Executive Summary
Patagonia’s care for the environment and people is demonstrated in all components of their business. Since their founding over 30 years ago, leaders have made decisions as if the company would be around for 100 years and employees would work there for the rest of their careers. Long-term thinking has enabled Patagonia to envision transformation at the systems-level and live out their mission to “use business to inspire and implement solutions to the environmental crisis.” Patagonia’s innovative business practices drive the creation of high-quality products. Privately held, Patagonia is not beholden to profit maximization and can instead build an adaptable company that is responsive to environmental and human needs. Patagonia’s reputation for accountability, stewardship, and transparency has generated financial growth and scale that will allow the company to use their influence to create transformative change for decades to come.
Analysis
This paper uses Bolman and Deal’s Four Frames to analyze the effects of Patagonia’s innovative business practices on employee development, engagement, and culture. The paper will examine how these organizational systems enable Patagonia to live out their mission to “build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis.”
The Human Resources Frame
From a flexible schedule that encourages work/life balance to an on-site child development center, Patagonia is known for offering generous benefits to their employees. Founder, Yvon Chouinard wanted to support his employees, many of whom were close friends, as they started families. “The solution was not to fix a problem, but to respond to what humans need, including a place to nurse newborns, and later, to provide safe and stimulating child care” (Anderson 2016).
For over 33 years, the Great Pacific Child Development Center has allowed employees to “be the kind of parent you want to be” (Anderson 2016). Parents often each lunch with their children or pick vegetables together in the “secret garden.” Patagonia provides transportation to the center for school aged-kids so parents can connect with them in the afternoon (Anderson 2016). The two child care sites in Ventura and Reno serve 80 children, employ 28 staff, and cost $1 million dollars a year to operate (Anderson 2016). Patagonia’s Human Resources department calculated that their Ventura site recoups 91% of its cost through tax breaks (50%), the value of retention (30%), and employee engagement (11%) (Anderson 2016). Coming in at just .005% of Patagonia’s SG&A costs, senior leadership believes the ROI of this investment certainly justifies the expenditure (Anderson 2016).
Patagonia’s human-need centered approach has yielded significant benefits in employee retention, engagement, and culture. “100% of the women who have had children at Patagonia over the past five years have returned to work, significantly higher than the 79% average in the US” (Anderson 2016). Furthermore, meeting the needs of parents has promoted gender equality amongst employees at all levels of the company, a rarity amongst corporations in the United States. Patagonia employs 755 women and 760 men and maintains gender balance amongst managers and senior leaders while the average percentage of women executives and senior-level managers at S&P 500 companies is 25.1% (Catalyst 2017) (Bradley 2015) (Anderson 2016).
In such a people-focused company, Patagonia’s Human Resource department excels at providing a wide range of employee development opportunities. In addition, to a minimum of 45 hours of training per year, employees are offered a range of “brain food” classes such as French culture, sewing, and time management. Patagonia invests in employees and culture because they recognize people as the most important company asset. Dan Carter, Patagonia’s current HR manager describes turnover as “freakishly low,” reporting just one person leaving the company in the last month (Fisher 2016).
The Environmental Internship Program offers all Patagonia employees the opportunity to work with an environmental group of their choice while continuing to earn their paycheck and benefits for two months. In 2016, 34 individuals, 12 stores, and one department took advantage of the program volunteering over 10,000 hours at 43 different organizations (Patagonia Employee Internship Program n.d.). Kevin Mack who works in Patagonia’s returns department recently, completed his internship at Great Basin Bird Conservancy in Nevada. Mack noted "I've always respected Patagonia. But seeing what truly profound effects it can have… I now feel even better about what we do” (Laabs 2000). Time spent volunteering for environmental nonprofits often amplifies the employee’s passion and inspires them to develop new products (Laabs 2000).
An additional benefit of the Environmental Internship Program is that it allows employees to be cross-trained and test their interest in new roles while their colleagues are away. "There's a domino effect because you send this person out into the world to get experience they might not be able to get here, and in the meantime, you create an opening for somebody else to grow and learn" (Laabs 2000). The secret to making this program work is Patagonia’s creative and proactive HR department.
The Structural Frame
Patagonia’s organizational structure is designed to leverage the flexibility of human brilliance and innovation. As a company initially staffed by friends of founder Yvon Chouinard, Patagonia developed a structure that allows employees to cultivate a healthy work/life balance and treat their co-workers with respect and appreciation (Laabs 2000). “There are no four-inch-thick HR manuals” at Patagonia as they might stifle creative problem solving (Laabs 2000). Rules and policies that do exist are flexible enough to convey managers’ trust in their employee's judgement. Chouinard explains, "we have a policy that when the surf comes up, you drop work and you go surfing" (How I Built This 2016). When founding Patagonia, Chouinard did not believe that exerting strict time controls would serve the interests of the business. Indeed, many firms that maintain rigid structures see a decrease in creativity, increased resentment, and only a temporary increase in performance (Kleiner 2008). These firms even see a rise of attempts to sabotage the business, as employees grasp for their only way to exert some control over their work (Kleiner 2008).
In stark contrast, employees at Patagonia are noticeably happy, engaged, and passionate about their work. Trusting employees to get their work done, even while taking breaks on the beach, invites employees to practice accountability. Since Patagonia’s business is based in reverence for nature, providing employees with numerous opportunities to live out their passions creates even greater return to the company.
While Patagonia's current organizational structure is vertically coordinated, authority is dispersed as employees are trained to understand their autonomy and interdependence. Chouinard noted "ant colonies don't have bosses. Everybody knows what their job is and they get their job done.” Chouinard boasts that psychologists who have studied the Patagonia culture believe employees "are so independent they are unemployable anywhere else” (Clifford 2016). Lu Setnicka, Patagonia’s former Director of Public Affairs, explains "it's not that we don't like rules, but one of our core values is to not be bound by convention" (Laabs 2000). Lateral coordination is also present in various task forces and informal relationship networks within the company. Patagonia measures internal performance in the development of people, their level of engagement, and work/life balance. These measurements are also markers of a supportive and inclusive company culture.
The Symbolic Frame
Patagonia’s culture offers an alternative vehicle for performance and coordination that is both steady and adaptable. Patagonia’s culture of democratized leadership encourages contribution and accountability. Patagonia employees build strong relationships with their colleagues that invites open communication. For example, employees in the Human Resources department regularly walk around the office and participate in employee activities to seek out both good and bad feedback (Laabs 2000). By proactively engaging with employees HR realized that their current structure, made up of Specialists, didn’t allow them to be responsive to employee needs while a colleague was away. A structural reorganization to Generalists, allowed each person to perform the same duties of the department (Laabs 2000).
Patagonia’s values of transparency, enduring quality, and responsibility show up both internally in their organizational culture, and externally through their brand. Patagonia’s “Do Not Buy This Jacket” advertisement, published on Black Friday, was a symbolic representation of Patagonia's value-proposition that products should be thoughtfully designed, manufactured, and consumed. The advertisement managed to be both sincere and drive sales of Patagonia products in the following year (MacKinnon 2015).
Patagonia was transparent with their calculations of the exact environmental costs of the jacket; 135 liters of water, enough to meet the daily needs of 45 people, and 20 pounds of carbon dioxide (Worn Wear 2017). The advertisement went on to state “as is true of all the things we can make and you can buy, this jacket comes with an environmental cost higher than its price…Don’t buy what you don’t need” (Worn Wear 2017).
Patagonia envisions their consumers as mutual partners in reimagining a sustainable future where people only take from the environment what they can replenish. Customers are asked to take the Common Threads Pledge on Patagonia’s website to affirm their participation in this cycle. Communications with customers often feature storytelling to make the case for responsible consumerism. CEO Rose Marcario says that developing the company’s current business model has been “a decades-long process and one that relies on communicating its message effectively with its consumers” (Hoang 2017).
The Political Frame
One ongoing political and structural challenge is Patagonia’s relationship with multi-tiered garment supply chains that notoriously obscure the working conditions of thousands of people who produce Patagonia products. For at least ten years, Patagonia has voluntarily funded audits of their supply chain through a partnership with Verité, an international fair labor nonprofit. To exert more influence over the way factories treat their workers, Patagonia reduced the number of first-tier suppliers they contract with from 108 to 75 (White 2015). In 2011, Patagonia turned their attention to verifying the conditions of their 175 second-tier suppliers, a move beyond the industry standard and what labor advocates such as the Fair Labor Association recommend. These investigations revealed patterns of human trafficking, health and safety violations, wage issues, and overtime abuses that plague garment manufacturers around the world.
In response, Patagonia increased their investment in corporate social responsibility efforts by nine fold and initiated a “new set of employment standards for migrant workers aimed at combating trafficking and educating suppliers and brokers on acceptable hiring, recruiting, and labor practices” (White 2015). The company required suppliers to do away with “brokerage fees'' and return illegally obtained fees to 5,000 workers in Taiwan. To create change where their products are produced, Patagonia feels “a responsibility to work with the suppliers, mills, and laborers in Taiwan to improve conditions while maintaining job opportunities'' (White 2015).
Patagonia hopes that customers will appreciate their transparency efforts, even if their findings were disturbing. COO Doug Freeman, said “we're going to be really honest about those things... We're going to dive very deeply into this issue and we're going to break trails for the rest of the industry” (White 2015). Patagonia’s supply chain investigations revealed, “the near impossibility of treating workers well at every step in the production process, even when a company is genuine in its desire to do so” (White 2015). Patagonia’s partnerships with factories and independent verifiers are built into the company’s structure by choice, not necessity, to create systemic change among garment supply chains. Patagonia’s involvement with coalitions such as Sustainable Apparel Coalition allows Patagonia to influence other businesses and manufactures to make similar changes and build a movement of support.
Recommendations
Patagonia’s leadership in business-driven solutions to systemic environmental and social issues has positioned them as a market leader and innovator. Customers have responded overwhelmingly positively to Patagonia’s transparency efforts, even during difficult times, generating growth. Their organizational systems are structured to take care of human needs which directly creates employee engagement and retention. By building long-term relationships with employees, customers, and coalition partners, Patagonia has fostered a movement of accountable change-agents poised to address pressing environmental and social issues through business.
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