Editor's Note: This story contains one of our Best Business Lessons of 2014. Check out the full list here.
Since Rose Marcario joined Patagonia as CFO in 2008, the beloved outdoor outfitter has doubled its scale of operations and tripled its profits, with about $600 million in revenues in 2013. In January, she became CEO.
Marcario told us about the skepticism she had when first joining the company, the alchemy underneath their famous culture, and why examination is the root of innovation. An edited version of the conversation is below.
As you become a more aware person about yourself and about the environment, you recognize that you can't really split your working life from the life you live every day as a person. You can't go to work and think that business should just be about financial profits, because you'd be serving only a very one-sided view of what it means to be a human on the planet. And we live on the planet.
When you're going through your career defining your success by how success is defined around you, you can get caught up in that way of thinking. I feel like I did that, and I had an epiphany of going, ‘I don't think I can participate in that and still feel like I'm being completely myself.’ I had a very successful career in private equity, made great money, and had everything you would think my Italian immigrant grandfathers would have wanted me to have, but there was something missing for me, a deeper purpose in the work I was doing.
I have to say that I was first very skeptical. I had had a lot of experience in business; I didn't really know if the model that (founder) Yvon (Chouinard) had put forth and touted and talked about in his books was really for real or not.
I began to see very quickly that it really was true. It really was a completely different model for business, where we don't give profit primacy over our other values, like building the best product or using business to implement solutions to the environmental crisis. It's a strange alchemy and I don't know totally how it works together, but it’s created a wonderful company and a wonderful model—and it’s really converted me.
This concept of leading an examined life and inculcating that into a company so the company's constantly examining their practices, their products in the context of the environmental crisis. That is a very different lens than the corporate-public world where I grew up in, where most decisions were made solely through the profit of the financial shareholders.
I had lived and worked in that world before I came to Patagonia, and I can tell you that is the road to hell—we will destroy the planet with that mindset. We want to make a profit, we want to be in business, but we have a lot of other reasons to be in business.
Patagonia had been a private company for 30-plus years by the time I got there and it needed a real significant revamp of their infrastructure in terms of processes and systems and all the things that are the underlying structure that make a company go.
For me personally, I feel like I was using skills that I learned in private equity and other corporate roles to help businesses to scale. Being able to look at the overall business and see what are the areas that really require the attention and get the most benefit from attending to and how to prioritize the actions you're going to take at a management level and a leadership level.
I came in as CFO, then became COO, so moving to CEO feels quite natural. There’s more of an internal leadership role within the company, parts of it are more external facing. But the principles are the same: curiosity, being true to myself, having a point of view, working with transparency, being honest and forthright, these are the things that come with you as you evolve in your career.
As the company has doubled in size over the past six years, the biggest challenge has been reconciling growth and our values. We keep our distribution pretty tight. We give 1% of sales to grassroots environmental organizations and we've doubled our contributions to those organizations over the past five years. That's what our employees relate to—which is a very different kind of paradigm.
I don't think you can solve problems unless you're curious about them, and so much of what we do are solving problems or looking at innovations in our supply chain or working with complicated issues around partnerships or innovations, to me that's a natural quality that you’ve got to have—about business, your colleagues, challenges—it helps you be a better leader.
We started this food business called Patagonia Provisions. The whole point of the business is we're facing this ecological disaster that's brought upon us by industrialized fishing and agriculture. We wanted to rethink our food supply chain and use business to implement solutions and when you start looking at where your salmon comes from, unless you're a very curious person, you're not going to know all the answers. You might assume this is farm salmon and its okay because, 'I heard that farms are okay.'
We don't look at problems like that. We actually have a sourcing council that looks at all these issues. Like the impact of industrialized fishing, the fact that when salmon is caught in the ocean and its not selectively harvested, many endangered species are destroyed as a matter of course. We've discovered that in-river fisheries, responsibly managed, are the best source and the best supply for salmon.
I think what you'll see from Patagonia Provisions is telling the story of the supply chain—because people have become divorced from that. If you see the label "organic" and you're not curious of what organic means, you're not going to understand what you're eating.
I think they are intimately linked. Unless you really examine a problem or an issue, I don't think you can really effectively innovate it. You have to keep going deeper and deeper—its a philosophical quality that Patagonia has as a company. All the people that do the work in our production and design group—they ask deep questions, and we need a world full of people asking deep questions or else we're not going to have a world to live in.