Thinking Outside the Box at The Container Store

The Container Stores are palaces of boxes and bags, racks and shelves that help you organize and store everything from shoes to spices. “Contain Yourself,” the company playfully entreats customers. But to its valued employees the mantra is quite the opposite: Think outside the box. The expression may be a maddening misnomer at many work places. At the Container Store, it’s real.

    The company has become so respected for its commitment to employees and their creative input that it has catapulted itself into a position of leadership in the HR field. The reason is simple. “A funny thing happens when you take the time to educate your employees, pay them well and treat them as equals,” company president and CEO Kip Tindell declares. “You end up with extremely motivated and enthusiastic people.”

    Sitting and talking with Beth Barrett, vice president of operations at the company’s Dallas headquarters, you quickly realize that the company isn’t like most old-economy retailers. And Barrett definitely isn’t a conventional head of human resources. Much about the organization and how it handles people management is unusual, but well suited to the company’s unique business mission: To sell products that save customers space and time.

    Just as no organizational product solution is ever the same for two different customers, The Container Store believes that people management should be the same way. Rather than filling positions as quickly as possible, Barrett would rather hold a job open for six weeks or more to make sure just the right person is hired.

    Barrett knows that her management style is definitely not straight out of HR 101. When she began working at The Container Store, she was just out of college, a French major with some work experience in sales. Perhaps her distinctive and creative take on HR is a direct result of having no preconceived notions about how to direct the people side of a business. What she didn’t know couldn’t become a stumbling block.

    Sitting back in her chair dressed in a white sweat suit with the distinctive blue company logo, she says that although she’s had no formal HR training, her 20 years of running HR at The Container Store has been her practical training ground. Working hand-in-hand with the organization’s founders, Garrett Boone, who serves as chairman, and Tindell, Barrett has used her own keen insight and business savvy to develop management strategies. It’s worked. Since it opened in 1978, the company now pulls in more than $214 million in annual revenue.

    As the original storage and organization goods retailer, the company attributes its success to accomplishments in several areas. In an industry where 100 percent turnover is common, The Container Store boasts a very low 15 to 20 percent . Forty-one percent of new hires come from employee referrals. But it’s the enthusiasm among workers that’s so palpable.

    It can be measured by taking a stroll through the organization’s headquarters, or the adjacent distribution center, or one of its 24 sites in the United States, or in its manufacturing facilities in Sweden. A stunning 97 percent of employees agree with the survey statement “People care about each other here.”

    In recent years, the firm has been praised as a leader in many business organizations. The Container Store received the Retail Innovator’s Award from the National Retail Federation based in Washington D.C. And the company has been ranked the best organization to work for in America by Fortunef magazine for the years 1999 and 2000 – the only time a company has won the honor two years in a row.

    The Container Store wins the Workforce magazine Optimas Award 2001 in the category of General Excellence for outstanding people-management strategies. These plans have resulted in the firm’s achievement of sustaining a 20 to 25 percent increase in annual sales each year.

    Sure, The Container Store set out to be a profitable business. But the question of how to reach that goal has always been the primary difference between The Container Store and many other retailers. The company’s founders never intended to grow for growth’s sake. Rather, they set out to adhere to certain business values centered around deliberate merchandising, superior customer service, and constant employee input.

    If you think of a start-up business as empty space around which you build boundaries – almost like taping up the six sides of a box – that’s exactly how company founders Boone and Tindell organized their ideas around building a strong company culture. It’s something few, if any, other retailers do.

    Not long after creating the company, Boone and Tindell created innovative parameters called foundation principles. They are a set of humanistic, spiritually based, do-unto-others philosophies. These principles are practiced internally among employees and are reflected in how they treat each other and how the company treats them. Ultimately this translates into a strong customer-service philosophy that allows all employees to take ownership of the company and make decisions based on their own intuition and discretion.

    The company strives to astonish its employees, which makes it an easy proposition for them, in turn, to astonish customers. “If we expect our employees to astonish customers, we have to first take care of them,” says Barbara Anderson, director of community services and staff development.

    “Because they’re going to treat customers the way we treat them. We can’t say, ‘Go be this wonderful person’ with a customer, but not treat them with respect. That’s where it all begins and that’s why we put so much time and energy into that. Someone needs to role-model how we treat each other.”

    True to its name, and its “Contain Yourself” slogan, the company approaches business with simplicity, straightforwardness, and a spirit of eagerness. By design, the company doesn’t contain creativity with rules. There’s no employee rulebook or manual. Instead, the company operates within a few uncomplicated but unwavering guidelines, such as always being flexible.

    When you’re the trailblazer in your own market niche, you start with a clean slate in designing business – including how you approach people management. Barrett doesn’t believe in a traditional HR structure, but instead has focused on a single concept: to support the business goals in the best way possible rather than to construct HR for HR’s sake.

    Like many small companies, The Container Store operated without a personnel department for several years. From the beginning, managers have been responsible for many of what are traditionally considered HR tasks because they’re closest to employees.

    “Many companies define HR as being almost solely responsible for attraction, motivation, and retention. Our approach has always been to entrust our great supervisors with that responsibility,” wrote Barrett in her memo to the company about the HR changes.

    “We know this helps in so many ways, from reduced turnover to clearer lines of communication, as well as a greater sense of trust and ownership in the company.” It also gives people who are ultimately responsible for HR functions more time to focus on strategic rather than tactical issues.

    In 1994, Barrett formalized the payroll and benefits functions into a semi-traditional human resources department. However, the recruitment and training activities were always distinct functions. More traditional HR activities such as compensation and payroll later followed under the HR umbrella.

    However, Barrett broke up the HR department last year into three separate functions, all still reporting to her. The recruiting and training departments have continued to operate as distinct areas, but the payroll, benefits, and workers’ compensation functions are now separate. “I spend a tremendous amount of my time really working with Garrett and Kip on building the structure, changing the structure, and looking at new areas of need,” Barrett says.

    Part of The Container Store’s unique management style is to give human resources managers responsibility for other areas of the company, such as store operations. This gives them a multifaceted view of the organization at all times.

    This year, as a get-back-to-basics effort, Barrett has directed HR managers and other senior staff members to take positions at the store level so they can even further reconnect with the company’s core purpose – to serve customers. Most employees start out working as salespeople, so this isn’t a new experience for them. Everyone in the company understands that the more they know about serving the core customer’s needs, the more successful they’ll be.

    The Container Store’s business is to solve customers’ one-of-a-kind storage and organization problems. Its people management practices also mirror this concept. The company has a focused people strategy: hire for fit; train comprehensively; and pay and support for longevity.

    Just as The Container Store finds storage solutions for its customers, it tailors jobs to people. The company customizes jobs to fit skills, abilities,and talents. The Container Store matches employees’ strengths with the needs of the company, focusing on talent rather than titles.

    From the beginning, the company’s operations team decided not to train employees by just dumping information into their heads. Instead, The Container Store decided early on to educate its workers using interactive techniques, and discussing the whys along with the whats and hows. “There’s a lot of philosophical discussion and education as opposed to just learning the keystrokes,” Barrett says.

    To achieve the company’s primary goal of providing extraordinary service, the firm invests in more than 235 hours of training for employees in their first year – an astonishing feat for a retailer in an industry that usually provides workers with an average of seven hours of training per year.

    Included in rookie training is a full week of orientation training, topped off with a session on learning the foundation principles, offered in an unscripted presentation delivered directly by new employees’ managers. But it isn’t just quantity that matters, quality is essential for The Container Store. It has achieved that end.

    Leonard Berry, a leading expert on service quality, profiled the company in his book, Discovering the Soul of Service: The Nine Drivers of Sustainable Business Success (Free Press, 1999). In his book, Berry concludes that the single most important factor in building a lasting service business isn’t a matter of savvy business practices but of humane values.

    After their first year at The Container Store, full-time employees receive an average of 160 hours of training annually. Although training has never fallen under HR at The Container Store, Barrett has provided leadership around all development activities, which includes measuring the direct impact of training on store sales. The company can prove that its substantial training investment has a measurable financial impact on the organization.

    “The impact of the training is long-term oriented,” Barrett says. “I mean, what we do today is going to impact the customer who comes in three months from now. So, it’s over time, and we’ve watched our dollar-per-customer grow from the late eighties when our average dollar-per-customer was in the low $20s. Our average dollar-per-customer now, depending on the market and the store, is headed for $50.”

    Looking beyond the minimum-wage concept, The Container Store has taken the bold move of paying employees two to three times the industry average, which cultivates fierce employee loyalty.

    “Kip and I worked for 18 years very closely on building the structure that allows us to pay more – to think out of the box and devote 10 percent of store sales to payroll,” Barrett says. The industry average is 3 to 4 percent. “I really don’t believe that [employees], especially at the store level are a focus in general for retail companies. Merchandise is their first focus and gross margin plays a huge role in determining payroll for a retail company.” This goes back to focusing on what the company considers its number one asset: employees.

    The company shares all financial information with everyone and offers benefits to all employees, both full- and “prime-timers” – people who work less than full time.

    The Container Store carefully cultivates a work environment that’s both fun and based on the company’s strong values. Many employees have left or retired from other careers where they’ve often experienced business cultures where trust and empowerment are only words on a mission statement. They aren’t lived daily by everyone from the top down.

    The company likes to hire its customers and usually employs college-educated people who are looking for a home at work. They want their quality of life at work to reflect their lifestyle, their beliefs, their values, and they’re usually seeing The Container Store philosophies as a good match for their value system,” Barrett says. “Often, it’s as simple as that.”