Online Extra: Fashion, with a Conscience
As founder and CEO of Men's Wearhouse (MW ), George Zimmer is known to the shopping public as the bearded company pitchman who declares "I guarantee it!" in his TV commercials hawking suits and sport coats.
Founded in 1973, the Men's Wearhouse chain has grown to more than 500 stores catering to the man who doesn't necessarily adore shopping. Stores are located in outdoor shopping centers, letting customers get in and out quickly. The $250 to $300 price tag for most Men's Wearhouse suits is budget-conscious. The merchandise isn't high-fashion, but it is practical and functional.
Behind the scenes, Zimmer has long worked to build a corporate culture that centers first and foremost on keeping his employees happy and loyal. That culture appears to benefit Men's Wearhouse: So far this year, its shares have risen 25%, outperforming the 1% increase in the Standard & Poor's index of apparel retailers. Last year, earnings rose 23%, to $52.3 million, on sales of $1.4 billion, a gain of 7.5%.
To date this year, same-store sales [revenues for stores open at least one year] have risen 12%, including a same-store gain of 8.2% in the U.S. and Canada, and earnings have jumped 48%, to $33.3 million. Zimmer recently spoke with BusinessWeek Correspondent Louise Lee about his background, his beliefs, and the company culture. Here are edited excerpts of their conversation:
Q: How did you get interested in the clothing business? A:
Q: How did you get interested in the clothing business?
A:My father was a manufacturer and had been in suits. I'd been exposed to the apparel industry through osmosis my entire life. When I tried to think of starting my own business, the only thing I had any semblance of awareness of at the time was men's apparel. I never was a clothes horse in a personal sense. It was a vehicle for a business. As the years unfolded, I was able to create an economic model.
Q: How does your job differ from that of other men's apparel companies? A:
Q: How does your job differ from that of other men's apparel companies?
A:Normally, the CEO of a men's apparel company is very involved in the merchandise side of the business, which is obviously mission-critical. We have both a direct manufacturing business as well as a merchandise team that buys from outside, and I have very little input into that process. The other execs who manage that are given great autonomy. It enables me to focus on other aspects of the business.
Q: So how do you spend most of your time? A:
Q: So how do you spend most of your time?
A:The bulk of my time is focusing on our corporate culture, which is store operation -- the intersection of employee, customer, brand, and merchandise. They all come together. I focus on the experience of our employees and customers, and how it can be improved year after year after year.
Q: How are your beliefs enforced throughout the company? A:
Q: How are your beliefs enforced throughout the company?
A:There's an enormous opportunity for us to unfold through our consciousness, through our ability to think. One of my real passions is the nonprofit Institute of Noetic Sciences. We study, scientifically, the phenomenon of consciousness. There's untapped power in our consciousness, which by the way, isn't just coming out of our brains. Consciousness is the intersection of the heart and the brain.
We've woven that thought into our [corporate] culture. What does that mean? You've got to have a company that starts with trust and fairness. I said in a speech a couple of years ago that compassion and forgiveness must sit at the board table side by side with accountability and responsibility. The voice I represent here is underrepresented in the business community.
Q: What kind of specific benefits does Men's Wearhouse have that directly reflect these values? A:
Q: What kind of specific benefits does Men's Wearhouse have that directly reflect these values?
A:We have a fund, named after our first Hispanic district manager, that we set up six or seven years ago after he died. We ask employees to donate $1 per week through automatic payroll deduction. Executives put in thousands.
Employees apply for loans and grants, mostly grants, to cover unexpected expenses like a car repair. It's $250,000 a year, and it gets used.
We allow a sabbatical once every five years. We add three weeks of paid vacation to the three weeks of vacation you get, so every five years, you can take six weeks paid. This is for all full-time employees, including store-level and distribution-center employees. We encourage people to take six weeks all at once.
Q: How about fairness? A:
Q: How about fairness?
A:We have an ESOP [employee stock-ownership plan]. Ours is capped, meaning income above a certain number doesn't calculate into your distribution. It's capped at $50,000, which is what the average store manager earns.
We originally had it capped at $200,000. After 5 or 10 years, I realized what that meant as to how money was being distributed. I said, Let's reduce the cap to $100,000. I remember resistance from certain execs and remember smiling at the resistance. Five years later, we lowered the cap to $50,000. We had less resistance from executives, but now we had resistance from district and regional managers.
I smiled because human behavior is human behavior. What we should condemn is selfish behavior, but not the instinct. That's an instinct embedded in us because it serves survival.
Q: Has anyone tried to take advantage of the culture of the company? A:
Q: Has anyone tried to take advantage of the culture of the company?
A:Ten years ago, we had a store manager who had a gambling problem. He stole bank deposits and asked for the opportunity to pay it back and stay with the company. We gave him a second chance. I said it wasn't an absolute necessity he be terminated if we thought this man could be rehabilitated.
This was a way of getting our money back, and sometimes people can change. But to be honest, most people don't change in this situation. Ultimately, he did it again and was terminated. You have to be prepared when using values like this to have situations not work out well.
Q: So your values are still worth the small cost? A:
Q: So your values are still worth the small cost?
A:For the number of people who take advantage of the values we operate with, the dollars you lose are not so great. The overall change in the corporate energy is still very positive. We do $1.5 billion in sales a year and make a lot of money.
We have millions of dollars of stealing in this company, just like at every company. But if an additional hundred thousand was stolen because we made decisions based on forgiveness and compassion and empathy, and the overall corporate culture was enabling us to earn $100 million pretax, our culture would be a good business decision.
This is not some New Age flighty business model with false nobility with no sustainable earnings. We're a company that's driving consistent and growing earnings over decades while using this business model.