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The NLI Interview: Patagonia’s Dean Carter on How To Treat Employees Like People

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With an employee turnover rate of just 4%, the Patagonia clothing company is known for the loyalty and devotion it inspires in employees. Now, as it prepares for a major organizational transformation, the company is taking a step back to consider not just what it’s taking out of its people, but what it's putting back in. Dean Carter, the company’s CHRO, joined us recently for an interview on NLI’s podcast, Your Brain At Work, where we discussed performance management, making organizations more human, and how sometimes the answer is to just let people go surfing.

This interview has been edited for length and clarity.

NLI: Patagonia is known all over the world for its apparel, but now the company's looking to make a different move and make a different impact. Can you tell us a little bit about that?

Dean Carter: Making responsible apparel and gear for the outdoors has been a core part of our mission for a long time. It's the part that says, "Do no unnecessary harm." But as we've seen the planet in crisis, we realized that isn't enough. Our mission now simply says, "We're in business to save our whole planet." So we’ve leaned into a new product — agriculture — because we believe that if we do agriculture right, we can actually repair the planet, versus just damaging it less.

NLI: That corporate mission feeds into how you do performance management — and you actually apply the agriculture metaphor to how you approach HR. Can you talk about that?

Carter: The principle is this: In conventional agriculture, when a seed goes into the ground, a rich microbial community is formed that helps the seed grow. Then, when the plant reaches above the soil, it pulls carbon into its roots and enriches the soil. 

But at the end of the season, when the plant has grown, we rip the fruit off, cut into the ground, and start the whole process over again. Every time you do this, you damage the soil a little more — you deplete it of nutrients. Ultimately, you have to spend a lot of money on fertilizers, water, pesticides, all these things. You have to spend more because you're damaging the community in the soil every time.

Regenerative agriculture says that instead of ripping into the ground at the end of the season, you just put a new seed in. You leave the community intact, and the seed goes into a rich growth community. I started to wonder, what processes do we have in HR that feel more extractive in nature, and what processes do we have that are more regenerative in nature?

We really dug into our performance management process because it’s a growth process that feels good throughout the year and ends with a moment that the employee hates, that the manager hates, and that everyone has to recover from during the next cycle: the performance review. There's a lot of science that says people literally feel depleted at the end of the process. And companies then have to spend a lot of money just to recover. It's not only damaging to the person — it's also expensive.

NLI: And when you start treating people with a regenerative approach versus an extractive one, you trigger a whole new way of people working and relating to one another. What have been the biggest benefits at Patagonia?

Carter: When we announced that we weren't doing performance ratings, and that we were making a change to our performance management process, the entire company cheered. Now HR is providing a tool that people can use and opt into, that they feel is helping their performance, and that they can lean into based on their needs and the needs of their manager. 

And that frees up the HR organization to look for insights and other interesting pieces of data that can help us continue to improve the system and structure. It also frees up time for the employee and the manager to lean in and do better work — or in Patagonia's case, maybe go catch a surf. 

NLI: This whole space is counterintuitive. If you're a CEO, you want data and metrics on people's performance. But there are unintended consequences when people feel like they’re being treated like a number. We've done a lot of research on this, and Patagonia's led the way with some really innovative practices. What are your recent lessons? 

Carter: I think it’s really important to understand what you put into people as well as what you take out. One of the things we looked at recently was a change to our work schedule. At first it was to help people who like the snow have more time to get to the mountains. We ultimately moved to a schedule where we close every other Friday, giving everyone in the corporate office 26 three-day weekends a year.

But that wasn't necessarily the interesting part of this. We did a survey before and after, and we measured what we were putting in and taking out of people's lives. Of course we measured the extractive things like productivity and engagement. But we also measured what we're putting into their lives. Did this help with your relationship with your spouse? Did you have more quality time with your children? Did you have time to go to the doctor? Did this improve your ability to contribute to your community? In every case, all of the things that we were putting into people's lives improved. In addition, engagement went up.  And there was no difference in productivity!

NLI: What you're talking about is creating a more human organization — treating people in a way that respects the demands of their time, their energy, their family, everything. There's a lot of research around the way power changes the brain so we focus less on people and more on goals. There are two networks in the brain — one for thinking about your goals, and one for thinking about people. And there are very few situations where you're activating both. When you've got hiring power and you're very goal-focused, you start thinking of people as resources to utilize. It's an interesting challenge. I think Patagonia is doing a good job of re-humanizing the workforce.

Carter: At Patagonia, our view is that people are resources to steward, not resources for extraction and depletion. Patagonia has a philosophy that we run the company as if we’re going to be in business 100 years from now. So I'm stewarding the employee population as if I'm going to employ them for the next 100 years. I want to take good care of their children, because 100 years from now I might be employing their children or their grandchildren. It pays to be good stewards of not just the employee but their children as well.

Listen to the entire conversation with Dean at neuroleadership.com/podcast.

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