Outside the Box

Smart Business

Smart Business Magazine cover, June 2007

Cover Story

Outside the box

How Kip Tindell analyzes his customers, employees and limits to lead The Container Store to double-digit growth

By Robyn Davis Sekula

Smart Business Dallas | June 2007

Kip Tindell, co-chairman, CEO and one of the founders of The Container Store Inc., wanted to build a strong team of great people that could help grow his store of home and office organization products into a national chain of stores dedicated to helping consumers organize their lives. Since the store’s founding in 1978, he’s done that, and he’s proud of what the company has achieved. But Tindell says the success has come as a result of one key focus: quality. He wants his stores located in the very best locations for his potential customers, even if that means waiting for the right location. More important, he only wants the best employees, even if it means spending more a lot more than the industry average to get them.

“The most difficult and frustrating and rewarding and wonderful part of any business is the people aspect of it,” Tindell says. “I’m a big advocate of the fact that you can’t achieve uncommon results unless you are surrounding yourself with people who are awesome. If you’re going to have a golf team, why not have Tiger Woods on it?”

The $550 million Dallas-based retailer has 39 locations and 3,500 employees, and has never shuttered a store. The company has grown at a steady pace of 15 to 20 percent annually.

Tindell’s commitment to quality calls for careful analysis and a lot of patience, regardless of whether it’s real estate or people. For Tindell, rushing would lead to a dilution of the company’s quality, and that, in turn, would put the entire company in jeopardy.

Great customers make great employees

The Container Store’s success starts with knowing its customers, and knowing them well. By simply collecting phone numbers of customers at the checkout point, the store knows who shops, what they buy, where they live and even their average income.

Tindell says The Container Store’s strongest customers have a household income of $100,000 and up, are highly educated and highly likely to be female.

And here’s what’s interesting: Tindell sees those people as great potential employees. Tindell says if they like shopping at the store, they’ll love working at it, and he’s been proven right, time and again.

To capture those potential employees, The Container Store’s staff members have little cards on hand that they are free to hand out any time they meet someone whom they believe would be a great employee. The card invites the recipient to apply for a job at the store, and this doesn’t just happen when a store has openings, either.

The Container Store invites anyone to apply at any time and begins training new employees before others leave so the company’s always ready when a vacancy occurs. Not that it happens much: Annually, the retailer’s turnover is in the single digits. The company hires about 6 percent of those who apply.

“We always have backups,” Tindell says. “We are very big on succession planning. I run across a lot of great retailers and business-people that I’ve admired over the years that, as they became older, they didn’t have any succession planning, no one chosen to replace themselves or their top people.”

Almost two decades ago, Tindell adopted the one-equals-three philosophy, where one great person is the equivalent of three good ones. Instead of staffing a store to the max, Tindell’s philosophy is to hire only the very best people.

“If you really believe that, you can afford to put your money where your mouth is,” Tindell says. “It takes a lot of bravery to pay 50 to 100 percent above industry average, but it works because everybody wins. The employee wins because she is getting 50 to 100 percent more money than someone else might pay her, and the company wins because it is getting three times the productivity for only 50 to 100 percent more pay, and the customer wins because they are getting this really great person who is thrilled about their compensation and loves to come to work every day.”

Employees aren’t paid on commission, because that tends to encourage them to sell more than a customer needs. Instead, they are trained to help customers solve problems.

A good example is a customer who wants something to organize his or her shoes. The employee is trained to ask deeper, more probing questions of the customer about that person’s entire closet. If his or her shoes are disorganized, chances are, so is that person’s closet, and The Container Store sells a variety of products that can help tame that troubling, disorganized beast.

Ultimately, the store will sell more products by helping customers solve problems rather than just meeting the immediate need that brought that person to the store, and Tindell says the customer is happier in the long run.

Part of what keeps employees working for The Container Store is the company’s level of investment in them. It spends about 240 hours training employees before they start work, and continues the training as they continue to work so that they are always up to date on the latest products.

“You can’t lose them once you do that,” Tindell says. “Once you have that kind of investment in an employee, you need to have a very, very low turnover rate, which we do.”

That’s at least in part because of a few great perks. Besides its higher-than-average pay, employees receive a 40 percent discount on products. Because many of them are already storage aficionados, that’s a really nice perk, and it encourages them to continue to get to know new merchandise as it comes in. Tindell says the more merchandise they know, the more products they can demonstrate and the more customers will buy.

For a new store, Tindell has a very deliberate process to staff it. The company opens up a nice office near the store that’s set up as if it is a location of The Container Store. Applicants get the look and feel of how the store will operate.

Before their group interview, applicants are given a homework assignment: Find a product on the company’s Web site or in its store that they like and give a presentation on how the product works and its major features. Applicants are interviewed in groups, and product demonstrations take up most of the initial interview time. That shows how potential employees sell and how they interact with others.

“They get a good flavor in this group interview for the quirky culture of The Container Store,” Tindell says. “People leave the interview and go home and say, ‘Oh my God, I hope I get this job.’ It’s a thrilling process.”

After the first cuts are made from the group interviews, the company’s representatives from its home office and retail locations personally interview potential associates in several one-on-one interviews.

“We start months in advance,” Tindell says. “We hire our employees a couple of months before the store opens so that they are fully trained. They participate in the set-up of the store. Most retailers hire employees a day or two before the store opens because they don’t want to pay them for the previous month or two. We hire them as early as possible.”

Group interviews continue year-round, even though stores might not have openings, to ensure every store has enough employees whenever they are needed.

Tindell says one key change has helped the company redefine how it thinks about recruiting: Recruiting is under marketing at the company; The Container Store has no human resources department.

“We just wanted to break the mold on that whole concept,” Tindell says. “The people who are in charge of recruiting for the company understand that it’s not their job to go out and recruit great people for The Container Store. It’s their job to make sure that the rest of us are constantly recruiting great people to work for The Container Store. A key part of everyone’s job is to find other great people to come and work for The Container Store.”

The recruiting card is a handy tool for doing that, even if it means giving them out at a family gathering.

“We are happy to have friends, cousins, relatives,” Tindell says. “People know which of their cousins are great and which are not. ... It takes a little bit of boldness to recruit a soccer mom at a soccer game. We are huge on the concept of our customers make our best employees.

“Employees get recruited right off the sales floor. We really want our employees to be people our customers can relate to.”

Examining markets

Part of what keeps The Container Store strong is knowing its limits. Similar to his philosophy on employees, Tindell says he’d rather have one great location than three good ones. He concentrates on finding the very best retail locations for stores, which, as it happens, are in plaza-style, outdoor shopping centers that allow the stores to be on one level.

Customers are buying large, bulky items, in many cases, and wouldn’t want to carry them around a mall.

“There is a limit of how fast we can grow,” Tindell says. “We are not limited by capital. Money has never been our limiting factor. Our limiting factor has always been the people aspect of things. We have learned we can grow at 15 to 20 percent a year. It’s right for us. We take the best real estate development locations we can find.”

Currently, The Container Store has some 29 markets it is examining, and the company waits patiently for the right space in those markets. And until it taps out the U.S. market, Tindell won’t consider international markets, as he says that’s a whole other type of market. He says there are more than 100 cities he’d like to locate in, and as he sees it, that means The Container Store has decades of potential growth ahead of it without ever sacrificing its quality.

“It’s the most exciting period in our history,” Tindell says. “We are in this adolescent stage. Even though we’ve been in business since 1978, everything just keeps getting better. Now, everybody wants us in their shopping center.

“That wasn’t always the case. Now, everyone seems to want to work for us. The average person we hire is better and better and better. The products we are able to develop with manufacturers are getting better. ... It’s so much fun and so exciting because it just keeps snowballing. We are really hitting our stride right now.”

HOW TO REACH: The Container Store Inc., www.containerstore.com