Kip Tindell argues that paying employees well is not only the right thing to do, but good for the bottom line. Tindell is the CEO of The Container Store.
Kip Tindell: We, at The Container Store, and I'm just speaking with my Container Store hat on as the CEO of Container Store, one of the foundation principles, the company is sort of based on a sort of seven foundation principles that are all very simple but very thought-provoking, kind of like the golden rule: very, very simple but very thought-provoking at the same time, things that nobody ever disagrees with. How many people do you know that say I don't know about that do unto others thing, maybe that's not such a good idea after all. So one of them is one equals three; that one great person can easily do the business productivity of three good people. It's actually an understatement. There's all kinds of things that you do 14 times or 38 times better than me, but one equals three allows you to kind of hold out for only the great employee. I mean we think the most important thing that we do is who we hire to join The Container Store, that wonderful company, so we're looking for people that we think will do at least three times the productivity that someone else might hire for that position, and no one's overqualified.
I mean we always joke that if a retired federal reserve chairman wants to work in our accounting department that's fine with us. If you go to our stores and look at who's working there you have masters degrees. The average full-time sales person in the store makes about $48,000, which is not an enormous amount of money but it's a lot of money, it's a whole lot of money for a retail sales position. First you have to believe that you can get great people to work in a retail sales position or in a hot distribution center in Dallas Texas. And boy have we been successful at that. And we've been on Fortune magazine’s 100 Best Companies to Work for in America list for 15 years in a row, number one twice, number two twice. We have a reputation for being a great place to work, and so we seek out great people. We put you through eight interviews, so we wind up with great people and they're very productive and they're very innovative. Then you can pay them well and you need to pay them well.
People join The Container Store and they never leave. I mean our turnover is single digit in an industry that averages triple digit, and pay is part of that. It's an inverted pyramid. I don't, as CEO, I make substantially less than industry average. The vice presidents make maybe about industry average, but the people closest to the customers and the people in the stores make well above industry average. In fact we say in general 50 to 100 percent above industry average; that can vary a little geographically. It's different in San Francisco and New York than it is in Fort Worth and Atlanta. But you're getting three times the productivity at only 50 to 100 percent higher labor costs. So the employee wins because she's getting paid 50 percent more than somebody else would likely pay her, the company wins because It's getting three times the productivity at that only 50 percent higher cost, and the customer wins because they're getting this engaged really great employee.
When you go in the stores the people that wait on you have been there four years or eight years or 12 years, they love their jobs and they're truly interested in your storage and organization problem. So, we're not advocates of paying mediocre people well, we enjoy excellence, we insist on a meritocracy and we really believe in paying great people well; we give much bigger than usual annual increases. I'll look forward to the day when we have people on the sales floor making $100,000 a year. We don't have a single one yet but I think we will sometime and I think plenty of people are good enough to make that. A great place to work it's not just about pay, but pay is still important. People's families depend upon it. It's very important.
We're trying to pay in accordance to contribution. Most business people will tell you I don't know, some of my worst people make the most money and some of my best people make the least money. And you just have to realize how important it is. You have a finite pie of compensation. The person who makes the 15th biggest contribution should have the 15th biggest slice of the pie.
I think it's important that people feel mildly tickled, maybe you don't want them to feel wildly tickled, but maybe if they feel mildly tickled about their compensation they feel very hopeful about the opportunities they have for advancement if they want that or more money or a lot more money if they want that. So, there's also a pride factor. There's also the new groom wants his new father in law to be proud of what his salary is, so this stuff’s important.
Directed / Produced by Jonathan Fowler, Elizabeth Rodd, and Dillon Fitton