Brief
Patagonia, Inc. is one of the brightest companies in the outdoor industry. It is selling rugged clothing and accessories for mountain climbers, skiers, and other extreme sports lovers and environmentalists. It was founded by Yvon Chouinard, world-class mountaineer, diehard surfer and environmentalist, in 1972.
From the mid-1980s to 1990, sales at Patagonia grew from $20 million to $100 million. By the late 1980s it was expanding at a rate that, if sustained, would have made it a billion-dollar company in a decade. But what really made Chouinard worry was the deterioration of the natural world and keeping alive company’s cultural values.
In 1991, after years of 30 to 50 percent annual growth, Patagonia faced crisis. The United States had entered a recession, and the growth stopped. Patagonia’s primary lender was in financial trouble, and it sharply reduced its credit line. To bring its borrowing within the new limits the company had to drastically reduce spending. The owners were forced to rethink priorities and institute new practices.
Chouinard came to the conclusion that uncontrolled growth put at risk the values that had made the company succeed so far. Now Patagonia takes many steps to control its growth, such as drastically limiting its catalog distribution and not taking the company public in an IPO. Chouinard even encourages his customers to buy less and focus on their needs rather than their wants. He insists that every time Patagonia invests in the environment, he sees an increase in the company's bottom line.
Alpinism remains at the heart of a worldwide business that still makes clothes for climbing – as well as for skiing, snowboarding, surfing, fly fishing, paddling and trail running. These are all silent sports. None requires a motor; none delivers the cheers of a crowd. In each sport, reward comes in the form of hard-won grace and moments of connection between people and nature.
Because of its high prices some hikers and climbers in jest call Patagonia “pataGucci”.
Culture
Barefoot employees, cavorting pets and organic chefs - in many ways Patagonia looks like it is an Internet startup, but as a matter of fact it is a thirty-plus-year-old clothing and equipment company. The place is all business, but it's business conducted upside down and inside out.
Patagonia grew out of a small company that made tools for climbers and its founder built business on his own terms. Patagonia's Mission Statement is formulated as “Build the best product, do no unnecessary harm, use business to inspire and implement solutions to the environmental crisis”.
"There is no business to be done on a dead planet" – this is a quotation from the Sierra Club executive director David Brower and also the first thing visitors of Patagonia headquarters see as it is etched into the front door. The next thing they see is today's surf report. If it does not look good most of employees will be in residence. But if it looks promising most probably the place will be clear out.
Patagonia has no private offices, an architectural arrangement that sometimes creates distractions but also helps keep communication open. In 1984 it opened a cafeteria where employees can gather throughout the day that to this day serves healthy, mostly vegetarian food. Malinda Chouinard also insisted onopening an on-site child care center, at the time one of only 150 in the country. The presence of children playing in the yard, or having lunch with their parents in the cafeteria helps keep the company atmosphere more familial than corporate. The company also offers – mostly for the benefit of working parents but also for others – flexible working hours and job sharing.
Patagonia commits 1% of their total sales or 10% of their profit, whichever is more, to environmental groups. Since 1985, when the program was first started, Patagonia has donated $25 million to over 1,000 organizations. Patagonia co-founded the alliance 1% For the Planet. This is an alliance of businesses who, like Patagonia, commit at least 1% of their total sales to the environment. Patagonia is a member of the Fair Labor Association. Inspections conducted by the Fair Labor Association rarely find violations at factories producing Patagonia clothing.
Leadership
During his career as a businessman Yvon Chouinard often faced situations of choice: his principles vs. profits. Despite the fact that he always chose the first, it's turned out to be more profitable. Last year his company made $270 million.
Chouinard committed the company to being an outstanding place to work, and to be an important resource for environmental activism. Being an avid climber, not a businessman, he wanted to be surrounded by like-minded people who could dress however they wanted, even walk around barefooted.
He greets employees by name, and they light up when they see him. Patagonia receives more than 900 applications for every job opening. The people who get hired are anything but slackers, and Chouinard is an unrepentant perfectionist. "He has an easygoing persona, and he's a California guy," says Casey Sheahan, Patagonia's 51-year-old CEO. (He got the job in March 2006.) "But he does demand excellence. People in this company would run through walls for him."
“When I look at my business, I realize one of the biggest challenges I have is combating complacency”, Chouinard says. “If I say we're running Patagonia as if it's going to be here a hundred years from now, that doesn't mean we have a hundred years to get there! Our success and longevity lie in our ability to change quickly. Continuous innovation requires maintaining a sense of urgency—a tall order, especially in Patagonia's seemingly laid-back corporate culture. In fact, one of the biggest mandates I have for my managers is to instigate change. It's the only way we're going to survive in the long run.”
Background Links:
Yvon Chouinard, Let My People Go Surfing, 2005
Yvon Chouinard, Let My People Go Surfing, Patagonia.com, 2005
Amanda Griscom Little, Don't Get Mad, Get Yvon, Grist, October 22, 2004
Roger Rosenblatt, Jackson Hole, Reaching the Top by Doing the Right Thing, Time, October 11, 1999
Susan Casey, Patagonia: Blueprint for green business, Fortune, May 29, 2007
