Elevating the Bottom Line
Auto pioneer Henry Ford recognized that “a business that makes nothing but money is a poor kind of business.” Being a good corporate citizen today, however, means going beyond traditional sponsorships and campaigns to marshal the talents, skills and interests of employees into meaningful action that extends far beyond the front doors of a business.
“Making a difference in the community is no longer limited to writing a big check to United Way or whatever,” Nashville-based consultant and best-selling author Joe Calloway tells SUCCESS. “Rather, it is: ‘Let’s share our time and talents with the people closest to us.’ There also has been recognition that this is not something extra a company does because it has to, but rather that it is smart business to give back. Over the long haul, I truly believe the good guys win more than ever before because consumers are so much more aware and have more access to information about social responsibility. I think they want to do business with the good guy.”
So what do those good guys look like today? There are more of them out there than popular opinion might consider. Half Price Books Records Magazines, Chipotle Mexican Grill Inc., and Starbucks Corp. are three very different retailers—in size, scope, core business and style. Each, however, has evolved into a successful business with a social conscience and significant community impact.
Rewriting the Book on RESALES
Sharon Anderson Wright was the first employee of Half Price Books, which was founded by her mother, Pat Anderson, and Ken Gjemre in 1972. At age 13, she sorted and shelved paperbacks comprising the original 2,000-book inventory in a converted Dallas Laundromat. She worked her way through various positions, succeeding her mother as president and CEO when she passed away in 1996.
“A lot of people in management at Half Price Books have come up through the ranks by design,” the 52-year-old Wright tells SUCCESS. “Most of the board started as hourly employees and worked their way up through multiple positions at the company. We all know the trials and tribulations of the daily activities in the stores.”
Under Wright’s tutelage, Half Price Books Records Magazines—which buys and sells new and used books, magazines, comics, records, CDs, DVDs and collectible items—has steadily expanded to become the largest family-owned independent bookstore chain in the nation. The company operates 110 retail locations in 16 states, with several more openings under way. It sold 48.2 million books in 2009.
“From Day One, we were a little different,” she says. “We had kind of an organic growth plan. We ran out of space, so we got a second store, and it continued like that. My mom would say, ‘We need to open another store so this particular person can go and be a manager.’ As our employees started getting a little older and started to raise families, we needed more stores so they could have better jobs and earn more money. We didn’t have a specific growth plan back then—we would have the money, find a location, have a person who needed to expand their duties, and we’d open a new store.”
In the process, Half Price Books has introduced quarterly profit-sharing, a comprehensive insurance plan and in-depth training that foster employee loyalty (a 20-year tenure for staff members is not unusual); empowered its employees with purchase responsibility that accounts for the lion’s share of the company’s inventory; and launched multiple literacy initiatives that include sizable book donations to hospitals, clinics and pediatric centers.
Pride of Ownership
From the start, the business focus was about being kinder to the environment by recycling and on making knowledge more accessible. “Ken and my mom were tired of seeing books being thrown away and people not being aware,” she says. “We’re now splitting our efforts between environmental and literacy issues.”
Half Price Books is on the EPA’s Top 20 Green Partnership retailers list, reflecting green power purchases that help reduce the environmental impacts of electricity use and support the development of new renewable generation capacity nationwide. “We also try to use green suppliers for paper and our trucking,” Wright says. “We try to make the right choices.”
The company looks to hire people “from all backgrounds, experiences, walks of life” with a well-rounded knowledge of culture. “As they are working together in the back room, pricing, buying and sorting, they are all talking, learning more every day,” Wright says. “There is so much conversation and interaction. Sometimes it takes me two hours to get up to my office in the morning.”
The company has found some dynamic ways to acknowledge the supplemental talents in its 2,700-person workforce as well.
“We attract artistic, creative, smart people who like to use their brains,” Wright says. “A couple of years ago, we put out a call for musicians within the company to submit their work to us for possible recording. There were so many that it became a very difficult process for the people judging what was the best of the lot. We narrowed the selections down to 13 and called it Music by the Book.”
Proceeds from the CD sales went to the Mr. Holland’s Opus Foundation, which provides instruments for youths who cannot afford them otherwise.
Because of its nature, the company and its customers also share a closer bond than most retailers and their patrons. “About 70 percent of our book offerings are used; that means our customers are shaping 70 percent of our inventory,” Wright explains. “The connection each store has with its customers is significant. Neighborhoods across the country, comprised of like-minded people who’ve chosen to live in those areas, shape their specific stores. We supply some constant inventory, but all of our stores have their own feel that reflects the communities they are in.”
At a time when many bookstores are struggling, Half Price Books continues to post steady growth. “It is pretty amazing,” Wright says. “We started out as a bunch of crazy people, and now we are doing $220 million in annual sales [for the 2009-10 fiscal year]. It blows us all away. It is kinda fun, though.”
Wright admits she is frequently approached about selling the company. “We have no plans to do so,” she says. “I wouldn’t feel right doing that to everyone at the company; not everybody comes out well in that situation. I’ve got a lot of time left, and we have a good mix of experience and young, bright people to take us forward.”
Changing the FAST FOOD Landscape
When Steve Ells, founder of Chipotle, graduated from the Culinary Institute of America in 1990, he never dreamed he would one day find himself testifying before the Senate against the sub-therapeutic use of antibiotics in farm animals.
He had expected to open a fi ne-dining restaurant somewhere. That didn’t happen, however. In 1993 Ells opened Chipotle Mexican Grill, a Denver-based fast-food-done-well project that has blossomed into the industry model for ethical food growth, preparation and service through its “food with integrity” philosophy.
“As Chipotle began to grow and expand, I learned quite a bit about the way most of the food in the U.S. is produced and processed, and what I learned was pretty grim,” Ells says in company materials. “Pigs are raised in stark confinement, produce is grown on vast factory farms with little or no regard for the environment, and dairy cows are confined and injected with hormones that make them produce eight times their normal amount of milk. But I also learned that there is a better way. I met ranchers and farmers dedicated to raising livestock and growing produce using responsible, respectful and sustainable techniques. By partnering with these producers, we have increased the amount of naturally raised meats and responsibly grown produce we purchase exponentially.”
Ells sought to bring quality, sustainably-raised ingredients, previously available only in high-end restaurants, into the mainstream— items such as chicken without antibiotics and beef without hormones. Although the approach makes Chipotle’s costs significantly higher than most fast-food restaurants, its noble burritos-in-foil fare has captured consumers’ fancy. The company, which went public in 2006, today operates more than 1,000 restaurants, feeding “750,000 people a day,” Ells says.
The company began serving produce from local farms in all of its restaurants in 2008. “We are proud of our accomplishments, but there is still a long way to go,” says the 45-year-old chairman and CEO.
New Farm Initiatives
Chipotle announced in May that it is working with about 50 local family-owned farms to provide various produce items to its restaurant locations throughout the nation. The producegenerally comes from within about 250 miles of Chipotle’sdistribution centers, with nearly 70 percent coming fromwithin 150 miles and one-third of the produce arrivingfrom within 50 miles. On average, the company says,produce eaten in America travels about 1,500 miles fromwhere it is grown to where it is consumed.
In 2008, Chipotle committed it would serve at least 25 percent of one produce item grown locally, when seasonally available, and increased that commitment to 35 percent in 2009. For 2010, the company raised its local produce goal to 50 percent. The company projects that it will serve more than 75 million pounds of naturally raised meat (from animals raised in a humane way, never given antibiotics or added hormones and fed a pure vegetarian diet); 40 percent of all of its beans will be organically grown; and its meals will include more than 5 million pounds of produce from local farms when it is seasonally available. All of its cheese and sour cream is made with milk from cows that are never given the synthetic hormone rBGH (recombinant bovine growth hormone).
“Serving food made with locally grown produce and other sustainably raised ingredients is challenging,” Ells says. “But we have committed to pushing ourselves to find the best sources we can for every ingredient we use and hope that others will follow our lead. The more consumers understand the benefits of eating food from more sustainable sources, the more they’re going to want it from everyone.”
Ells told a Senate hearing in March that passage of the Preservation of Antibiotics for Medical Treatment Act “will expedite the transition to a better meat supply, and hopefully, serve as a catalyst for other companies to review their food supply practices just as we have chosen to do on our own.” Hearings continue on the measure.
The company is also pursuing more environmentally responsible building designs, including LEED certification for its newest restaurants. (Leadership in Energy and Environmental Design is an internationally recognized green building certification system.) Chipotle is a participant in the U.S. Green Building Council’s LEED for Retail pilot program. It also partnered in 2009 with a renewable energy company to install solar panels at a number of its restaurants.
“Some years ago we were thinking about how our design has evolved,” Ells told SmartPlanet.com earlier this year. “I wanted to make sure our philosophy about using great integrity in food is also influenced by our buildings. Solar panels fit right into the program. With 75 this year, we will be the largest producer of solar power in the restaurant industry. We’ve changed our lighting package to one that takes about one-tenth of the watts to create a lumen; and we’ve changed to a grill that uses almost half the energy.”
A Whole NEW CUP of Joe, Again
Howard Schultz wasn’t an expert on coffeehouses when, in 1980, he first became enamored with a small coffee bean retailer in Seattle’s Pike Market. During a buying trip to Italy a year after he joined Starbucks as its director of retail operations and marketing in 1982, Schultz was struck by the “romance of the coffee and a sense of community that existed in all the coffee and espresso bars” in Italy. He began devising plans to bring a “front-porch” atmosphere to the American coffeehouse market. (Schultz would become Starbucks’ chairman, president and chief executive in 1987.)
“I wanted to blend coffee with romance, to dare to achieve what others said was impossible, to defy the odds with innovative ideas, and to do it all with elegance and style,” Schultz wrote in his 1997 book, Pour Your Heart Into It: How Starbucks Built aCompany One Cup at a Time. Schultz developed and expanded a caffeinated version of the Cheers model, a place where everybody knows your name, with the twin tenets of serving “a great cup of coffee” while building “a company with soul.”
The company chose to buy and roast all of its own coffee. It also made a couple of unprecedented workplace decisions for retail—providing all employees working at least 20 hours a week with comprehensive health coverage, including coverage for unmarried partners and introducing an employee stock-option plan. These moves boosted loyalty and led to low worker turnover. As a result, the company became a regular on “Best Places to Work” and “Most Admired” lists.
“If I want to gauge the greatness of a company, particularly in relationship to its impact on its community, I start with how it treats the people closest to them—first of all its employees and then customers,” says author Calloway, who wrote Becominga Category of One: How Extraordinary Companies Transcend
Commodity and Defy Comparison. “There’s a lack of congruence if a company does all sorts of grand things in the world but doesn’t treat its employees well. I think that disqualifies them from being a great company.”
Amid their growing success, Starbucks and Schultz proved enthusiastic philanthropic citizens. Among his many acknowledgements, Schultz received the National Leadership Award for philanthropic and educational efforts to battle AIDS in 1999.
The Second Act
When Schultz resigned as CEO in 2000, the company was in robust shape as one after another Starbucks shop popped up on busy corners in American communities. Although he remained chairman, the company’s fortunes changed without Schultz at the rudder. An unforgiving economy that changed consumer behavior and some strategic missteps took their toll on the company. When Schultz re-emerged as CEO in 2008, the retailer was in crisis.
“The past two years have been transformational for the company and, candidly, for me personally,” the 57 year-old Brooklyn native says in the July 2010 Harvard Business Review. “The decisions we had to make were very difficult, but first there had to be a time when we stood up in front of the entire company as leaders and made almost a confession, that the leadership had failed the 180,000 Starbucks people and their families. We had to admit to ourselves and to the people of this company that we owned the mistakes that were made. Once we did, it was a powerful turning point. It’s like when you have a secret and get it out: The burden is off your shoulders.”
In what Schultz considers a watershed moment for the company, he took 10,000 store managers to post- Katrina New Orleans for a character-and-values boot camp. According to the company, its employees logged more than 54,000 volunteer hours, and it invested more than $1 million in repair projects in the ravaged city.
“If we hadn’t had New Orleans, we wouldn’t have turned things around,” Schultz told the HBR. “It was real, it was truthful, and it was about leadership…. We reinvested in our people, we reinvested in innovation, and we reinvested in the values of the company.”
Schultz is writing a new book, scheduled for March 2011 publication by Rodale Books, because “the world has changed in ways I couldn’t have imagined, testing Starbucks as a company and challenging my own understanding of the responsibilities required of a leader,” he said in an April press release. “My motivation is to chronicle Starbucks’ transformation and how we confronted these challenges by reaffirming our core values and reinventing our company from the bottom up.”
The revival has had its rocky moments, but the most recent company financials are trending upward again. The brand, which is operating more than 17,000 stores in 50 countries, is seeking to help meet the need for human connection and a sense of community, whether the venue is in Seattle or Hong Kong.
“I think we’ve demonstrated that the strategy is right, and the balance between profitability and having a social conscience and being a benevolent company will lead to significant long-term value for shareholders,” Schultz told the HBR.
Whether the product is books, burritos or coffee—or computers or tractors—a successful business formula must extend beyond the front doors of an organization, into the lives of employees and customers.
“My big starting point is the vision of a company, a ‘who are we and what’s important here?’ measurement,” says author Calloway. “That thinking should make sense not only for how you make money but in a larger sense for who you really are.”
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