You can run a great company that treats its employees, customers, and community really, really well. You can even do those things and earn great profits at the same time. But whatever you do, don't launch an IPO, or you may have to abandon the principles that made your company great in the first place.
That's what's happening to the Container Store. When the company went public two-and-a-half years ago, share price doubled in early trading. But it's been buffeted since then, actually falling below its IPO price about a year ago. This week, things are looking optimistic for the company, which announced its earnings on Monday. Net sales are up 3.5 percent to $232.1 million, and earnings per share were $0.20.
CEO Kip Tindell had another bit of joyous news, at least from Wall Street's point of view. "We are focused on cutting costs in a comprehensive manner," he said. This would include freezing employee wages and 401(k) contribution matches, and "a reduction in payroll." At most companies this would be a euphemism for layoffs, but a Container Store representative explains that there are absolutely no layoffs planned and the reduction in payroll (besides the wage and 401(k) freezes) will largely come from less use of temporary and part-time flexible staff. In any case, this news, combined with the increase in sales, was enough to send Container Store's share price zooming up 21 percent.
So everything is rosy and everyone is happy, except perhaps Container Store employees. But what of the philosophy that built the company? Container Store is known for putting people and community ahead of profits. It can pay employees 50 to 100 percent more than the going rate because it hires great employees, and one great employee is as productive as three good ones. That's part of what it calls its "Employees First" culture.
"When employees, customers and the community feel best taken care of, that's when the shareholder benefits the most as well," Tindell explains earnestly in a video about the Container Store philosophy. "It's about a higher purpose beyond just profits," he says, adding, "You can make decisions based on love and still be immensely profitable."
Well, maybe not immensely. But Wall Street wants those immense profits, and even more important, profit margins that are increasing, not decreasing as the Container Store's have over the past year. And so, with what I'm certain was some reluctance, he announced the plans to cut costs by cutting back on the company's vaunted generosity to its employees.
Faced with similar profit pressures, LinkedIn CEO Jeff Weiner gave back his own stock options. And Amazon's Jeff Bezos has simply ignored Wall Street's demand for profits and plowed any excess money back into Amazon R&D for years. So it seems possible that Tindell could have made a different choice.
It's hard to know. But there's one important lesson here. If you want to run a company that truly cares about its employees, its customers, the environment and the community around it, stay very, very far from the stock market.