The Container Store: Stacking Up Ethically


Many retail companies are not known for outstanding treatment of their employees. In more recent years, the media has delivered news stories with companies involved in lawsuits over wage inequalities, discrimination, or poor labor conditions. The retail industry in particular has been receiving a lot of criticism. One think tank recently published a report which states:

Retail is far from the only low-paying sector of the American economy, yet … [it is] one projected to add a substantial number of new jobs over the coming decade, [so] the choices the nation’s major retailers make about employment will play a crucial role in determining the nation’s economic future. (Resnikoff)

While very recent press has indicated retail companies such as Target, Wal-Mart, and T.J. Maxx may increase employee wages slightly in the near future, there are also companies who do not receive considerable media attention but who have, from their very founding, held higher standards regarding treatment of their employees. One such company is The Container Store (TCS). From its website, to its blog, to newspaper articles, books, YouTube videos, and more, The Container Store makes it clear that it aims for a business model encompassing all stakeholders, but employees in particular. In this paper, I will evaluate how the company has upheld this employee-centered model and determine whether it can be considered an ethical company through Immanuel Kant’s ethical theories.

Background

In the year 1978, Jimmy Carter was President, the first Iron Man Triathlon was held, and the movie “Grease” was released in theaters (“Historical Events for Year 1978”). This same year, on July 1, the founders of The Container Store opened their first retail space in Dallas, Texas. Kip Tindell (Chairman and CEO), Garrett Boone image1(Chairman Emeritus) and Architect John Mullen opened the 1,600 square-foot store in a completely new category of retail – one they would originate – storage and organization. Their store offered “an exceptional and eclectic mix of products devoted to helping people organize and simplify their lives”, including commercial parts bins, wire drawers, mailboxes, burger baskets, milk crates and wire leaf burners. While quite an unusual collection, these were all products that consumers couldn’t find in any other retail environment and that served as a solution for customers, saving them space and time (“Our Story”).

Today, the company operates 67 stores in 22 states, with over 10,000 innovative products to help customers save space and time. The store layouts are divided into lifestyle sections marked with brightly colored banners such as Closet, Kitchen, Office and image2Laundry. These stores are often located in the “nice part of town”, offering products at a wide range of prices, from a closet set-up for close to $4,000, to a razor case for just $3.99 (Nichols). Beyond its stores, the company sells over 5,000 products online. TCS aims to continue growth online, since its proprietary products insulate it from Internet giants, as well as through brick-and-mortar stores, believing it can grow to at least 300 locations in the U.S. (Cheng). However, The Container Store’s stores and the products it sells are not nearly as significant as how it conducts business.

Founding Principles

CEO Kip Tindell was put into leadership roles from an early age. Whether sports teams or Boy Scouts, Tindell says he began to write down thoughts he found to be the best he’d ever heard, ultimately creating a notebook of these thoughts, which became more business-oriented with time. In 1988, the company opened a store in Houston that was four times the size of any previous space. Management hired just about anyone to fill positions, paying no consideration to whether these new-hires fit into the culture of the company at the time, a culture 10 years in the making. Ultimately, Tindell realized the situation and revisited his notebook of thoughts, nervously unveiling his core business-guiding ideas to co-workers and employees. From these thoughts and ideas came the seven founding principles that guide the company to this day, principles that immediately inspired employees into a cohesive team and which influenced all future business decisions (Bryant).

These seven principles are as follows:

1 Great Person = 3 Good People – “we only hire great people!”

 Communication IS Leadership – “we believe in practicing consistent, reliable, predictable, effective, compassionate, and courteous communication”

Fill the other guy’s basket to the brim. Making money then becomes an easy proposition – “we believe in creatively crafting mutually beneficial vendor relationships”

The Best SELECTION, SERVICE & PRICE – “pricing doesn’t have to be mutually exclusive of great service and selection”

Intuition does not come to an unprepared mind. You need to train before it happens – “the best possible customer service begins with well-trained employees”

Man In The Desert Selling – “we’re trained to astonish our customers with customized solutions – not just products”

Air of Excitement – “three steps in the door, and you know if a retail store has it!”

(“Our Foundation Principles”)

 Overall, according to The Container Store, its Foundation Principles are basic, fundamental business philosophies about treating employees, customers, vendors and the community with respect and dignity. Rather than a large document or manual, the principles guide all decision-making at the company. For example, TCS strives to hire only “great” employees, believing hiring one great employee is the equivalent of hiring three average workers. It also aims for complete transparency within all ranks of the company, strives to maintain mutually beneficial relationships with all vendors, believes price, high quality service, and selection are not mutually exclusive, and aspires to astonish every customer who enters the store (“Our Foundation Principles”).

Employees

Six of these seven principles are focused on employees. Considering the extent to which TCS proudly emphasizes its employees-first culture, it should come as no surprise that this is the case. Tindell often expresses a desire for customers to do a dance they are so excited about the products solutions TCS provide them. He claims this “customer dance” is highly dependent on high levels of customer service and a positive interaction between salesperson and customer (Gupta). container-store-employeesIn line with the fifth Foundation Principle, in their first year on the job, all full-time employees receive more than 263 hours of training and part-time employees receive about 150 hours of training. And that’s compared to a retail industry average of about eight hours, or less, of training (“Our Foundation Principles”). In addition, according to Tindell’s book, Uncontainable, and many other accounts in the media, the average Container Store retail salesperson makes nearly $50,000 a year compared with what the Bureau of Labor Statistics says is a national average of just above $25,000 (Taube). Tindell argues the secret to high wages is The Container Store’s “1=3” principle (the first of the seven Foundation Principles). He claims he gets ahead by receiving three times the productivity of an average worker at only two times the cost and offering employees an 8% increase on their salaries based on productivity. As a result of this strategy, the company can only accept 4% of applicants annually and has an industry-low employee turnover rate of 10%, compared to the retail sector’s double turnover rate (the national rate for retail falls between 20-70% depending on job position) (Cheng). The company has also been named on Fortune magazine’s “100 Best Companies to Work For” list for 16 consecutive years.

In his 2014 book, Uncontainable, Tindell also reveals his approach for building a business where everyone associated with it thrives is based on Conscious Capitalism. The company’s seven Foundation Principles are in line with this approach, and his book emphasizes that other businesses can create a similar, sustainable business model by embracing the “Golden Rule” of business, treating all stakeholders – employees, customers, shareholders, vendors, the community – as the business would want to be treated in return, creating a balance of win-wins (Tindell).

Conscious Capitalism

Tindell adheres to a model for conducting business without any trade-offs: Pay employees well and treat them with respect; consider vendors and customers as family; have fun. John Mackey, a college friend of Tindell’s who co-founded Whole Foods Market with a similar perspective on business, calls this conscious capitalism. Companies that practice conscious capitalism are supposed to have a higher purpose, rather than a simple goal of image3growth or profit. Conscious Capitalism, Inc. cofounder Raj Sisodia argues conscious capitalism is about believing in the inherent good of both business and capitalism. Business executives that practice conscious capitalism believe in a higher purpose for their company, understand that a business should create value for all stakeholders, practice conscious leadership, and foster a conscious culture within all levels of their organization (Mackey and Sisodia).

Tindell, as an advocate for conscious capitalism, strongly believes in a higher purpose for The Container Store. He aims for his business to create value for all its stakeholders, with a heavy focus on employees. Tindell believes “great” employees have the enthusiasm and know-how to have positive interactions with the community and to create customer satisfaction and profitability (and thereby shareholder satisfaction). Focusing on employees is ultimately a focus on all stakeholders.

Kantian Ethics

Immanuel Kant was a philosopher whose teachings were central to deontological moral theories. Deontology is an ethical theory that judges the morality of an action based a person’s universal duties or rights. Deontology guides and assesses our choices based on doing what is “right” (Trevino, 91). Kant believed that the fundamental principle of ethics is the ‘categorical imperative.’ He believed ethics could be determined by the intentions behind an action rather than its consequences. He had three main formulations of the categorical imperative, all of which The Container Store follows through its business model.

The first formulation of the categorical imperative states that one must, “act only on that maxim by which you can at the same time will that it should become a universal law” (Bowie, 4). This functions as a test to see if the principles upon which an action is based are morally permissible. A business manager who accepts this formulation would ask for any given decision, should the principle on which this decision is based be willed universally without contradiction? If it can, the decision would be morally permissible (Bowie). Would the global business world benefit from universalizing The Container Store’s high-wages model of business? Could all companies focus on hiring only the best employees, pay them double the rate they do now, and foster an environment where employees enjoy coming to work each day because they enjoy the company of their colleagues (Berfield)? Possibly, but not necessarily. While the high-wage model works at TCS, because the CEO and management make below average so that those closest to the customers can make much more than average, even CEO Kip Tindell admits this aspect of his overall business model may not be for everyone. In an interview with Fortune magazine, he claims:

It’s not for The Container Store, which conspicuously pays above minimum wage, to say that’s what’s best for other businesses like a mom and pop store or different types of industries. It’s a thorny and complex issue. I’m in support of what various people think is best for their businesses. (Gupta)

Still, if all companies believed that they had a responsibility to give a percentage of their sales to their employees (TCS gives 12%, which is much higher than the industry), and paid higher than minimum wage, there would be a lot more money for these employees to spend as customers in other stores and less reliance on government aid, thus improving the overall economy.

The Container Store has other components to its model, however. Its second Foundation Principle supports “consistent, reliable, predictable, effective, compassionate, and courteous communication” (“Our Foundation Principles”). Should all companies follow The Container Store’s example and ensure transparency in communication at all levels of their business? Absolutely. While TCS acknowledges some of the information it shares could possibly fall into competitors’ hands, it strongly believes that the advantages of its open, honest, transparent and thorough execution of communication far outweigh the “possible” disadvantages (“Our Foundation Principles”). It feels it is its duty to share information, regardless of consequences. If all companies ensured transparency in their business, employees would feel more valued; shareholders and vendors would feel respected; and customers would be properly educated about who exactly they are buying their products from, and make more informed decisions. All companies should feel that their consumers have a right to know that they are treating suppliers and employees fairly, their suppliers have a right to know that they are being treated fairly, and employees have a right to know of any changes in the company and that they are all receiving equal treatment.

The second formulation of the categorical imperative states, “always treat the humanity in a person as an end and never as a means merely” (Bowie, 7). Essentially, this means that one human being cannot use another simply to satisfy his or her own interests. Author Norman Bowie states that, by Kantian standards, a company that treats an employee as ‘an end’ will provide the employee with meaningful work, which consists of five concepts. Based on Bowie’s summation, Kant would find that The Container Store indeed provides its employees with meaningful work and is mostly aligned with his second formulation. First, meaningful work must provide opportunities for workers to exercise autonomy. TCS employees are expected to do more than just meet sales quotas. One manager clarifies this, saying, “we want them to…help everyone else, help us run our business, be engaged, speak up in [the] huddle [we hold each morning before the store opens]” (Berfield). Second, the company supports this autonomy by giving 8% annual raises to employees who show they take on responsibilities, have energy, and cooperate with others. Third, TCS pays workers nearly $50,000 on average, compared to a national average of just above $25,000. Thus, the company satisfies the ‘meaningful work’ requirement of providing a “salary sufficient [for workers] to exercise independence” and provide for their physical wellbeing and desires (Bowie, 10).

The fourth requirement of meaningful work is to enable workers to develop rational capabilities and the fifth is not to interfere with employees’ moral development. Workers are not given mindless tasks at The Container Store. They are trained well beyond that of the average retail worker and strongly believe in the Foundation Principles, which are the cornerstone of the company. Each day, they work alongside coworkers they are friends with and use their enthusiasm and expertise to creatively devise solutions to customers’ organizational problems. Thus, they are challenged on a daily basis, learn each day, and get to work with others to please customers. The fact that the company has been listed on Fortune’s “100 Best Companies to Work For” each year since the 1990s and has an immensely low turnover rate of 10%, indicates that employees find personal satisfaction, belonging, self-fulfillment and joy in working for the company. If they didn’t, they would surely leave. While The Container Store may not provide a plethora of obvious opportunities for employees to explore their identities beyond their job (as some more modern companies are ensuring), employees at TCS definitely feel a sense of value. Thus, TCS honors the humanity of its employees, while also striving for positive sales outcomes as a result of its strategy.

The third formulation of the categorical imperative loosely says “you should act as if you were a member of an ideal kingdom of ends in which you are both subject and sovereign at the same time” (Bowie, 10). An organization is a community of individual persons (a “kingdom of ends”) and since these persons are moral beings, the business should be governed by morality. The third formulation requires organizations to treat people with dignity and respect. The rules that govern an organization must be rules that can be endorsed by everyone in the organization. The Container Store’s Foundation Principles are crucial to the company’s identity. With hisimage4 commitment to conscious capitalism, Tindell believes in a model for conducting business without any trade-offs. While this model may not apply to businesses universally, all individuals at The Container Store believe in these principles, the backbone and “rules” of the company. The company even knowingly admits that new-hires who don’t agree with The Container Stores more “parental” style of management or its seven key principles is likely to leave soon after starting, considering each new employee has a week of training devoted solely to these principles. Through its business strategy, it strives to ensure all employees and individuals in the organization endorse its principles. Thus, I am able to conclude that Kant would agree TCS is a moral company.

The Container Store treats its employees, customers and vendors with dignity and respect. It acts in an ethical way, valuing transparency and meaningful work for employees, and other companies should strive to emulate its model, though perhaps with some slight alterations, depending on the industry or scale of the business. Tindell argues that all businesses have a powerful wake; in other words, he believes all businesses make an immense impact on the companies around them, and world around them. He says, if organizations are “mindful of [their] wake, good things [will] happen to them; they become an unassailable business” (Gupta). The Container Store strives to be an unassailable business that stays true to its principles and ethics.

Works Cited

Berfield, Susan. “Will Investors Put the Lid on the Container Store’s Generous Wages?” Bloomberg.com. N.p., n.d. Web. 31 Mar. 2015.

Bryant, Adam. “Three Good Hires? He’ll Pay More for One Who’s Great.” The New York Times. The New York Times, 13 Mar. 2010. Web. 29 Mar. 2015.

Cheng, Andria. “How Container Store Plans to Grow after Hot IPO Debut.” Behind the Storefront RSS. MarketWatch.com, 1 Nov. 2013. Web. 30 Mar. 2015.

Gupta, Shalene. “The Container Store’s CEO Unpacks His Business Philosophy – Fortune.” Fortune. N.p., 19 Oct. 2014. Web. 29 Mar. 2015.

“Historical Events for Year 1978.” HistoryOrb.com. N.p., n.d. Web. 29 Mar. 2015.

Mackey, John, and Rajendra Sisodia. Conscious Capitalism, With a New Preface by the Authors: Liberating the Heroic Spirit of Business. Boston, Mass.: Harvard Business Review Press, 2014. Print.

“Our Foundation Principles.” The Container Store RSS. The Container Store Inc., n.d. Web. 30 Mar. 2015.

“Our Story.” The Container Store RSS. The Container Store Inc., n.d. Web. 29 Mar. 2015.

Resnikoff, Ned. “Low Retail Wages Disproportionally Hurt Women.” MSNBC. N.p., 2 June 2014. Web. 30 Mar. 2015.

Taube, Aaron. “Why The Container Store Pays Its Retail Employees $50,000 A Year.” Business Insider. Business Insider, Inc., 16 Oct. 2014. Web. 30 Mar. 2015.

Tindell, Kip. Uncontainable: How Passion, Commitment, and Conscious Capitalism Built a Business Where Everyone Thrives. New York: Grand Central Publishing, 2014. Print.

Trevino, Linda K. Managing Business Ethics 3rd Edition Abridged. John Wiley & Sons, 2004. Print.

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One thought on “The Container Store: Stacking Up Ethically”

  1. I had no idea Tindell and Mackey knew each other. Dallas, TX hardly seems like a hot bed of “wacky business ideas.”

    I wonder how they filled the early stores before the whole product niche had developed as much?

    Like

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