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A Little Enlightened Self-Interest

Patagonia's Yvon Chouinard and Winning Workplaces's Ken Lehman talk about values, ethics, and why companies that treat employees well have a business advantage.
How It WorksYvon Chouinard (far right) and Ken Lehman (far left)
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Great workplaces aren't born from some accidental confluence of motivated workers, bountiful benefits, and dogs in the office. They are created, purposefully, by leaders.

Ken Lehman and Yvon Chouinard are two such leaders. Lehman is the co-founder of Winning Workplaces, a nonprofit that every year anoints America's Top Small Company Workplaces. Previously, Lehman was co-chair of Fel-Pro, a maker of gaskets and sealants in Chicago. Until it was sold in 1998, Fel-Pro was consistently ranked as one of the top 10 companies to work for by Fortune and Working Mother magazines.

Chouinard is owner and founder of the clothing company Patagonia, a winner of a 2010 Top Small Company Workplaces award. The $314.5 million company, based in Ventura, California, is legendary for its environmental focus and beloved by employees, who enjoy an almost unparalleled degree of autonomy and flexibility.

Inc. editor-at-large Leigh Buchanan spoke with Lehman and Chouinard about building businesses at which people genuinely love their jobs.

Yvon, you climbed mountains before settling into your company. Ken, you were in the Peace Corps in Guatemala. Did those experiences influence how you built your businesses?

Chouinard: I never wanted to be a businessman. But once I realized I was in business and had all these people working for me, we sat down and stated our values. One: We wanted to be able to go on a climbing expedition for six months and not have the company fold in our absence. Two: We wanted to work with friends. Three: We wanted our families close by. We wanted to blur the distinctions between work and play and between work and family. We created a business that was to our liking. It turned out the way we did things was to other people's liking as well.

Lehman: My situation was different, because I was custodian of a family business. I went into the Peace Corps because I was raised with the same values that existed at Fel-Pro. The Peace Corps did give me self-confidence and a certain credibility. Coming into the company as the boss's son and grandson and great-grandson, it helped that I had done something adventurous and idealistic on my own.

Is there a Maslow's hierarchy of company culture -- an ascending order of employee needs?

Lehman: I think of Maslow's hierarchy as cake at the bottom and frosting at the top. But really, there's some cake on every level. At the bottom is just bringing home a paycheck. The next level is to be physically and emotionally safe. We had a lot of heavy equipment at our company, so we had to be conscious of physical safety. But you also don't want people to worry about being bullied or harassed or emotionally ripped apart. The next level is friendship -- feeling that your workplace is like a family. The top level is self-actualization. The opportunity to be creative and solve problems. Maybe the top-top level is chair massage. That one could be just frosting.

Chouinard: For every opening at Patagonia, we have an average of 900 applicants. I think that's because people know we're in business to try to save this planet and influence other companies that green business is good business. Our people are young and idealistic. They want to do more than just get a paycheck.

So the bottom level of the pyramid is having a higher purpose?

Chouinard: Absolutely. I would say the next level is job security. If we became a public company, we would outgrow our natural niche, lose our brand. It would be suicide. The fact that we control our growth gives people job security. At the top of the pyramid is making over and above average wage. We pay pretty much the same salaries you would make in a city like Los Angeles.

One might argue that flexibility is the single most important job benefit. In general, how should employers think about adjusting work to accommodate employees' lives?

Chouinard: The title of my book is Let My People Go Surfing. It means I don't care when you work. All I care about is that the job gets done and the work is excellent. If you come in at 7 at night because you want to go surfing at 2 in the afternoon, that is fine with me. But it can't impact your fellow workers.

Lehman: Flexibility is part of every winning workplace. But if you are a white-collar service-oriented business, it is easier to be flexible and let your people work remotely. In a manufacturing business, you need all your key pieces of equipment running around the clock. You still need to be flexible, but it's more challenging. People need to balance work and life. They need to go to the teacher conferences and see their kids in the school plays. It's possible to do that no matter what kind of business you are in.

At your companies, were there benefits you had to think especially hard about implementing?

Lehman: We had the first day care center in Illinois, in 1983. It gave us the most pause, because there were all kinds of licensing procedures and regulations. Worries about liability. But we said, "If we don't do it, who will?"

Chouinard: When we put in our on-site child care center, there were only 50 in the United States. The accountants said, "This is going to cost you a lot of money. Even if you charge, you're going to have to subsidize it, and it comes off the bottom line." But we have 75 percent women in high-level positions. If one gets pregnant, I can't afford to lose her. The average cost to replace an employee is $50,000, including headhunter fees, lost productivity, training. So I say, put in child care. Give people flextime. Let my people go breastfeeding, for God's sake. Before we had a child care center, employees came to work with their babies and kept them on their desks in cardboard boxes.

Lehman: I agree: It's enlightened self-interest. Because the cost of replacement is high and the benefit of continuity is great. Over the years, Fel-Pro did a whole variety of things for our workers, including starting a summer camp for their children. Even so, the work-life benefits accounted for only 7 cents out of every benefit dollar. The basic benefits like major medical and hospitalization and vacation were a much bigger share. The government-mandated benefits were a much bigger share. Yet those things that cost us just 7 cents earned us a disproportionate share of the credit from our employees.

The Top Small Company Workplaces take very different approaches to social responsibility. Is one approach preferable?

Lehman: I prefer to create a culture where community service and volunteerism is encouraged but not prescriptive. At Fel-Pro, we had a United Way campaign. But we also had an employee-administered Better Neighborhood Fund that awarded grants to worthy programs in employees' communities. In addition to the grants, on Fel-Pro Volunteer Day, employees could choose from a menu of projects involving the recipients of those grants. The message to employees was, We care about the place you live.

The Neighborhood Fund was another example of enlightened self-interest. When our workers brought charitable contributions into their neighborhoods, they became heroes there, and they bragged about where they worked. It further cemented their relationship with us.

Chouinard: We give employees two weeks' paid time to volunteer at the environmental organization of their choice. I also co-founded 1% for the Planet, an alliance of 1,300 companies that give 1 percent of their sales to environmental causes. It is surprising how small these companies are. The most philanthropic people are often the poorest -- the people who give 10 percent of their annual income to the church. But certainly it is good for business. Recently I was talking to some of the largest companies in the group. And we agreed that during the recession, we're having the two best years we've had.

Is environmental responsibility something all companies must commit to, the same way they presumably commit to ethical financial behavior?

Chouinard: We look at that 1 percent of sales as a cost of doing business. We make outdoor products, so it's to our benefit that there be some nature left. We have more responsibility than your average taxpayer. But anytime you find a process that makes your business greener, you are way ahead.

When I talk to business students, I say, "Imagine you have one of the best companies to work for in America. You give great benefits. You do everything possible for working mothers. And your product is the best of its kind in the world. But you're making land mines." You have to think about these things. Business leaders can't afford to lead an unexamined life.

Lehman: We see in the applications to Winning Workplaces that green has become way more prominent. Along the lines Yvon was talking about, at Fel-Pro the biggest risk was asbestos, which had been a primary raw material in our industry. We reengineered our product line and eliminated it before anybody told us we had to. Then we went to our original equipment customers and said we've got products that work equally well and don't have asbestos.

What should company leaders pay more attention to in order to maximize the quality of the work experience?

Lehman: Open, two-way communication. Open-book management, for example. Employees want to do a good job. But they need to know what is going on and how they fit in. Frequent, open communication -- including financial information -- equips people to do their best. Every good organization has a culture of shared risks and rewards. You also need shared information.

Chouinard: I agree. Openness creates trust. Our employees know we reinvest profits back into the company, so we remain debt free. They know what we give to environmental causes. It's part of an overall message where there is no hierarchy and everything is very honest and equal. At Patagonia, we don't have special parking spaces for the executives. When my wife and I go down to the cafeteria, we pay for our food just like everyone else. To do anything else sends the wrong message.

Lehman: Companies with an executive dining room are robbing themselves of an opportunity. We always ate in the cafeteria. We would sit down with different people and learn what was going on in their departments. Do you know the show Undercover Boss? The leader of a company goes undercover among his frontline workers and learns what their jobs are really like. That is ridiculous. No good leader could go incognito. Even in a 100,000-person organization, you can use technology to be seen and heard by employees -- and to see them and hear them. If you are a good leader, then your people know you.

If you were starting a company today, what would you do to create the best possible workplace?

Lehman: I would run it with the same values we had at Fel-Pro. I would instill in my new company a long-term outlook. I would remember the golden rule, every day. I would create an atmosphere where the business was a family. I would try to be the best employer in the markets in which I found myself.

Chouinard: I couldn't state it better than that. But I would add one thing. I would search out older women as employees. Ones that have already raised families and are looking for something to do. These people have lived with a budget. They are aggressive. They are honest. You can't find better employees. They are one of the most underused resources in America.

Winning Workplaces is Inc.'s partner for the Top Small Company Workplaces report. The Evanston, Illinois-based nonprofit helps small and midsize businesses create better work environments. Learn more by visiting their website www.winningworkplaces.org/

IMAGE: Chouinard by Emily Shur; Lehman by Jeff Sciortino
Last updated: Jun 8, 2010




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