By Mauricio Goldstein, Corall Partner and Consultant
A passionate advocate to the Conscious Capitalism and the servant leadership style, he was interviewed by Mauricio Goldstein, from Corall Consulting. Tindell, a truly family man, is married to the same woman since 1979, Sharon, who is the company’s President & Chief Merchandising Officer and lives a long-term oriented life. Describing himself as a “pretty feminist guy”, he strongly believes that women make better business leaders than men. During the conversation, the entrepreneur talked about his business beliefs, politics and, obviously, The Container Store.
Thank you for taking time from your busy schedule to talk with us today. Do you have any opening statement?
K.T. Well, let me start by saying I think CEOs are generally a little overrated in terms of how important they are to an organization. The bigger the organization is, the less important the CEO is to everything. I mean, they are not monarchy and they are not Gods. It is amazing how celebrated CEOs are but I will tell you this. They are important, obviously, but not quite as crazily important as people think.
However, in terms of providing leadership for a Conscious Capitalism company and in terms of setting an example and actively pursuing what we might call servant leadership, CEOs are critical. These things are enormously important, even more important than the media makes them seem overall. You cannot have a Conscious Capitalism organization unless the top leader, the CEO, is not somewhat committed. He has to be completely dedicated and permanently committed to that or things just will not happen.
It is interesting, CEOs are perhaps more important in the cultural side of things, in the Conscious Capitalism servant leadership style of things than they are in the strategy and operations.
When you say that the CEO is really important in terms of Conscious Capitalism, what do these CEOs do differently in terms of leadership?
K.T. First, they understand that business is not a zero-sum game. They understand that dealing with their colleagues, employees, vendors, communities is not a zero-sum game and that is a big surprise to some people. Most sophisticated businesspeople are beginning to accept that and figure out that CEOs measure their success and impact by how well people around them do.
I believe that everything you do and everything you don’t do impact your business and the people around you more than you think it does. People who are wiser, more considerate, selfless and just better human beings, are usually more respected and go further in an organization. Those organizations are also more respected and actually have a big competitive advantage, because so many companies do not behave that way. Employees are more motivated to work for companies that exhibit that type of behavior. And the consumers are also more willing to support them. Not just Millennials, even boomers do.
Eventually all capitalists are going to subscribe to the Conscious Capitalism model. Don’t you think that the good capitalists are going to eventually adopt that methodology which is clearly more successfull than the old top-down military command form?
Absolutely. I wrote a book three years ago on new models of organizations. Actually, that is why I have visited The Container Store in Dallas. I visited almost fifty different companies, and my last sentence in the book is that in twenty years from now people are going to look at this book and say, “This book is absurd, common sense! Did they work differently than we do now?” Therefore, this is going be natural overtime…
K.T. John Mackey and I always joke that we spent so much time and effort in sort of building Conscious Capitalism and really we could give ourselves a break and not worry about it because eventually a lot a people would do it anyway (laughs).
After 35 years as a private company, The Container Store went public late 2013. What has changed since then? Can the company operate in the same Conscious Capitalism way or has it changed?
K.T. There are plenty of great Conscious Capitalism companies which are public and Costco’s James Sinegal pioneered a lot of this. He took so much abuse for paying his employees far more than his nearest competitor. But, you know what? They do far better than their nearest competitor. They are paying their employees double for the same position and yet they do better.
Southwest Airlines has done better than almost all of the other major airlines. Certainly, Herb Kelleher sets a great example of Conscious Capitalism. In fact, I live in Dallas and so does Herb Kelleher and we are friends. Herb told me thirty-five years ago: “Kip, you can build a much better organization on love than you can on fear”. I thought: “Oh my God, who is this guy talking about love in the workplace?” (laughs). He’s been a big mentor to me and there are lots of other good examples…
Every equity provider brings their own charms and quirks. A public company does also. I wish my dad had left me US$3 billion and I would not need any of them. However, assuming that does not happen, you have to decide. You can have the strategic investor, a retailer or something, but then I think you subjugate your brand and perhaps even your management team to that bigger culture. Sometimes it works out, but that is difficult.
Private equity has its own set of issues. Those people are not investing particularly for the long-term. They have to sell their share in a private equity company so they cannot be particularly long-term oriented indefinitely, but a business itself can and should! We all know how short-term oriented Wall Street is.
Interestingly, I had a breakfast this week with Joe Biden, the Vice President of the United States. It was a very small breakfast, just four or five people, and we were discussing short-termism on Wall Street and what could be done about it. I believe that the best way of building a business is like building a family farm. Everything is long-term oriented. What you do today for the soil helps the farm ten years from now.
I spent a lot of time over the last few years interviewing CEOs who I know really well and, trust me, in general, if you read their quarterly reports and see what their initiatives are today, if you ask them the simple question: “What would be different about these initiatives if you were still private?”, they would say that the differences are gigantic. The chasm between the two is much bigger than anybody would imagine.
It has more to do with more investment and long-term orientation. Now, short-term shareholders are stakeholders too so you have the obligation of take care of them but they can be certainly counterproductive in their demands to most of the stakeholders, certainly the employees and to the longer-term shareholders as well. It has to be balanced.
I think the financial world needs to change. In American Taxation, a long-term capital game is more than one year. One year is not a long-term investment. How about a sliding scale where after three or five years there are no taxes at all? These are things that we can do to encourage long-term investment in the communities. Vendors and employees and the businesses themselves would be better off. In fact, I think that a longer-term orientation on Wall Street would add — I have no way of calculating this, but my gut and lifetime of being in business says — about 2 points to the GDP.
Our businesses want investment, long-term leadership, long-term orientation and hopefully we can move more towards that. And one forward thinking on that note, I think the short-term orientation and the electronic trades harms the American public, the common man, the average investor, like a little stockbroker in Iowa. I think it harms their love of business in order to invest in these “uber short-term investments”. We have far fewer individual investors on the stock market today than we did ten or thirty years ago!
“I believe that the best way of building a business is like building a family farm. Everything is long-term oriented. What you do today for the soil helps the farm ten years from now (…) Life is richer, deeper and more beautiful like that.”
The financial market in a sense is driving short-termism. So, a critical question that you are addressing is: How do we generate long-term money somehow? Conscious Capitalism makes total sense longer-term. But, it’s not necessarily the best if you want to extract short-tearm money, of course.
K.T. It’s about investment and not extraction. There are some people that are supposed to be investors, but are actually extractors (laughs).
You retired after 21 years as CEO of The Container Store. How was it to pass the baton to Melissa Reiff?
K.T. It has really been thirty-eight or thirty-nine years in the company. My co-founder Garrett Boone was the CEO at some point at the very beginning. He is ten years older than me. We had our different roles. I always recommend to any executive to assume, in a humble way, filled with humility and servant leadership, that you are the last guy on the soccer field, the center field, or the safety in the American football. Assume that you are the CEO of something, that you hold 100% of the stocks, and behave that way, be that responsible. That is when you will be the happiest and most effective and that is when the company will do the best. I have always operated that way and recommend that to everybody.
Melissa is one of the two or three most effective business leaders I have ever seen. My wife Sharon is the President and Chief Merchandising Officer and everything she touches turns to gold. If I disagree with Sharon, I usually find out two or three years later that she was right. That is a good way to be if you are married and working together. And I do recommend being married and working together. I think it is great. People used to do it. Think about the family farm we were talking about, the family mercantile business! Melissa has been a dear friend of ours for forty years, as has her husband, and we believe in the same things culturally.
When she was president and executive vice president of sales marketing, she and I would have updates that would last all day, one to two days a week. Then we would go off somewhere and have a list of a hundred and twenty items to cover and we would get them all done. We would work together on them. We believe in collaboration together and when you cover that many decisions and topics together working hand by hand for that long you become very united. So it is very easy for me to support Melissa.
She and Sharon are the two top leaders of this organization. Sometimes they want less of me, sometimes they want more. I am not at all intrusive and I do not want to be. I want them to find their own place. People say that I am probably still in control and I am like: “I am not in control, with these two women, nobody tells them what to do. I didn’t tell them what to do when I was the CEO much less now!” They want to do it on their own, but I am here and support and love them and they know that. That is the rule. I am not bragging, but this was my first job out of college so I did not know how I was supposed to do it, but I probably worked fourteen hours a day for thirty-eight or thirty-nine years and nobody loves their work more than I did. But, I think now I am just supposed to work like ten or twelve hours a week. I do not care how much you love your work, but ten hours a week beats the crap out of fourteen hours a day! (laughs).
I am actually enjoying and meeting many of the most remarkable people. I have met so many remarkable people in my life and now for the first time I have time to spend with them. I have more time to spend with the employees in the stores, to hug them … It is like coming home to your kids – not that the employees are like children, but the reaction when you go a store is… Oh gosh, it’s just so fantastic! When you are the CEO it’s hard or impossible to do it. The vendors want to be reassured that everything is the same and everything is good. These vendors have become friends over the decades of designing products to having vacations together. It is pretty easy and fun. I swear, I feel like I have less time maybe than I did before in a way, because there are so many opportunities that I want to take advantage of.
I am doing a lot more, mentoring young Conscious Capitalism entrepreneurs, most of them have read my book and they model their business after the foundation principles and Conscious Capitalism. Actually, it is a wonderful opportunity to see so many businesses and then those that I think the most of I can invest in but I do enjoy mentoring the young Conscious Capitalism entrepreneurs because that is what happened to me. I mean, if Stanley Marcus did not fall in love with our business early on, I am not sure that we would have made it. He was the most famous businessperson in New York and Dallas in those days. He thought what we were doing was the best thing he had ever seen. You cannot imagine what that does for you when you are 26 years old. So, I try to give that, teach them about servant leadership and Conscious Capitalism and our foundation principles, which I believe are identical to the Conscious Capitalism ones. It has been quite an awakening. I don’t want to say that there is more life in storage organizations now, but maybe there is! (laughs).
Dou you have any personal development or self-awareness process that you have used over the years?
K.T. Not in a structured sense. I am interested in everything, I believe I read too much. I love people, I talk a lot, I listen a lot and I think I am a pretty good listener. I am very open to different cultures. Sharon and I love to travel, specially to Europe and Asia. I wish I spoke more languages, but I am afflicted with this American disease where I only speak two, English and Spanish. That is pretty good for an American (laughs).
It is just a manner of having the humility to learn from people. Everybody says the 25-year-old analysts do not know what the hell they are talking about. Doesn’t it drive me crazy? Yes, sometimes. But, it’s interesting because now these people actually know a little something about your business. They do not know nearly as much as they think they do, but they know a little something. Before, nobody knows anything about your business, because you’re private, but now they´ve done their research so they have knowledge to give you information that maybe you don’t see. Even an analyst shorting your stock might offer you something you learn if you have the humility to listen with an open mind.
We started with US$35,000 and one little 1600-square-foot, so I’m often proud of what we are doing. Now retail is changing so much. Many of my favorite companies are having trouble. At The Container Store, we´ve never been better than we are now at selling an we’re happy about our business model. Our earnings are good, but our stock price is down. The stock is a funny thing. We came out with US$18, doubled in the first day to US$36 and then we went to US$48, which I think was about 3 hundred times P/E, so I knew that was trouble..
I just think we need to learn and be modest. I have a friend that just went on a motorcycle trip with her boyfriend all over India, just the two of them, riding around and then they went to Vietnam and did the same thing. That has to be a lot of self-development. First, that is bravery. I would never do it.
Other thing is the multiculturalism. I have learned so much from it. The last time I was in Los Angeles, I thought, “Hey, look at this multiculturalism, look at this people here. They are so different. I live in North Dallas and everybody looks the same!”I found myself cherishing and feeling good about it because that’s how we learn!
Your company has landed on Fortune magazine’s list of “100 Best Companies to Work For” for 17 years in a row. What are the reasons this keeps happening?
K.T. We really believe that if you take better care of the employee than anybody else, they will take better care of the consumer than anybody else, and both employee and consumer are happy then your shareholder is going to usually be happy as well. Milton Friedman says that the only reason for a corporation to exist is to maximize the return of the shareholder. Well Milton Friedman, you won a Nobel Prize and everything, but we think that if you focus on the shareholder it does not work! You need to focus on the employee or the customer first.
I believe that the best way to take care of the customer is to take care of the employee, and we really do that. It is hard to take better care of your employee than anybody else. You have to work your butt off at it, and yes, human beings can be ungrateful. Anybody who has had kids knows that occasionally! It takes a lot to really impress them, but when you really do it, they know it… I am always amazed when people leave our company to go somewhere else and then want to come back saying: “Oh my God I didn’t know how good it was!” It happens all the time. Employee first means just that.
It is really hard to ever pay the employees enough. We try very hard to pay them double than the industry does. Usually 50% to 100%. Particularly people in the stores, that handle the customer contact. They get pretty close to double. The fact is that the average full-time salesperson at The Container Store makes about US$50,000 a year, which is not an enormous amount of money, but that is a heck of a lot of money for a retail sales person. That allows us to compete for talent. It makes people motivated! Then I think the most important thing is you are not just making that employee happy, fulfilled and better so they can be more productive for your company. That´s true: the average employee in any company gives about 30 or 35% of what they could give productivity-wise. The first 25% they have to do or they are fired, so they give a little bit more than that. They do not look forward to getting out of bed and going to work, and they do not like their jobs, bosses and co-workers. But if you change all of that, you can nurture and then see bigger and better, more fulfilled and happier human beings. They rise in the Maslow scale of needs. We spend more time working than anything else and our sense of that is so wrapped-up about what we do for a living. It is sad and it should not be like that. The French people kind of understand that but the rest of the world, particularly, the Americans and Japanese…
If you nurture, develop and let this person succeed by being themselves, they become less insecure and I swear, they go home and treat their kids and spouses better. The world becomes better one fulfilled employee at a time. One company at a time. To me, that is so inspiring about Conscious Capitalism. We really can change the world by changing the world of business. When it comes to employees, we can do that by one fulfilled happy employee at a time, who really looks forward to getting out of bed and going to work. So it is pretty inspiring stuff.
I can’t tell you how many times I’ve had an employee or significant other saying “Kip, she’s worked there for 20 years on your foundation principles, Conscious Capitalism stuff and it made her a better wife, a better daughter”. I used to reply “Don’t say that, that’s embarrassing”. I could hardly stand and listen to it, but now I realize that is what’s we are doing. It is central to entrepreneurs, business owners and CEOs to understand that. That is the kind of impact we have.
“I think that sustaining excellence is more interesting. Life is too short to not to do things with excellence.”
That’s beautiful. In your days as CEO, what were the most drastic and successful changes promoted in the company?
K.T. We have worked to integrate those things even before I was CEO. Garrett and I were co-CEOs for a while. I was president and he was CEO. He was really more involved with the stores, so… Most of these things we have been doing over thirty-eight years, such as building a culture based on the foundation principles and based on employee first. It is a little different than what other people do. We have always done those things and we believe that that is what leads to the best bottom-line. We attribute it to selecting great people and really training them. Our average salesperson at The Container Store during the first year gets up to 263hours of training, and the industry average is 8. People never leave. We have a single digit turnover. We were Fortune’s 100 best companies number one twice and number two twice. It is just amazing. I think that sustaining excellence is more interesting. Life is too short to not to do things with excellence.
What is your passion today? What is inspiring you nowadays?
K.T. I am very involved with Conscious Capitalism. I really believe in that. Servant leadership and long-term orientation in business are part of that. Long-term is my nature. I have had one job in my life, since I got out of college and only have had part-time jobs in high school and stuff. I have had one wife. My golden retrievers last 16 years, thank God! I buy these Toyota Land Cruisers and they are great and I keep them eight or nine years. I still have a lot of friends from high school, most people don’t. I believe that life is richer, deeper and more beautiful with a long-term orientation to things.
Experiences and things in life are only beautiful if you are sharing them with somebody, and I feel the same way about making money. I have been fortunate to make some money but what’s fun is to make money together with people.
I am not a big casino guy, and Sharon does not like the casinos. But occasionally I go to them. I think it is fun. Sometimes we would get a blackjack table, just friends and family, and every once in a while, it does not happen often, everybody is winning at the same time, and laughing, and so happy. It is because it is really fun to make money together. To build this together, to change the world together, Love is where is at and bringing joy and happiness to the people around you and yourself is a hell of a lot more fun than just bringing it to yourself.
Any last comment that you would like to share with our readers?
K.T. I would like to talk about women in leadership roles (Melissa Reiff is The Container Store’s CEO, while Sharon Tindell is its President & Chief Merchandising Officer). I do not really like the word feminist, but I am a pretty feminist guy. I actually believe that women make better business leaders than men. At speeches, for example, I sometimes get somebody aggravated by that statement and I usually say that about twenty-four of the Fortune 500 best CEOs are women. All of the largest 500 companies in America, only about twenty-four of their CEOs are women. We got a hundred of US senators, but only twenty-two of them are women. We are not anywhere near parity, and the something happens in countries like Brazil, or even Sweden!
At The Container Store we say communication is leadership and that’s one of our foundation principles. Well, we don’t like to generalize, but guess who tends to communicate better, men or women? People would say women, and they are also better on that whole servant leadership thing for their empathy and communication skills. A lot of the qualities that enlighten modern leadership gravitates towards the traditionally described feminine skills.
The old testosterone militaristic style of leadership sucks! That is not the way to do it. I think if we are long-term oriented, the global GDP will go up and I think if we start utilizing women in leadership and businesses more, the GDP will also go up, but men are great too, don’t get me wrong! (laughs)
Thanks, Kip. This was a great conversation.