Interview: The Container Store-Thinking Outside of the Box

June 1, 2005
Amy Carovillano, vice president logistics and distribution for The Container Store, talks about DC operations at one of America's "Best Companies to Work For."

In 1978 Garrett Boone (chairman) and Kip Tindell (CEO and president), opened a small store that sold storage and organization products to help people streamline and simplify their lives. In so doing they created a new retail category and a company that has steadily grown revenues by approximately 20 percent per year ever since. Headquartered in Dallas, Texas, today The Container Store operates 34 retail outlets in 15 U.S. markets with projected 2005 sales of $450 million.

Fortune magazine has named The Container Store at or near the top of its list of "The 100 Best Companies to Work For" for the past five years. The company's retail formula consists of: unique, high-quality products; equal or better prices than the competition; and service beyond comparison. To achieve competitive prices and superior service, the company lavishes attention on selecting "great" people and training them to excel. Each store has a full-time sales trainer and all employees receive 162 hours of training on average each year.

Several years ago company leaders noticed that the company's unique culture had not been replicated at its distribution center. If they could create a different culture in retail, they thought, with happy, career employees delivering superior service, why couldn't they do the same thing in their warehouse? Tindell asked Amy Carovillano, who was working in the corporate office at the time, if she believed it could be done. She didn't see why it not, so he put her in charge of distribution.

A double major in biochemistry and microbiology, Carovillano started working at The Container Store as a temporary job until she found a real job. She says she fell in love with the company and the culture. She eventually became a store manager in Houston and added multi-store responsibilities before moving to the corporate office to work on strategic planning and special projects. Currently vice president of logistics and distribution, Carovillano says not having a logistics background was an advantage in the beginning because she didn't have any preconceptions of what a warehouse is or should be like, and could literally think outside the box.

Please describe The Container Store culture as it is manifested at the distribution center?
It's a culture that's based on our foundation principles. It's based on communication and understanding that you're part of something larger than just moving that box, or driving that forklift. You're part of a very special company that is helping customers.....

A lot of it is just building trust and listening. Communication I think is sometimes misconstrued to be, 'I communicate because I put this newsletter out and I put some metrics on a board.' That's posting some information. That's not communicating. Communication is two-way. If you're going to share information, you share everything.

The Container Store is a private company. How much financial information do you share with employees?
Two or three times per year we have a staff meeting [that includes] the top two to three hundred people in the company (two or three people from every store, and 30 people from the distribution center). Kip [Tindell, CEO and president] gives a Powerpoint presentation that is exactly the same presentation that he gives to our board of directors, usually about a week after the board meeting. It includes our full P&L, what our real estate investment trends and strategies are, everything they talk about at the board meeting.

From that [we create a] 30-page, 4-color briefing and give every single employee a hard copy. It has last year's revenues, our gross margin, our cost of goods, our SG&A; here's what we spent on payroll, here's what our profits were and here's how we're going to reinvest. Here's what our projections are for next year. We share all of that....

There's a huge risk of a competitor getting hold of that information if we're sending it out to 3,000 employees, but the benefit of having those 3,000 employees have that information so outweigh some competitor getting a snapshot of where we are.

How do you find and recruit "great" people?
Part of it is the bravery to hold a position open even though you're dying and being crushed by production. If you hire somebody who isn't great, someday they're either going to be terminated or substandard or they're going to be that person who is okay but they're not helping us grow. We only want to bring people on who will raise the bar and help us get even better....

We hire passion, intelligence and enthusiasm and attitude. A lot of warehouses hire a fork truck driver and they need him to be productive tomorrow. He might not be around in three months but that's okay, [they] got two months and 30 days out of him. We hire someone with the hope that they'll be here in 10 years. If it takes time to get them foundation trained, and a week to get them trained specifically on the job that we want them to first work on, that's nothing in the course of 10 years....

In the distribution center we haven't hired a temporary worker or contract labor or run a [newspaper] ad for almost 5 years. We [hire] by using employees. We pay our employees $200 for every new hire that they recruit. They all carry around cards saying, "We're looking for great people," or "Now hiring neat people." We change it every year or so.... It's expected that every employee is handing those out all day long.

How does your compensation strategy support the impression that The Container Store is a different kind of company?
In the stores, our pay is 50 to 100 percent above the industry average because that's the front line. Our sales people are paid extremely well. In the warehouse we are not quite that aggressive, but we want to make sure first of all that we're well above industry average. Part of the secret is that we don't have a pay structure where inbound clerks make this much and fork truck drivers make this much. There's no salary cap and there's no range....

Once we hire someone we review them at 45 days and give them a real quick reviewand a pay increase of 50-75 cents [per hour]. Frankly, after 45 days you know real well if that's a superstar or someone who is really struggling. If you do it quickly it has a big impact on them and nips in the bud [any movement in] the wrong direction. Six months from hire we give them another more formal review and pay increase. There again, they have an opportunity for an up to 75 cents raise. Every six months we give a review. If you're really good, you can accelerate really quickly.

How do you define really good performance?
On a daily basis we talk about traditional performance metrics. How many picks per hour did you do? How many system hours did you do? How are you to standard? We have all of those in place. We talk about those daily and weekly. That's basic metabolism. That's expected.

When it comes to the actual performance review, of course we bring those [metrics] in and we talk about attendance and the traditional things, but the first part is 'the 10 characteristics of a great employee of The Container Store.' We talk about those 10 areas and whether or not they are a strength or an area for improvement. There are things like attitude, passion for knowledge, and communication. Simple characteristics. Nothing that is warehouse or store or office specific. This is across the company. Our warehouse employees have the exact same review form as the store and the office uses.... It is not okay just to be the top performer. If you're the top performer, great, but you also have to help the rest of the team to perform, and you have to communicate how it is that you achieved that. You have to have a great attitude and add to the overall culture of the warehouse. You have to help out on special task forces if we put them together. You're expected to do a lot more than just be a cog in the wheel. You can't be the best worker bee. That's not part of our culture. Everyone is expected to be part of the bigger team.

Amy Carovillano

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