Jeffrey Swartz, the CEO of the Timberland Co., strode purposefully into a New York office packed with McDonald's executives. Dressed in a blazer, jeans, and Timberland boots, he was there on this mid-August day to convince the fast-food behemoth that it should choose his $1.5 billion shoe and clothing company to provide its new uniforms. The executives waited expectantly for him to unzip a bag and reveal the sleek new prototype.
"We didn't bring any designs," Swartz said flatly. Eyebrows arched. Instead, he launched into an impassioned speech that had virtually nothing to do with clothes or shoes. What Timberland really had to offer McDonald's, Swartz said, was the benefit to the company—and the world at large—of helping it build a unified, motivated, purposeful workforce. "Other people can do uniforms," Swartz said, his Yankee accent asserting itself. "This is about partnership. We can create a partnership together that will be about value and values."
As unorthodox as it sounds, what Swartz was pitching was not Timberland's creativity or craftsmanship, but rather its culture, and the ways that culture could rub off on McDonald's. Growing more and more animated, Swartz talked about how Timberland's employees get 40 hours paid leave every year to pursue volunteer projects. He discussed Serv-a-palooza, Timberland's daylong paroxysm of do-goodism that this year would host 170 service projects in 27 countries, covering 45,000 volunteer hours of work. And he talked about City Year, the nonprofit that Timberland has supported for more than a decade, which brings young people into public service for a year. As for McDonald's, it was part of practically every community in the country, Swartz explained, but was it helping every community?
The room was silent. Swartz couldn't tell whether they thought he was a touchy-feely freak or whether what he said had struck a deep chord. (McDonald's won't make a final decision for many months to come, but Marlena Peleo-Lazar, McDonald's chief creative officer, says she appreciated "the passion he had for his brand.") Yet Swartz was elated all the same. "I told my team to find me 10 more places where I can have this conversation," he said. "No one believes in this more than we do, and that is our competitive advantage."
The "this" that gets Swartz, a third-generation CEO whose grandfather founded the company in 1952, so fired up is expressed in Timberland's slogan: "Boots, Brand, Belief." What Swartz is really trying to do—no kidding—is to use the resources, energy, and profits of a publicly traded footwear-and-apparel company to combat social ills, help the environment, and improve conditions for laborers around the globe. And rather than using his company as a charity, he's using the hard financial metrics of profit, return on investment, and, oh yes, shareholder return, to try to prove that doing good and doing well are actually self-reinforcing notions. The idea of helping others, Swartz believes, is a vision around which he is creating a more productive, efficient, loyal, and committed employee base, which in turn helps produce real results.
So far, Swartz has done a more than respectable job of proving the point. Over the past five years, the company, which sells outdoor-themed clothes, shoes, and accessories, has seen sales grow at a compound annual rate of 9.7% and earnings per share of 20%. Its stock price has risen 64% over the same period. The company is also looked at as a trailblazer by companies many times larger when it comes to corporate social responsibility. "Timberland has one of the best business cultures of any retailer I know," says Kevin Martinez, Home Depot's director of community affairs. "It's because many pieces of that culture are built around service." But Swartz's big ambitions also draw doubters who question whether Timberland's drive for sustainability is itself sustainable in a profit-driven world, whether the amoral world of capitalism and the spiritual world of service can be merged.
Those who think Timberland must choose between profits and passion have not spent much time with Swartz, an earnest, funny, hyperkinetic 45-year-old who can barely sit still, so anxious is he to discuss the beautiful—and profitable—nexus between, in his words, "commerce and justice." Dressed in a wrinkled short-sleeved plaid shirt and a baseball cap turned backward, this CEO of a $1.5 billion company looks and acts in some ways like a kid—albeit one with a lifetime's worth of homework. His words spill forth in a jumble, dotted with self-deprecating jokes and references to literature, the Red Sox, and Judaic texts. "I can see things that are so clear, so desirous, so compelling that I can't be as rational as I should be about them," he says, squirming in his chair. "I see what the outcome should be, and I'm not as good at figuring out on my own how to get there."
Swartz wasn't always this way. For most of his life, he was, as he puts it, the "overeducated, watered-down third-generation entrepreneur—what I would call a 'trained seal.' " But things took a dramatic turn when, in 1989, the then-tiny City Year asked him to donate boots to its workers. Soon, cofounder and CEO Alan Khazei challenged Swartz further. "He said, 'You think my job is to save the world and your job is to make boots,' " Swartz remembers. " 'If you give me half a day, I'll show you how the two could be one.' " With nine other employees, Swartz agreed to help clean up Odyssey House, a residence for troubled teens. There he met a young man who asked him what he did. "I'm the COO," he said. "He says, 'What do you really do?' I say, 'I'm responsible for the global execution of strategy.' Then I say, 'So what do you do?' He said, 'I work at getting well.' That was an answer that sort of trumped mine."
In a thunderbolt, Swartz felt he had a new purpose, a true calling.
It was a life-altering moment for Swartz, who suddenly saw his woes as minuscule compared with the teen's vast emotional and physical struggles. In a thunderbolt, he felt he had a new purpose, a true calling: helping those less fortunate than himself. "It wasn't frightening; it was, in fact, exalting and exhilarating," he says. "There was a discontinuity between how you are in the world and an opportunity to reimagine how you would be in the world." Swartz, who would replace his father as CEO in 1998, was determined to make Timberland a living laboratory for an altruism-driven culture—without torpedoing the family business.
If it sounds like a religious conversion, that may be because it came on the heels of one. Although he was raised in the more secular Reform tradition of Judaism, Swartz had recently become an Orthodox Jew. Somehow, this perpetual insomniac (four hours is a good night) now devotes nearly as much time to Torah study and to philanthropic activities as he does to his day job. "He's an amazing person," says Barry Schrage, president of the Boston-based Combined Jewish Philanthropies. "I've rarely met a volunteer who has the capacity to move people as strongly as he does."
Although Swartz knows the business inside and out, it's hard to get him to talk about it. Asked if he cares about shoes, he looks shocked. "Am I proud of the boots and shoes we make? Desperately." But making good gear, he says, doesn't matter enough. "I can't care enough about shoes or clothes to do what I do unless there is a different kind of purpose to it."
Certainly, Swartz's quest has created a cohesive culture at Timberland. Even outsiders understand it, like the car-service driver, who, when asked about the fact that Tyco International used to share the same leafy office park in Stratham, New Hampshire, says pointedly: "These people are really different from those people." In the parking lot, the primo spots are reserved for employees with hybrid cars. Just past the main entrance is Timberland's Community Impact Center, featuring a bulletin board and computer where employees can sign up for a host of volunteer projects or propose their own. After that, you pass the local offices of City Year, housed entirely within Timberland. There's a gleaming on-site day-care center—and no stock ticker.
Betsy Blaisdell, manager for environmental stewardship, laughs when she thinks how horrified she originally was at the thought of working for a big, bad corporation. With Swartz's support, she has helped push through such initiatives as a $3,000 cash incentive for employees to purchase hybrid cars (six have taken advantage so far) and the company's $3.5 million solar array at its Ontario, California, distribution center. Although it will provide 60% of the center's energy, it may take as many as 20 years to show a return, and that's just fine with Swartz.
For Timberland, service is not something you do once a year. While volunteer projects are always under way, many of them have been organized under the rubric of Serv-a-palooza, held in late September. Its 2005 projects included a massive effort to clean up and reclaim public spaces around Lawrence, Massachusetts, and a plan to improve a center for handicapped kids in Ho Chi Minh City, Vietnam. Timberland suppports these efforts for their own sake, but the potential corporate benefits do not go unnoticed. "There are lots of things people do to build teams," says Danette Wineberg, Timberland's general counsel. "They use consultants, exercise programs, off-sites. Not only does [service] not cost anything, it does some lasting good."
In the most recent employee survey, 75% of employees said they would choose Timberland again if they were looking for work, while 79% said Timberland's reputation had played a big role in their decision to come to the company. "I love my job," says Michael Moody, a staff attorney. "The core values are humanity, humility, integrity, and excellence, and I see those values used as a touchstone in all conversations."
And as his pitch to McDonald's shows, Swartz also sees service as a powerful differentiator for Timberland with its current and potential customers. To celebrate its 30th anniversary, Foot Locker, one of Timberland's largest retailers, invited its top-five shoe brands to a huge leadership conference in October 2004. Each brand tried to top the other: Reebok, for example, brought spokesperson and rapper 50 Cent. Timberland brought Swartz and a group of young people spending a year with City Year.
And Timberland's anniversary gift to a key retailer? About 15 Foot Locker employees were invited to help Swartz and other top Timberland execs clean up a women's and children's crisis center. "It made our two brands stronger and enhanced our partnership," says Jeanine Zocks, Foot Locker's director of sports marketing. "It was an unusual, but worthy gift."
But while Timberland's message is getting through to its business customers, it's not at all clear that consumers have any clue what the brand stands for beyond cool stuff. Nor is it clear that they care. Says John Shanley, senior athletic and footwear industry analyst at Susquehanna Financial Group: "The vast majority of footwear is purchased by teenagers, and some don't believe in advertising at all, so it's tough to reach them."
Swartz insists that it's simply a matter of time until consumers refuse to patronize companies that don't tell them what they're doing for the community. "I expect deep engagement on the issue of not just what you make but how you make it; not just where you make it but under what circumstances; not just the environmental ethos but the environmental practices. I believe that there's a storm coming against the complacent who say good enough is good enough." To help that storm gather strength, Swartz is criss-crossing the globe. He stops in for impromptu meetings at retail shops in cities across the country. And he walks the factory floors of his suppliers, helping to spot problems.
Sometimes, Swartz's causes cause trouble. Although Judaism is not a part of Timberland, it is so much a part of Swartz that it can be difficult for him to distinguish between his role as CEO and as a spokesman for Jewish causes. In 2002, he caused a stir when The Jerusalem Post printed comments he made about the Israeli-Palestinian conflict. "The boycott started two hours after it showed up online," he says. It was a painful lesson for Swartz on the need to segment his life. "I wrote a note [to the company] and said, 'I beg your pardon. I crossed the line.' "
Probably Swartz's biggest challenge is getting Wall Street to buy into the doing-good side of the story. "Jeff can scream from the woods and say that this is actually helping his numbers," says Samantha Beinhacker, president of New Capital Consulting, a social-entrepreneurship consultancy, "but the fact is we don't have these metrics yet." Sure, the brand's a success, says analyst Shanley. "But investors would rather see Timberland doing things like increasing dividends or share buybacks. Nobody's investing in Timberland just because Jeff's a nice guy. They expect results." Shanley rates Timberland a "neutral," not because of its altruism, but because current fashions favor sneakers over boots.
That shift in fashion hit Timberland in the second quarter of 2005, when earnings per share fell 18%. While no one suggests that was anything more than a blip, it's worth considering what would happen to Timberland's model if things really did go awry. The cautionary tale is Levi, Strauss & Co. Levi's was once as vaunted for its "enlightened management" as Timberland is for its service—and it was a successful apparel company, too. Now Levi's is ice cold. The rap: Levi's took its eye off the ball, largely because its former scion CEO Robert Haas spent too much time and money on being nice—paying employees for "aspirational" leadership, for example.
Swartz thinks that Levi's social activities and its business problems were unrelated. And he has the advantage of having already weathered one such crisis himself. In a story that's part of Timberland's corporate mythology, Swartz, as COO, overexpanded the company and led it into a liquidity crunch in 1995. A banker told him that he would now have to "cut the country-club crap out." Swartz went home, dejected, and happened upon a brochure for a volunteer project. "I started to cry, because I thought, What are these people doing? Do they have any idea that we're cooked, that the goose is headed toward crispy?" But then he decided that if his workers were really committed, there was no reason he shouldn't be. Instead of heeding the banker's advice, he doubled the amount of paid service hours Timberland provided—and managed to turn the company around.
It is, of course, relatively easy for Swartz to defy his critics. Although Timberland is public, the family maintains 69% voting control. And Timberland has no debt, tons of cash, and had enjoyed nine straight record quarters before its glitch this year. But wouldn't it be easier for Swartz to pursue his social objectives at a nonprofit, or at least a private company? Absolutely not, he bellows. "The only way to enact the model is in a transparent public way. If you want to make the assertion that commerce and justice are not divorceable notions, then you need to demonstrate that in a constant, open, and inspectable way."
And because Swartz is an avowed capitalist, he believes in listening to the market even as he tries to encourage it to measure success in different ways. Although it offends the purists, that means he doesn't immediately fire suppliers for labor infractions. Instead, he uses "constructive engagement" to get them to change their policies and so keep workers employed. And while organic cotton T-shirts may be better for the environment, he'll try to build demand for them over time instead of forcing them into the market and pressuring margins.
Can one man and his band of devotees really change the role of the corporation? To Swartz, it's only a matter of time. But even if he didn't feel confident, he has no choice but to press on. "It's not required of you that you complete the task," he says, quoting Jewish text. "Nor is it permitted of you that you lay down the task." You just need to keep walking the walk.
Jennifer Reingold (email@example.com) is a Fast Company senior writer.