This is a tale of two companies forging a very different path to profitability: Patagonia and Trader Joe’s. One is a story I heard. The other is a story I Iived.
Patagonia: At the recent Emerald Circle summit hosted by our wonderful friends at Green Builder Media, one of the most compelling speakers was Patagonia CEO Casey Sheahan. Faced with a recession-generated business slowdown, Sheahan came home one day and told his wife Tara that he thought he would be instituting layoffs.
Tara asked him: “Are you leading from fear or are you leading from love?”
Not a question I suspect a lot of CEOs get. Or consider. Businesses exist to make money, not to help people feel the love. But it made Sheahan stop and think. Did he have alternatives? Had they found all the possible efficiencies? The market would be back at some point. What about the costs of recruiting and training? Eventually, he decided on the following:
• No layoffs, but severely limited raises and no bonuses.
• Direct and honest communications with employees about the decision and the implications.
• Reducing other operating expenses by 20 percent.
Not every job was saved. The reduction in operating expenses meant identifying and terminating the few poor performers. No one likes to tell anyone they no longer have a job, but taking a hard line helped keep everyone else employed.
“Jack Welch was famous for his strategy of focusing on the 5% of employees who were poor performers,” Sheahan said. “I like to focus on the 95% who are good to excellent.”
Results: “Business didn’t just increase. It went through the roof,” Sheahan told us. He said his employees became more motivated than ever, realizing that things could have gone very differently. The resulting loyalty improved both retention and performance.
The good performers were rewarded. The business and Sheahan were rewarded.
Which brings us to Trader Joe’s.
Our son worked at a Trader Joe’s for about a month when he was involved in a horrible accident on his way home from work. Here is the note he sent to Trader Joe’s last month:
Last fall, October 21 to be exact, I fired up my motorcycle and headed on home. Not 5 minutes in to the ride, a car attempting to make an illegal u turn cut from the right lane in to the left and I collided with them. Long story short, I spent 6 weeks in the hospital, and was lucky to be alive.
My crew only knew that I did not show up for work the next day, until one of the EMT’s came by and informed them of what happened.
On my first return visit there was practically a line of people waiting to greet me. I couldn’t believe it. They had only known me for a month, but everyone welcomed me back as if I was family. Genuine feelings and concern were shown by every single person. I have never experienced anything like that before.
As I had only been employed for a month, I did not qualify for any leave. When I returned, my Captain assured me I was welcome to return as soon as I was ready.
I have now been back to work for almost 6 months. I still have various problems that limit me to working 4 days a week, and sometimes force me to leave early. The family here has stepped in every chance they have to help me through the work day.
None of this is shown in the job description or any benefits package. It just goes to show what a company built on simple values can create not just for its customers, but for its employees. The grocery business is about stocking shelves. The TRADING business is about building relationships and maintaining them through consistency, integrity, and apparently, random acts of kindness performed on a regular basis. WOW.
Alex is definitely a performer, a hard-worker with exceptional customer service skills. Trader Joe’s clearly recognizes that. But in a recession, there’s no reason to think they could not have easily replaced him.
They chose to stand by him.
Results: Many of our friends already shopped Trader Joe’s for their unique shopping experience. Now, no one in our circle of friends and colleagues will shop anywhere else, given the choice. More Trader Joe’s business results here.
A brave new world for business? Not for all; some brands will continue to invest in obfuscation to tell their story. Other will invest in government lobbying power to avoid competition.
Others will compete just as fiercely, but—dare I say it?—with love. Because that’s what consumers are increasingly demanding, according to studies like this showing that consumers are taking values into account in their purchase decisions.
It’s the return on relationships. And it works.