Winning Workplaces/Wall Street Journal
Top Small Workplaces Conference Oct 15th 2008
By: Trish Karter Dancing Deer Baking Co.
I was asked to speak about our mission and the challenges and opportunities of being a double bottom line company. In the context of the turmoil in the capital markets it seems more important than ever.
Before I talk about our mission, I want to tell you that it puzzles and disappoints me that Dancing Deer is held up as a paragon of virtue. We just don't do that much - certainly not relative to what I think is possible and what I aspire to. And then of course there is the bigger and sadder reality that we look good because there is relatively little competition in this space of social responsibility. There is plenty of charity out there. But I distinguish between companies that make their income in ways that are inherently destructive to the environment or to the fabric of our society and then donate to charity, and companies which incorporate broad consideration of the common good in to their daily decision making and practices. I believe it's the latter that will move society and the former that perpetuates the need for non-profits to exist and seek support for worthy causes such as, let's just name something trivial like preserving biodiversity on the planet so a few more generations of us can enjoy life on earth.
Another timely case in point. I bet the very financial institutions, and the financial gurus who ran them and dreamt up the various complicated financial instruments and practices which led to the sub prime mortgage crisis were largely involved, at a company and personal level with any number of good causes, likely making very generous charitable contributions. I would love to have the data on how many of them contributed to programs to feed, house, educate and sustain the homeless.
I come from a line of good hearted kooks. My parents never uttered the words social responsibility, social change, philanthropy, but they built their lives around it. They didn't think of themselves as heroes or pioneers. Mom joined or ran every good cause that came her way. She was very indiscriminate. She also had trouble finding anything bad to say about anyone and was maddeningly skilled at finding something good about everyone - even those folks that any intelligent, self respecting teenager understood intuitively were weird and icky. It was sometimes very embarrassing being her daughter.
She'd drag us all down to the shopping center parking lot on Saturday mornings where she and her buddy Jen Hillhouse had a truck and some barrels. People would bring their bottles to us and we'd pull off the metal caps and rings and smash the green bottles in to the green barrel, brown to the brown barrel, and white to white. They'd drive a full load up to the Dayville Glass plant and come back with a check for the Conservation trust. This was late 60's. Dad watched in horror. He was an engineer and it occurred to him that we weren't going to make a huge impact on world resource consumption and somebody was going to get hurt.
Dad and Mom ended up inventing a whole industry of collecting mixed post-consumer bottles and cans at the curbside and converting them in to reliable industrial commodities. Dad built the model for the interface between consumers, municipalities, the solid waste industry and the industrial users of these commodities. At its zenith RRS (Resource Recovery Systems) operated processing plants in nine states. Along the way he went bankrupt while I was in college and I left school to help dig him out of Chapter 11. I have, if you haven't noticed already, massive shoulders and upper arms. By day I'd market the concept to municipalities, fend off creditors and look for money. At night I ran a shift and drove a bulldozer, welded machines back together. I spent a lot of time on the top of a 40 foot roll off container shoveling glass cullet (hence the arms) to either end because we couldn't afford the fancy chutes that would evenly spread the load as it came of the processing lines. Then I'd occasionally ride the truck up to Dayville to collect a check. This check wasn't going to the Conservation Trust, I was racing to get back in time to deposit it and make payroll the next day.
I asked my Dad recently, in one of his moments of lucidity when the sparkle of his beautiful mind glimmered for a moment out of the daze of oncoming Alzheimer's, how it felt to be a pioneer and create a whole industry. He paused thoughtfully and said he never thought about it much. He was just trying to make it happen. We might all take a page from his book and worry less about our resumes and more about what impact we're actually having on the world. I made a whole bunch of bad decisions in my life because I was too focused on appearances and not enough on substance. I didn't have a clear vision of what kind of imprint I wanted to make on the world. I adopted too much of the societal standards of success. My best moments have been when I followed my heart.
I’d like to digress just a moment to relate this topic to the financial crisis. I have one thought about it. We can debate instruments and legal structures all day long, but if we don't recognize that the underlying force at work here is the ascendancy of a culture that values material wealth and superficial glitter over character, and one where individual greed is celebrated at the expense of the common good, we are lost.
On that point there are a few things happening in the frontiers of social responsibility I'd like you to know about if you aren't already tuned in. I’ll give you just a snippet of each. How many of you are familiar with the BCorp proposition? How many of you have heard of Slow Food? Slow Money? The Aspen Principles?
B Corp
This is a really important initiative to reform our legal structures to support what we say we want as a society when we're thinking big and collectively, vs. the way we act individually. We all know that there is a huge disconnect between what consumers say they value and will purchase (e.g., green, socially responsible, low carbon footprint lifestyle products, healthy food, exercise vs. sloth) and what they do. That's pretty much all of us guys. We all live that life of contradiction. Myself included.
BCorp is a new tool for distinguishing good marketing from good practices. To be a BCorp a company needs to do three things. 1) pass a minimum standard of already existing good practices which relate to employees, sustainability, community, etc. - nothing radical really. The survey is a work in progress but it is an attempt to put real metrics around corporate performance in this area and stem the tide of green washing. 2) Dedicate 10 basis points of revenues to supporting the building of the BCorp brand and evolving the standards it represents. 3) Change the corporate charter to allow Directors to consider not just shareholder value, which historically has been very narrowly defined in current financial terms, but to also consider broader stakeholders such as employees, the environment and community. That's where it gets a bit tricky. Ownership and Management have to agree to such considerations and once they do, are obligated to incorporate them in to decision making.
Dancing Deer has passed the survey and done the legal work - I'm in the process of getting my Board and Investors to sign on and it's an uphill battle, which is the crux of the issue really. People are understandably cautious about new liabilities and changes of this kind. I argue that it should be uncomfortable at the leading edge of a revolution.
Slow Money.
This is another cutting edge development that should be of interest to those of us who are disturbed by the effect of the movement of capital in our society. It's a powerful perspective on the role of investment capital in forming the world to our better vision, and healing the wounds of our exploitive past. I asked Woody Tasch, the originator of the concept, for his elevator speech to pass along to you. You might recognize his name as the Founder of Investors Circle. Slow Money is being published this month. Here’s a taste of it.
Even before current meltdown, several things were apparent: 99.5-99.9% of our investment and philanthropic dollars were going to industrial agriculture, monoculture, cheap, highly processed food, billions of food-miles, GMOs, significant problems of food security due to centralized processing and poor to non-existent quality controls in China and elsewhere, etc. We could say, "we might as well round down to zero" in terms of resources invested in sustainable agriculture.
At the same time, social investors have become increasingly frustrated by the indirectness and ineffectiveness of diversified mutual funds as tools for changing corporate behavior and foundations have become slowly but inevitably more cognizant of the silliness of a system that has $550 billion invested in economic growth so that it can give less than $1 billion of grants per year to environmental problems.
Slow money is a new investment theory/philosophy/organization that is bringing together the country’s leading organic farmers, food company CEOs, NGO leaders and funders to catalyze the flow of investment capital to small food enterprises, appropriate-scale organic farming, local food systems, and, last but not least, soil fertility.
But bigger than the local food system thing is the future of capitalism and philanthropy and globalization thing. Tectonic shifts are beginning under the boundaries of for-profit and non-profit: slow money will play a key role inventing new forms of intermediation.
The Aspen Principles
Judy Samuelson of the Aspen Institute pioneered this one. Quoting her:
It’s hard to imagine making the kind of progress we need to make in capital markets and progressive thinking in business--as long the system is locked down on--and rewards short-termism and the quarterly mindset. The consequences are abundantly clear in the recent market turmoil.
The need to turn the ship around and reemphasize LONG TERM value creation in public markets is at the root of a coalition of pensions, public companies, labor, corporate governance experts and their trade associations which last year released the "Aspen Principles" challenging both companies and investors to ignore earnings per share and give up the practice of forecasting EPS quarter-by-quarter, in favor of a set of key performance indicators and incentive systems that are critical to the long term performance for the firm. Early signers include Xerox, Pepsi, Office Depot, Duke Energy, and Pfizer. Rebuilding US Competitiveness and the public trust in markets depends on the success of this approach in redefining how we measure and report success. The hope that business engages deeply in our most complex issues--from climate change to economic development--is linked to its ability to think and act in the long term interests of both business and the wider commons.
These are all powerful concepts and structures that can foster change on a large scale.
Back to Dancing Deer and our own double bottom line. What does our package of social responsibility look like and what are the challenges? First of all I would say that building a company, any company, is hard and for as many great books as there are out there, and as many incredible technologies and helpful software, at the end of the day each company needs to grow as a unique individual, as an organism because it involves (yay!) people. Cookie cutters don't work. In fact there really aren't any cookie cutters for great companies. And it is hard, really hard just to build a healthy business. If you load on to that a desire to raise the bar on ethical and sustainability practices there is just a little bit more challenge. It's like good design. In theory it doesn't take more effort to have a really good design that improves on the status quo. It's just a matter of having a better idea. Right? But in practice, good design is almost always harder to find, develop and execute than the status quo. I'm not advocating, by any means, that we throw away what we've got. I think we are way too enamored of newness in our society. Things that are old and proven with time, weathered with age, concepts which repeat themselves time after time throughout history are really useful and very powerful. We should celebrate and study the patina of age and the wrinkles of time. But we have to look at what we've got in the context of where we want to get to. That’s the vision quotient. For Dancing Deer, we have made every mistake in the book and more, but we've always been very clear about what we are trying to do. We had principles about food and design and people that we never abandoned and that clarity has carried us through every crisis.
I am also an artist and had a period of my life when I had the luxury of just painting in the studio and out in the landscape. I showed my work and actually made a living at it which was quite wonderful. But it was a meager living because I wasn't dead. The kind of work I do uses principles of light and harmony and looks primarily to nature for inspiration. I study light in the way it reveals the human form or a mountain. But the commercial market, for about 50 years, was in love with anything that was new, abstract and experimental. In the art schools, during my formative years, they totally threw the baby out with the bathwater. The market still highly valued the works of Rembrandt, Turner, Sargent, Monet - all dead of course, but students, for the most part, weren't taught in those traditions. We misinterpreted someone like Picasso who was a genius and a powerful abstractionist. But the guy could draw like a demon. He understood and was a master of the fundamentals before he invented new forms. Is there any relevance here to how to build a better society through sustainable and progressive business practices?
My answer is yes but we have to use our common sense. Who are the Rembrandts of organizational and corporate structure? I think they are people like John Adams who understood the balance between the need for individual freedoms and the need to act collectively to preserve the common good in order to enjoy those freedoms. They are people like Ghandi and Susan B. Anthony who showed the power of individual determination to make change by starting in their own back yard and building their lives around their principles.
Now let's dive back down to the weeds where it's messy and dramatically imperfect and not quite so heroic. I'll describe 5 basic principles of our mission and how it's applied. It is a significant part of our brand voice and in that, a fundamental part of our commercial and marketing strategy. What works about what we're doing is a) it's real, b) it makes sense for our company and resonates with what we actually do - the products and services we offer, c) it's on strategy for where we're going, d) it is relevant to the marketplace we operate in and e) it is economically viable and in fact enhances the building of a valuable asset. Without that the game is lost. We have to win on conventional metrics of brand, market share and profitability or we're not proving anything. Here's our little mission package:
Natural, preservative free food. This is one of the founding principles of the company since 1994.
What's hard about that is that it was extremely challenging to build distribution systems for preservative free food and it put a serious governor on our growth. We passed up many opportunities to stick with our food principles. And we aren't yet doing all of what we want. We intend to continue to move up the continuum toward organic food. Meanwhile we do have to stay alive.
Environmentalism and sustainability. This is a basic commitment in our purchasing, packaging and manufacturing practices. There is a great deal more we can do over time to reduce our carbon footprint and improve our sustainability performance and we are committed to doing so. Our new 45,000 SF plant is a renovated warehouse in a 700,000 SF industrial park that is being retrofitted to reduce it’s carbon footprint, including a solar installation that is being designed for the massive roof area. Our lighting, waste, water and heating/cooling systems have employed the most efficient available technologies. One of our site requirements was to be on public transportation of course.
What's hard about all of that? The markets are only developing. It's hard to get good information on the supply chain and carbon footprint of materials we use. The answers aren't there yet. It's more expensive. It takes time. Of course it's WORTH the trouble. It's not only the right thing to do but consumers are getting savvy and are beginning to understand and reward our choices with their advocacy and loyalty.
Inner City economic development When we moved in 1998 from our original location we chose to renovate a derelict building in the very tough inner city neighborhood of Roxbury over a slightly less expensive and much cleaner building in the suburbs. This was primarily a function of our commitment to our work force which comes out of economically and socially challenged communities. We've been very involved in developing this work force and supporting individuals in their personal and professional growth. As we outgrew our plant again we committed to stay in the city. This made our search for new facilities especially challenging but after three years we found a solution. Ironically, the neighborhood around our current location has gentrified and we could no longer afford to stay here. Our new site is in an industrial Park in a back water borough of Boston.
Our commitment to stay in the Inner city resulted in a three year search and three failed deals. The suburbs would have been done in 6 months. The up side is that we have a terrific workforce and our good reputation as an employer that keeps people coming to our door for work when we need them.
Employee ownership and engagement. This was a founding principle. We issued stock to all our employees early on. In each round of fund raising, as investors took dilution we not only maintained the employee ownership percentage of the company, but increased it. The employee option pool is now over 13% excluding Board and C level. Additionally 1.5% of shares are still held by employees who were here prior to 1999 when we moved from outright grants of shares to grants of options (for the tax benefit of employees after we raised $200k in equity to accomplish our move to new facilities). We have a unique program to allow employees to leave the company and monetize the growth in asset value reflected in the value of their options during their tenure. We cash employees out of vested options upon departure because of the nature of our work force and our desire to help low wage workers build wealth. We have always been an open book company. In recent years we have been working more formally to ensure that all best practices of democratic workplaces are used.
I had to put my money where my mouth is and also find investors who were willing to support me. Not everyone gets it. But there is a cultural underpinning at Dancing Deer that everyone has an ownership stake and it is a very powerful motivator. It is also a cultural principle that all jobs are important, baked up by this broad plan, and that builds a more respectful work environment.
Social change Our Sweet Home product line is specifically designated to support our primary philanthropic mission to impact family homelessness. We donate 35% of the retail on that line to fund scholarships for homeless mothers to finish their education. We also have an excellent diversity record and have been a strong local voice for progressive CORI practices. We have always offered health insurance subsidies to our employees (in fact did that years before we paid ourselves as founders, and have a relatively generous benefits package. Among other things we offer full time benefits to permanent employees who work at least 24 hours/week and have a significant history of accommodating employees who require flexible work schedules and leaves of absence.
Sweet Home is a win all around. We did it to better focus our philanthropic efforts and to be clearly outside the realm of 1% of net profits style armband marketing. It turns out to be a powerful marketing and product sampling tool and helps us stand out from the crowd. All the rest of our personnel practices are going in the right direction and this room is full of people that are better at it than we are. I am a student.
Honest packaging and consumer advocacy. This is seen in our packaging architecture and product information disclosures. We are a leader in packaging design that uses less material and more recycled and recyclable materials. For example our 6 oz grocery cookie package is about 25% smaller than the industry standard for that category which is deceptive to the consumer, ships more air and uses more material. We print on only 100% recycled fiber board and paper and use only soy and vegetable inks. Our consumer information, particularly in the consumer direct area, is the most transparent in the industry.
This is a place where we may occasionally pay a premium such as giving up real estate on our packaging and on the shelf. But it makes sense and is really the only right answer for a company that wants its consumers to connect with the vision.
Advocacy to advance the role of women in business. We are WBENC certified and pursued a capital structure strategy to maintain the women ownership of Dancing Deer as well as use our voice in public discourse.
I paid a dear price for this one in a recent fund raise. It turned out to be very difficult to get the funding I needed because of the strategy I pursued. I have no regrets about the principle but plenty of learnings about how to do it better next time.
The overall benfits? We attract great people who believe in what we're doing. Consumers appreciate us and it builds terrific brand loyalty. Our marketing message is crisp. Anyone can make a good cookie but not everyone chooses to make a good karma cookie. It's fun. There is huge psychic reward.
The challenges? It's WAY not Shangri La at Dancing Deer. We are a small, growing, resource- short bootstrap company with great ideas and not enough horse power always on the ground to get the job done. So people come in with appropriately high expectations and it is hard to keep everyone happy as we struggle to build the vision. We have to think every day about how to be green and sometimes pony up in ways that are painful and more than we can afford in the short run.
In the long run it is all good.