they could easily drop work and go climbing nearby.
"Marmot products were always considered the sine qua non of outdoor equipment," says Peter Benjamin, a former Odyssey executive and the former chief operating officer of the North Face. "They talked about hot-cutting their fabrics one by one. It meant doing things in a slow, careful fashion, and that was considered very virtuous. The impression from the start was that this company really cared about the quality of its products."
Quality was Marmot's raison d'être and its greatest liability. "Stories abound of the company's not delivering product because the highest-quality down couldn't be found, or of products being seconded because of two or three stitching errors. The bottom line truly suffered," says Cooley, who was a Marmot sales rep for many years before he became vice-president of sales and marketing, in 1991.
In short, Marmot's commitment to quality didn't extend beyond the factory floor. Its lowest moment came in 1989 when it delivered its entire winter clothing line, due in stores by Labor Day, the following January. "The joke in the stores was, 'Oh, another Marmot surprise," Cooley recalls. But the consequence of that fiasco was no laughing matter: that year, Marmot lost a sizable slice of its business. "We represented a serious financial incident for retailers," he concedes.
What kept Marmot alive was its customers' phenomenal brand loyalty. The true believers managed to find a silver lining even in Marmot's screwups. "Having poor availability can be an advantage: it enhances the mystique that your product is hard to get," says Steve Hitchcock, Marmot's vice-president of sales.
But Marmot's chronic delivery problems and sloppy business practices inevitably took a heavy toll. Reynolds, who had been president of the company until his departure, in 1987, continually had to scramble for investors to tide the company through another season. His departure threw the business into turmoil. Over the next four years Marmot went through three owners before Odyssey stepped forward. The short-lived marriage with Odyssey was a turning point for Marmot. Odyssey was an aloof parent that temporarily relieved its rebellious child of burdensome financial responsibilities. But in Steve Crisafulli, Marmot had a tough taskmaster. He came with 30 years of executive experience in the ski- and sports-clothing industry.
Crisafulli's involvement with Marmot had begun in 1990, when Wall Street investment firm Spear, Leeds & Kellogg briefly owned the company and brought him in as its chairman. Working from his home in Vermont, Crisafulli stayed in the background, but he did insist on one change: the Marmot factory in Grand Junction had to close. "It was the single-least-efficient manufacturing facility I had seen in my life," he says. "The cost of labor and manufacturing of sleeping bags was higher than the selling price." That summer Marmot moved to Santa Rosa, Calif., and began outsourcing from Asia.
But it wasn't until his appointment to the president's office, in April 1991, that Crisafulli zeroed in on Marmot's most intractable problem: delivery. As Cooley notes, "Credibility in the outdoor industry turns on timely delivery. If you miss it by 30 to 45 days, you're history."* * *
The "marmots" -- employees who were true believers in the Marmot cult -- were wary of Crisafulli. The trim, white-haired, 54-year-old executive who pulled up in a Porsche each morning was an interloper among the community of mountaineers who had founded the company; his business background and his appearance cast doubt on his entire value system.
Gradually, Crisafulli cultivated the Marmots' confidence. To alleviate fears that he'd sacrifice Marmot's legendary product quality, he gave veto power to Randy Verniers. Verniers, the pensive, bearded director of product development, is the high priest of Marmot's famous "no compromise" philosophy -- the "keeper of the Holy Grail," as Crisafulli jokes. "If Randy said it wasn't Marmot, it didn't happen," says Crisafulli, who turned to fixing the company. His battle plan was disarmingly simple and sensible.
"The way to run a small business is to concentrate on one or two small things," he asserts. "Most of what you lack in a small business is resources. People often say, 'I don't have enough money,' but the real thing you lack is time. People are doing a once-over-lightly on too many things. Trying to advance on too broad a front, they don't go anywhere. In a military campaign, the way to advance is to hold a broad front and attack in one place. Running a business is the same: anchor yourself down on a broad front, and try to improve in one or two places."
Crisafulli took aim at the delivery problem. In the fall of 1991 he declared that it would be Marmot's highest priority over the next year. The 40-member Marmot staff agreed on a goal of shipping winter 1992-1993 clothes by mid-September of 1992. "Anything that negatively impacts delivery has to wait," he asserted.
The management established interim deadlines, choosing four easily remembered dates by which Marmot had to place orders with its Asian suppliers: Pearl Harbor Day (December 7) and tax day (April 15) for winter clothing, and a manager's birthday (June 15) and Columbus Day (October 12) for spring 1993 product. Marmot had never before set precise ordering and delivery schedules. Three days before December's order deadline, all meetings that might endanger delivery were postponed, and "everyone was running around, asking, 'How are we doing?" recounts Crisafulli.
Managers had to communicate. Director of imports and exports Debbie Bender suggested, and Crisafulli instituted, daily meetings of the 10-member management team. Each manager would identify and head off conflicts that might result in delays. In one case a prototype snap featuring the Marmot logo failed to meet specs. So the committee abandoned it until the following season: to wait for a perfect prototype would delay delivery.
The morning meetings provided a forum for collectively monitoring progress. If anyone was falling behind or pursuing a project that was diverting precious resources, other managers would insist the culprit address the delivery deadline. "What you end up with is a fair amount of group pressure," says Crisafulli.
Marmot's suppliers were also under the microscope. Marmot dispatched its quality-control gurus from Santa Rosa to Asia to ensure that products were made right and shipped promptly. The quality-control people hit the road 10 times -- up from the 2 trips to Asia they'd made in the previous year.
To reach its new goal Marmot had to limit growth temporarily. Cooley forbade the commissioned sales reps to open accounts for 18 months -- until Marmot could service its most loyal buyers. The reps signed on to the strategy because Marmot's problems had become their problems; if Marmot could fix itself, their jobs would be easier. Cooley imposed the same restraints on marketing: advertising and marketing budgets were diverted into production and more quality-control trips to Asia.
"The decision to have a single goal looming taints or filters all small decisions," Cooley explains. "Whether you are talking about a new label, resizing a jacket, or introducing a new product, if it modifies the overarching goal, you change your smaller goal. It becomes very tangible."
Even Marmot high priest Randy Verniers compromised. "In design-committee meetings, we got to the point of saying, 'No, it's too late. If we start making changes now, it will delay product delivery.' Late changes would just have to wait till next season."
The summer of 1992 progressed, the delivery deadline loomed, and Marmot's people worked nights and weekends to ensure that no last-minute glitches arose. When a Chinese supplier threatened to delay a shipment of parkas because it hadn't received the correct fabric, a Marmot staff member headed to China and found the giant roll of fabric lying in a neglected corner of the factory. When U.S. Customs in San Francisco sat on a shipment because of faulty Hong Kong paperwork, a Marmot employee traveled to the docks and sat on the customs agent until he released the freight. The Marmots could taste success, and they were hell-bent on showing the outdoor industry -- and themselves -- that they could both manufacture and deliver right.
In one feverish late-August week, Marmot filled orders, loaded boxes, and dispatched trucks filled with Marmot products to dealers -- two weeks ahead of schedule. Marmot had battled tirelessly on its weakest front and slain its enemy.* * *
At 9 a.m. one day last January, Sheryl Harten, Marmot's vice-president of operations, like Pavlov, walks around ringing a silver bell. Ten casually dressed people respond, migrating to a small conference room. This is Marmot's daily "stand-up" meeting -- "We stand so it doesn't go on too long," explains Crisafulli -- a 10-minute ritual in which members of the management team keep one another posted. "We're gonna deliver spring '95 early!" proclaims Neide Cooley, director of merchandising. A spontaneous whoop is followed by applause.
The managers' enthusiasm stems in part from the investment they have in their achievement. They are members of the group that includes all the sales reps, several retailers, and a few individuals who had bought the company from bankruptcy court about a year and a half earlier. The following year had been the first in Marmot's 20-year history that the company was profitable. And sales have been nothing short of spectacular since then: after hovering around $5 million in the early 1990s, they grew steadily to $11 million in 1994, and the company expects to increase that figure by 50% this year. The moratorium on new dealers, imposed in 1991, was lifted in 1993 -- after three seasons of on-time deliveries. Crisafulli predicts that Marmot will grow around 40% annually for the next few years.
Marmot continues to hammer away at its problems -- one by one. The company holds a strategic meeting each February, during which Marmot's management agrees on its primary goal for the coming year. In mid-1993, believing that its products were "going stale," Marmot management directed resources to new-product development. Randy Verniers headed up the four-person design committee. But he got stuck and was in danger of falling behind schedule. So Cooley proposed that he, Verniers, and a leading sales rep get out of the office and brainstorm. The three drove around Europe, stopping at outdoor shops. They examined designs, products, and styles of clothing and sleeping bags. Inspired, they returned after a few weeks to design, develop, and release 1994's line of sleeping bags -- the company's first new bags in more than a decade -- and a waterproof breathable fabric to rival Gore-Tex.
What does single-minded problem solving cost? "Most of these things don't require money," insists Crisafulli. Fixing Marmot's delivery problems "required no increase in cost. We spent a little money on trips to the Orient, but we added no personnel and no equipment. We didn't have any more money or any more time."
But as the problem-solving process at Marmot has matured the company has had to spend money to reach its goals. In 1994 Marmot turned to broadening market visibility and brand recognition. Other departments pared budgets to triple the marketing budget. But that intense focus required time that didn't exist: John Cooley couldn't possibly handle his expanded responsibilities alone. So his job was split: a vice-president of sales, Steve Hitchcock, was hired, and Cooley was free to focus solely on marketing.
While Hitchcock worked on expanding sales, Cooley launched an ambitious advertising effort. From running one ad in two publications the previous year, Marmot's marketing department reached out with a half dozen creative ads that ran for nine months in six publications.
Marmot, as part of its self-improvement program, asked some of its retailers to give it "report cards" on service. "We just got our first one back," a chagrined Crisafulli says. "We got a B minus." Marmot delivers too early. The shop owner wrote, "I've got my delivery schedule for good reason; I don't want stuff a month ahead of time!"
Crisafulli claims that a goal attained will perpetuate itself in succeeding years. "By and large, once you've got it up and running, it works pretty well on a continuing basis. It becomes part of what you do, part of your thought process." As proof, he notes that Marmot has met delivery goals each year since 1992.
"Shipping has been good, product quality has been excellent as usual, and there's more recognition of the product than ever before," observes Bob Wade, owner of the Ute Mountaineer, in Aspen, Colo., and a Marmot dealer for 20 years. "Overall, it's definitely a healthier situation."
Industry observers are impressed with Marmot's turnaround but add that the company benefited from unusual circumstances. Marmot, because of its relatively small size, was the first of Odyssey's outdoor companies to emerge from Chapter 11. Arch rivals the North Face and Sierra Designs languished in bankruptcy limbo for a year, during which time Marmot pounced on their market share. Says former Odyssey executive Peter Benjamin, Marmot "had the right set of circumstances and played it well. They've thrown the dice and won. Whether they can sustain it is a question."
Crisafulli believes that Marmot's future is ensured. "If our charge is to be the best company -- defined in the past as supplying the best product -- we are now trying to be the best at everything. We should have the best service, advertising, promotion, delivery, and new products." He's convinced of both the simplicity and the effectiveness of his "prioritizing to a fault" strategy. "It hasn't failed to work yet. That's the beauty of the system: if you focus on only one thing, it's not difficult to achieve. It's much easier than trying to meet 20 different goals. I think that if everyone in a small business concentrates on one thing, it will happen."* * *
David Goodman is a freelance writer who lives in Waterbury Center, Vt.
2/95 Marmot sets new goal: improved service. Begins upgrading computer systems, installs 800 number, and fine-tunes delivery schedule.
Fall/94 Goal achieved: a half dozen creative ads for Marmot begin running in national magazines.
2/94 Marmot sets new goal: marketing and brand development by end of year.
Spring and Fall/94 Goal achieved: Marmot releases line of more than a dozen new sleeping bags, introduces new waterproof breathable fabric.
7/93 Marmot Mountain Ltd. -- Marmot management, sales reps, retailers, and investors -- acquires assets of Marmot Mountain International from Odyssey.
Spring/93 Goal achieved: Marmot has delivered on time for three consecutive seasons. New-accounts moratorium lifted.
2/93 Marmot sets 1994 goal: new-product development.
1/93 Odyssey International files for Chapter 11 protection.
9/92 Goal achieved: Marmot ships winter 1992 products two weeks ahead of schedule.
Fall/91 Marmot sets new goal: September 1992 set as the date for on-time delivery of products for winter 1992. New-accounts moratorium imposed.
4/1/91 Odyssey International acquires Marmot and makes Steve Crisafulli president.