Leadership, Patagonia-style: Changing the Criteria for SuccessPublished: October 31, 2007 in Knowledge@Wharton
Kristine Tompkins, former CEO of outdoor apparel company Patagonia, pulled no punches with the audience attending her recent Wharton Leadership Lecture. Although Rachel Carson's book, Silent Spring, warned of the dangers of indiscriminate pesticide use as early as 1962, Tompkins said that when she began working full-time at Patagonia in 1972, she didn't understand how the actions of the business world as well as the behavior of individuals "affected the very underpinnings" of the individual, the family and the community. "You know that now," she said, and "the choices you make count more and more." People who can manage "the tough decisions and incorporate" difficult issues into their lives, she said, "are the future leaders."
Tompkins spent more than two decades with Patagonia and its founder, Yvon Chouinard, building an environmentally responsible and socially innovative company. After she retired as CEO in 1993, she and her husband, Douglas Tompkins, co-founder of The North Face and Esprit, moved to Chile and began channeling their respective fortunes into conserving wilderness in that country as well as in Argentina. Nearly 2.2 million acres have been placed in permanent protection to date through their foundations -- The conservation Land Trust, Conservacion Patagonica and The Foundation for Deep Ecology.
Tompkins focused her remarks on the ethical and environmental responsibilities of business and business people. "You are headed out the door -- practically and figuratively speaking," she told her audience. "I think you are really in a tough situation. You are coming out of Wharton well-schooled. You can probably get great jobs" that pay a lot of money, she noted, adding, however, that she hoped her audience would give themselves the "latitude" to think about their personal values and align themselves with work that reflects those values.
"Think hard about what your personal ethics are, what your needs are versus your wants, and chip away at the common cultural norm, which is [to] run out, get what we can -- and to hell with whatever we leave in our path," she said. "Because I don't think you have that luxury anymore."
'Blood-sucking, Bottom Feeders'
In 1976, Kristine Tompkins was general manager of Patagonia, working with Chouinard and his wife, Malinda, to establish the nascent clothing company, a spin-off of Chouinard Equipment, based in Ventura, Calif. A former ski racer and friend of Chouinard, Tompkins had first worked at the equipment company during summer vacations. She returned to work there fulltime after graduating from the College of Idaho with a degree in history in 1972.
That year, Chouinard Equipment, already the largest supplier of climbing equipment in the United States, was experimenting with selling outdoor apparel. Chouinard had tapped into a fashion craze -- comfortable climbing and ski clothing that was "hand-forged" in-house or sourced from European companies. "There were only six of us at the time," Tompkins said. "It was a small company. We wanted to build it to make clothes for ourselves." Also that year, Chouinard Equipment was closing out its signature climbing product -- hard-steel pitons that damaged rock face -- to sell removable/reusable aluminum chocks, marking the first of many times that the company would accept financial risk in order to minimize its impact on the environment.
The Patagonia clothing brand debuted in 1973, its logo based on the skyline of the 11,073-foot Mount Fitz Roy in Argentina which Chouinard and Tompkins' husband climbed in 1968. Tompkins became Patagonia's general manager in 1975 and was named CEO four years later. She learned her job, she says, via "the school of sink or swim -- daily experience. If I have one great trait, it's that I look for people who are the best at something, and noodle my way into them and talk to them by hook or by crook." She collared the best business leaders she could find, including the "heads of giant banks.... I was a very young woman. They probably felt, 'This pathetic little creature! Let's help her along.'"
This was the 1970s, and Patagonia was evolving its own corporate counter-culture. "We believed that all businessmen were corrupt, evil ... bottom-feeding, blood-sucking people," Tompkins said. Yet "we managed to maintain a company that ethically ran in parallel to our own hopes and dreams. Environmentally and socially, we were very aggressive." But to serve as an example of both, Patagonia had to be fiscally sound.
"People don't listen to failing companies," said Tompkins. "You can't be a model for 100 years if you're not profitable. If you're not profitable, you are beholden to a banking system [you don't] believe in.... People thought we were fast and loose financially. We were just the opposite."
No Unnecessary Harm
Headed by CEO and president Casey Sheahan since March 2006, privately held Patagonia reported revenues of $270 million in 2006. The company's mission statement today reads: "Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis." Environmental responsibility is officially a part of every Patagonia employee's job. The company's success in reducing its environmental impact as a business has attracted the attention of the likes of Wal-Mart, whose executives have toured Patagonia's facilities.
As it has improved and developed product lines over the decades, Patagonia has worked to reduce the environmental impact of its products, processes and facilities -- developing recycled polyester for use in its popular Synchilla fleece, introduced in 1985; shifting to recycled content paper for catalogs in the mid 1980s; minimizing packaging in the mid-1990s; and taking extensive energy conservation and waste reduction measures in its Reno, Nev., distribution center, to name a few examples.
In 1996, after recognizing the pollution impact of conventionally grown cotton, Patagonia shifted its entire cotton outerwear line to be organic. Earlier this year, Patagonia began recycling not only consumers' old Capilene long underwear, but also any brand of Polartec-branded fleece garments and Patagonia cotton tee shirts. As of this fall, Patagonia expected one third of its clothing line to be recyclable.
The company's corporate culture is progressive. Patagonia allows offices to empty when the surf conditions are good. It opened an in-house child care center in the 1980s, one of 150 in the country at its inception. The company also offers an in-house cafeteria, flexible working hours and job sharing. Patagonia has been named among Working Mother magazine's Top 100 Best Companies for 17 years running, often landing in the top 10.
Patagonia also has a long tradition of financially supporting environmental causes. In 1980, it started giving 10% of its profits to environmental groups like Greenpeace and Earth First! Chouinard dubbed those donations the company's "earth tax." In 1984, Tompkins said, the company modified that commitment and decided to donate either 10% of profits or 1% of sales annually -- whichever was greater -- to environmental causes. Over the years, donations have totaled approximately $26 million.
To be a great business or a great business leader, Tompkins said, one has to run one's business in such a way that "the day you kick the bucket, you look back and think: 'As best I could, I drove my life in a direction that I'm really proud of.' That's leadership to me. People, especially now, are not going to look up to you unless you have a point of view that's based on an ethical foundation and framework so that there's more to that business than making money. If you can lead people in that direction, they recognize and appreciate that."
From the mid-1980s to 1990, Patagonia's sales skyrocketed from $20 million to $100 million. "I had a great run at Patagonia," said Tompkins. But by the early 1990s, she was tired of being in the clothing business. "I loved what we created, but I was desperate to do something else."
So Patagonia hired a new executive management team to give Chouinard and Tompkins respite from overseeing the business. In his 2005 management guide, Let My People Go Surfing, Chouinard writes: "We made some classic mistakes. We failed to provide the proper training for the new company leaders, and the strain of managing a company with eight autonomous product divisions and three channels of distribution exceeded management's skills. We never developed the mechanisms to encourage them to work together in ways that kept the overall business objectives in sight."
After years of 30% to 50% annual growth, Patagonia was overextended, and the economy was headed south. In July 1991, the company laid off 120 employees -- 20% of its workforce. "We had to make the decision: Are we going to do whatever it takes to keep our business? And we did," Tompkins said. The experience "taught us how very fragile things are. Given a few basic decisions that were wrong, we could sink something very quickly."
For Tompkins, global climate change, species extinction, pollution, and the societal and environmental damage caused by un-checked development are creating real threats to business. She believes that future business leaders must address those threats directly to mitigate their impact. "When you are working against these kinds of things, you are trying to improve a situation that is rapidly deteriorating."
She encouraged her audience to take stock of their own values and act accordingly, even if they don't opt to build their own company from the ground up. "You have to start with you -- your personal behavior, your personal lifestyle. What do you ask of yourself? Then you will find yourself asking things of the people you work for. If you don't get it, you should do something else.... You have to align yourself with entities that reflect your personal ethics," she said. "If you don't, you deserve to watch the polar bears drown in the Arctic."
Tompkins noted that "it's much easier now to talk to companies about reducing their own emissions but also to take bolder steps." Yet she noted that shareholders of public companies are often resistant to such efforts. "Unless there is a willingness to act responsibly and not just for the economic benefit of the shareholders ... you are not going to get good results."
Asked whether environmental issues can be controlled as U.S. companies outsource production to other countries, Tompkins responded, "Of course you can control it. It's the willingness to do so.... Until you change the criteria for success within the business community, you will have more decisions" made that will increase pollution and bring down working standards "in the name of profit. If you don't change that, you're not going to change the system."