Striving for quarterly profits and short-term performance may often come in conflict with environmental and social aspirations, such as reducing the use of fossil fuels, discouraging product design extravaganzas and minimizing the number off layoffs in times of crisis. In this light, the approach of sportswear and mountaineering equipment manufacturer Patagonia is particularly refreshing. Mr. Yvon Chouinard, the founder, owner and CEO of the 2000-employee California-based company, explains his company's meteoric rise and delineates how his company has been able to cope successfully with core environmental and social issues while pursuing business priorities successfully.
His book, Let My People Go Surfing, lays out Patagonia's strategy in eight areas: Product Design, Production, Distribution, Marketing, Finance, Human Resources, Management and Environmental Philosophy.
Product Design
For Patagonia, product-design and social mission go hand in hand; it is crucial to make the best product possible, Chouinard stresses. He further articulates the implications of such an imperative for his company:
Is the product functional?
Is the product multifunctional? “Why buy two pieces of gear when one does the work of both?”
Is the product durable? This incorporates a focus on reparability, in contrast to the “throw away when broken” focus characteristic of most of today’s products. And can it easily be cared for and cleaned?
Does the product fit Patagonia’s customer profile? Rather than simply responding to mere fashion trends, the product should be designed not to “chase” fashion but rather to fit Patagonia’s core customers.
Is the product as simple as possible, and does it maintain a simple product line?
Does the product represent an innovation? Here, the author stresses that he often gets inspiration from and ‘steal(s) with pride’ innovations spearheaded by others.
Is it a global design, and is it authentic and beautiful?
Does the product cause any unnecessary harm? Here, Mr. Chouinard emphasizes the use of organic cotton and other such fabrics as wool, hemp and linen, as well as the avoidance of dyes and synthetics.
Production
Regarding production, Chouinard emphasizes the importance of flexibility and adaptability when called for. He highlights how critical it is to involve the designer with the producer and to develop stable relationships with key suppliers and contractors, who should be evaluated to ensure they have a healthy relationship with their employees—a key component of production.
Quality should be prioritized over cost-optimization in production. And, again, to “borrow with pride” from others might produce a better practice!
Distribution
Chouinard emphasizes that Patagonia enjoys tremendous growth by relying on several forms of distribution. He stresses the importance of retail outlets that may fit the company’s core values of the company. For instance, depending on the company’s aesthetic, it may benefit from occupying an older, restored building. Patagonia has a very explicit philosophy regarding architecture! Patagonia also employs wholesale, mail order and e-commerce (this route to market is managed in a similar way to the mail order business. However, e-commerce allows the firm to react more quickly to the needs of the company and its customers.)
Marketing
“Tell people who we are!” The key idea here is to build upon Patagonia’s image: its passion for outdoor pursuits and sustainability; core values shared by its founders and employees. Chouinard believes that to ‘tell the entire story’ of the brand and ‘to inspire, educate and inspire’ are more essential matters than spending money on marketing to force buying. Traditional advertising is kept to a minimum.
Finance
A 2014 Patagonia commercial stated: “fundamentally, businesses are responsible to their resource base. Without a healthy environment, there are no shareholders, no customers, and no business!” Thus, making a short-term profit should not be a goal in itself. Patagonia’s famous advert in sports magazines (“Don’t buy this jacket!”) underscores this ethos.
Human Resources
As regards human resources, Patagonia focuses heavily on attracting and keeping employees who fundamentally share the firm’s basic cultural values (i.e. an appreciation/passion for quality, the environment, the outdoors). The employee remuneration, incentives and benefits reflect this imperative. It can be noted that employees have access to good daycare centers/child development centers.
Patagonia underscores the importance of managing and making decisions that are consistent with the company's philosophy and basic principles.
Environmental Philosophy
Mr. Chouinard has a clearly articulated environmental philosophy, embodied by a set of practical ideas. These views may be more reflective of his personal views and commitments than his principles for managing Patagonia, but there are undoubtedly clear links!
He begins by professing his skepticism of massive growth for the sake of itself. Thus, he does not see Patagonia as a corporate brand, but rather as a social movement. Regarding growth, he wants Patagonia to maintain a manageable size so as to stay true to his and his company’s goals and principals.
Assuming a stance against global warming is key here. To that end, Mr. Chouinard has drawn on leading experts, such as Bill McKibbon, who addressed Patagonia’s Tools Conference in 2013.
Mr. Chouinard articulates six principles that he tries to follow, for himself and for his company:
Lead an examined life, based on asking the “right” set of questions.
Clean up your own act.
Do your penance. This includes Patagonia levying a tax on itself – 1% tax on sales or 10.5% on net profits, whichever is the highest.
Support civil democracy.
Do good or as little harm as possible!
Influence other companies. Patagonia has become an admired company. It is setting up a non-profit foundation to support environmental causes.
Conclusions
So, are Patagonia’s “good management” principles applicable to other businesses? For me, Patagonia is a perfect example of how family business can delineate itself from publicly owned businesses. Mr. Chouinard and his wife own Patagonia. They have no intention to “dress up the company for an exit” or to maximize the quarterly profits. Thus, their latitude to pursue a set of environmental goals is relatively high. The company has indeed succeeded in becoming something more than a brand. Thus, a prudent focus on environmental issues may indeed be paying off for business!
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