Patagonia: The New Green Business Model?

"Hire the people you trust, people who are passionate about their job, passionate about what they're doing. Just leave them alone, and they'll get the job done."

--Yvon Chouinard, founder and principal owner of Patagonia.

Patagonia, the apparel company, has a mission statement that calls for making the best outdoor products while doing the least damange to the environment.

"We acknowledge that the wild world we love best is disappearing. That is why those of us who work here share a strong commitment to protecting undomesticated lands and waters. We believe in using business to inspire solutions to the environmental crisis."

Patagonia, with $275 million in sales and 1,300 employees , prides itself on a workforce that is actually encouraged to have a work/life balance, not just give it lip service. In fact, they are very serious about having that balance. Lunchtime, for many employees in taken up by surfing sessions of two hours or 27-mile bike rides in the Ventura, California hillside overlooking the Pacific Ocean.

Flextime is a way to achieve a quality of life and a fitness lifestyle that other companies can only dream about. Remember that mountain bike you worked so hard for and bought years ago that is gathering dust, it would be kicking up dust daily if you worked at Patagonia.

Childcare is also offered at Patagonia, as are lunchtime yoga and Pilates sessions (four times per week). Employees, up to 40 of them, are allowed paid two-month interships with an environmanetal group. The parking lot caters to the most fuel-efficient car owners and the best spots are given to them. Solar panels supply the adminstration buildings with all their power.

Not surprising, Patagonia has 900 applicants for every job opening. Surfboards are ubiquitous at headquarters and barefoot employees are often spotted. Self-expression is fostered and people maintain their off-campus identities at work.

The founder and principal owner, Yvon Chouinard, promotes a philosophy of blending work, play, family and a passion for the environment. He was born in Maine and raised in California and was passionate about mountain climbing as a teen. He started the company in the 1960s and by 1970, his company was the nation's largest producer of climbing equipment. His company grew, expanding into outdoor apparel, while also maintaining a company rule that the business closed whenever optimal surfing weather and waves were achieved.

Flextime policies are not abused and yield substantial productivity. "A lot of people recognize that what they have here is unique, and I don't think they want to jeopardize that," says Shannon Ellis, vice president for Human Resources. Benefits at Patagonia include eight weeks of paid maternity and paternity leave. They pay 100% percent of health insurance premiums for full and part-time workers.

Chouinard says he wants to attract enthusiastic outdoor types to work at Patagonia to test, use, and communciate their expertise and passion for the products to customers.

"Everyone if these things is good business," says Chouinard, defending his philosophy, mission and business practices.

"He's proving Wall Street wrong. You can do the right thing and still have an extremely profitable commpany."

--Lisa Pike, leader of environmental grants at Patagonia.

It is possible!!

Excerpts from the New York Times, April 20, 2008.

Google: Lucky or Good?

With the anxieties about the economic conditions and predictions of a long recession, Google continues to chug along. Their financial results are better than expected, resulting in an increase in share value. Eric Schmidt, Google CEO, who attributes the results to strong advertising revenue growth, particularly overseas, optimistic.

Most investors were expecting a significant slowdown. There was a slight decrease in growth from the previous quarter, which is a troubling sign. And the US growth rate is of some concern. Google relies on short and sweet ads that appear on its search engine site and other related sites. Overall net income grew 30% in the first quarter. Closer analysis showed that paid clicks versus total clicks was down. Recent changes in quality control and operations in the area of ad relevancy was a possible factor in the slowdown of revenue. Also, the acquisition of DoubleClick in March was not felt to have had much negative impact on the bottom line revenue.

Complacency is human nature, so Google had better keep its eye on the ball if it is to continue to grow and prosper in these troubling economic times. Root cause analysis and forward thinking which have been Google's strength in the past must not give way to complacency, particular regarding its US operations. Time will tell.

To combat complacency, I suggest 9 steps that Google and all organizations should practice:

1. Continue to raise the bar, the same bar (don't try to change your metrics too drastically) in small, but significant ways, and satisfying, meaningful ways.

2. Reward and reinforce creativity and innovation in the ways in which things are done to continue achieve great results.

3. Ensure that standard operational procedures can be replicated too maintain discipline in operations.

4. Keep communication open. Reinforce questioning of assumptions. Avoid the tendency to develop what I call "sacred cows of success."

5. Work hard to keep moving the culture of the organization forward in the spirit of excellence, belongingness, and mission. Make sure that the people in your organization feel that they are making a difference in their lives and the lives of others, together.

6. Make sure that you have designated people in your organization who are responsible for "connecting the dots" and anticipating both problems and opportunities in the future.

7. Make sure that decision-making is done with due diligence and thoroughness.

8. Use a systems approach to communication and information sharing. Make sure that information runs both up and down the organization as well as accross the organization amongst departments.

9. View the "game films." Make sure that you have a process from learning from mistakes and failures as well as successes.

Big Company Blues: Is GE too big?

General Electric, one of the darlings of Wall Street, due to its performance as well as its diversified portfolio of companies, is reporting a earnings shortfall. Wall Street is not happy and is wondering if GE is too big. Analysts are wondering if the breakup of GE is imminent and necessary.

The most likely breakup scenario involves sales or spinoffs of NBC Universal and GE Money (their financial unit). Shareholders would benefit by the billions and GE would focus on its core business of engines and turbines. Share were down almost $5 from a week ago and well below what they were before Jeffery Immelt took over as CEO in September of 2001.

The shortfall is not as critical as the fact that last month Immelt told investors that GE would reach their financial earnings targets. Thus, the shortfall was a shock to most. The famed GE credibility and reputation was quickly shot, despite its long tenure as a sure thing. GE and others blame the credit crisis for the shortfall. The sixth largest US company is considered a barometer of the economic conditions.

Despite Immelt's support from others at GE and his pleasant leadership style, he is on a short leash with investors. He does not favor a fire sale, but may have to spin off all the consumer businesses. Many ancipate a major shake-up of the executive team at GE as well.

Is it an over-reaction on the part of Wall Street, a blip on the screen, or is it a preview of major change and turmoil at GE and beyond?

When is big, too big? If you have to ask the question, the answer is probably: NOW! I predict major changes, shortly. Stay tuned.

Another Merger? Another Failure?

(April 16, 2008) The CEO of Delta Airlines just announced merger plans with Northwest Airlines, which would create the world's largest airline. Touting "the combination is exactly right for all the constituencies," Richard Anderson did not exactly wow investors or analysts. In fact, stock prices immediately went down for both Delta and Northwest.

NW Pilots are not pleased and vowed to fight the deal, fearing lower pay than Delta pilots and the possibility of being shut out of choice assignments. Customers fear operational nightmares (higher prices, and ticket, flight and baggage problems). Mergers tend to create fewer flights and seat availability.

To answer skeptics, Richard Anderson says "the new Delta" plans no hub closures, assures more destinations and promises improved frequent-flier programs. The reality is that there have already been flight cuts at Delta and Northwest.

The annual savings of $1 billion will not be seen until 2012. Costs will continue to rise. Pilots will get raises.

Up to now and since 9/11, Delta can be applauded for surviving a bankruptcy, reduction of plane capacity and substantial debt and is currently positioned well in comparison to the rest of the "big airline" industry.

What hasn't been discussed is, not how the merger will be handled operationally and financially, but how the talent will be managed. No one is questioning how key people in key positions will be retained and made into a smooth running team. While the merged company works to smooth over the operational side of things, who will smooth over the problems when two distinct cultures come together? It appears that the top shareholders' and the pilots' issues have been discussed, but what about middle management/supervisors and the rank and file employees.

I suggest that this employee constituency will be what will potentially create the problems when customers demand good service and uninterrupted travel. If their concerns are not addressed and if they are not brought into the fold, the merger will lose most of its value. Cultural integration will be paramount.

Though the letter sent yesterday to all US-based Delta employees promised an integration committee made up of and including both Delta and Northwest representatives of all workgroups and future pay increases, the letter did not go beyond that. The letter should have:

1. Started with thanking all of the employees for their contributions during tough times, rather than thanking them at the end.

2. Discussed the vision for the merged airline and how the merger fit into that vision.

3. Discussing why it is pratically important to have the #1 Airline."

4. Emphasize what is in all of this for the employee (beyond promises of future pay increases).

5. Pointed out how their manager(s) will be prepared to effectively manage them and their career as part of the merger management strategy.

Most experts have blamed oil prices for the problems that set off this merger. Delta management suggests that the new company will be able to operate smoothly and efficiently to avoid operational issues. But the recent merger of US Airways and America West which was initially considered relatively smooth, has created ongoing performance problems including (reservation and ticket counter delays).

So, who is it a great deal for? How about Richard Anderson?

As with many mega-mergers, the promised synergies are not realized and a small group of people run away with compensation and bonuses that were promised to them either pre- or post-merger. Anybody want to bet on how this one goes?