The Container Store: Be Brave Enough to Pay Great People Well
By: Kip Tindell, Chairman and CEO of The Container Store® and author of Uncontainable: How Passion, Commitment, and Conscious Capitalism Built a Business Where Everyone Thrives (Grand Central Publishing, 2014)
Managing someone’s compensation and career is something we take very seriously.
Employee compensation is a very important part of the whole picture; so is culture, and being surrounded by great people, and everything else we do to make The Container Store a place where people look forward to getting up in the morning and coming to work, rather than dreading it.
What a responsibility it is to manage someone else’s compensation and career!
Making Compensation a Priority
How employees perform has so much to do with how we manage them and communicate with them, being mindful of our wake, and our impact on the life of each wonderful, devoted, hardworking person.
We don’t ever want to think that compensation is not important. Spouses and children depend upon it, and people who are great at what they do deserve to be paid well. We’re not advocates of paying mediocre people well, but we’re huge advocates of paying great people well.
Sometimes there are aberrations, and a situation is inherited where the top contributor is the third in compensation. This may take a while to correct — it might even take two to four years to fully correct — but we have to be patient. It can’t be fixed in one performance review, probably not even in one year.
The problem is that if we try to fix it all at once, we’ll end up with a situation like what we see in Major League Baseball’s free agent compensation. Currently in baseball, as soon as one person makes X, everyone who thinks he’s comparable believes he should also make X. That’s not the way to do it.
In the case of a store employee, the general manager, store manager, regional director, area director, and VP of stores are all involved and can collaborate and help to make sure that compensation and contribution are equated. We make certain all of these people understand our payroll philosophy and work hard to ensure that every area of our business is making decisions the same way.
The Confidence to Pay Great People Well
A company has to be extremely self-confident and knowledgeable to pay great people well. It takes more bravery to pay great people well than just about anything else.
Again, the proof is in the bottom line. We have superb productivity and terrific numbers, and as I said before, our payroll as a percentage of sales is very healthy.
This is so rare. The leaders of the organization — probably including someone in my position — have to be brave enough to pay great people well.
The 1=3 Equation
Our approach to payroll is easy to justify because we’re convinced that our 1 Great Person = 3 Good People approach really works. Our employee wins, because she’s making far more than anyone else in another company is likely to pay her for that position.
The Container Store wins, because it gets three times the productivity at only 50 to 100 percent more cost. And the customers win because they have this superb salesperson who actually cares about working in the store.
I think the reason most managers are afraid to pay people well is that they just don’t believe in 1=3. But we really do believe in it.
The Magic of Meritocracy
People say, “Oh, it’s culture that matters.” No, it’s not just the company culture. It’s pay that matters, too. That’s part of the culture.
We’ve had some of the best companies in America ask us about our compensation strategy; about how we divide up that pie and how we go through this painstaking process. We really work hard on it. I think most Conscious Capitalist business leaders do. It’s what makes their companies unique. It boils down to the fact that we really work it to death.
Even after more than three decades as a businessperson, I am still astonished by how magical this process is. I use the word “magical” deliberately because I realize this approach contradicts the usual, super-rational way of doing business, the number-crunching mind-set that blindly tries to cut costs everywhere and assumes business is really about spreadsheets, not about people or the vast, complex energies of life sustaining itself.
The coolest part is when you’re doing a performance review and give an employee a much bigger raise than she was expecting. She starts crying, you start crying, and the magic spreads across the company, and out into the world.
Excerpted from the book UNCONTAINABLE by Kip Tindell with Paul Keegan and Casey Shilling. © 2014 by Rufus Tindell LLC. Reprinted by permission of Grand Central Publishing. All rights reserved.
Kip Tindell is currently chairman and CEO of The Container Store and has been at the helm of the company since the first store opened in Dallas in 1978. In 2006, along with his wife, Sharon Tindell, (chief merchandising officer), and Garrett Boon (chairman emeritus), he was inducted into the Retailing Hall of Fame, and in 2010 he received the National Retail Federation’s 2010 Gold Medal Award, the most coveted award in retail.
Tindell is actively involved in the community, dedicating time and resources to the Salesmanship Club of Dallas. Tindell serves on the board of Whole Foods Market (WFMI) and as vice chairman of the National Retail Federation. He is passionately involved in Conscious Capitalism, Inc., a community of like-minded business, thought, and academic leaders working to elevate humanity through a conscious approach to business.