Posted on July 3, 2018.
Patagonia has moved beyond traditional approaches toward performance, rewards, and compensation to be more in keeping with its company values and unconventional culture. Not only has this spurred “ridiculously low turnover” according to Dean Carter, Patagonia’s Vice President of HR, Finance, and Legal, but also increases in productivity.1
Personalization of rewards is a key shift noted in Deloitte’s 2018 Global Human Capital Trends report, with leading companies—including Patagonia—taking steps to align rewards strategy, individual preferences, and company goals. For example, Carter says Patagonia considers what matters to the people they are hiring and offers rewards that suit those preferences as well as the company’s values. This includes leaning in on things like on-site childcare, time off when the conditions are prime for outdoor activities like surfing or skiing, and leaves of absence to volunteer for environmental causes.
Recognizing that the different company environments (retail, corporate, warehouse) have different needs, Patagonia tailors some of these rewards and opportunities accordingly, so people have a menu of benefits that work for them, depending on where they are in life and where they live and work. One popular program, called 9/80, reconfigures the traditional 40-hour work week. By working nine-hour days Monday through Thursday, the company is able to close the office every other Friday, giving employees 26 three-day weekends a year. Another program gives warehouse workers company-paid trips to wear and field test Patagonia products for skiing, climbing, or surfing.
Patagonia has also changed how it handles compensation and performance management. Base pay and bonuses are treated separately, which Carter says gives greater leeway in rewarding people for taking risks, increasing their skills, and meeting or exceeding their annual objectives. The traditional performance management system has been replaced by quarterly feedback check-in sessions between managers and employees. These focus on questions like, “What did you want to accomplish this quarter? Did you accomplish your goal? What did you learn along the way? Would you have set this goal differently, knowing what you know now? Would you stretch this goal more?”
This process helps people practice setting and working toward stretch goals, and makes managers’ jobs about creating insights rather than being judges. Carter says people are able to lean-in on behaviors that matter and get better at meeting goals. Company data show that people are three times more likely to hit their year-end goals when they leverage their quarterly check-ins and when conversations are more insight-based.
Carter notes other positive results of Patagonia’s new approaches, such as improvements in productivity and employee satisfaction as well as much greater process efficiency. The new performance management process, he says, eliminates hours of unnecessary time writing long reviews and having ratings calibration sessions—time people can now spend doing the work they love, being outdoors, or spending time with their kids. These are values Patagonia supports wholeheartedly or, as Carter says, “ridiculously.”
Given that only 8 percent of organizations in this year’s Global Human Capital Trends survey rated their rewards program as “very effective” at creating a personalized, flexible solution,2 Patagonia’s unconventional approaches offer valuable insights. Hear more in this video.
1 The information in this post was gathered in an interview with Dean Carter, Vice President of HR, Finance, and Legal for Patagonia, as part of the research for the 2018 Deloitte Global Human Capital Trends.
2 Dimple Agarwal, Josh Bersin, Gaurav Lahiri, Jeff Schwartz, Erica Volini, “New rewards: Personalized, agile, and holistic,” The rise of the social enterprise: 2018 Deloitte Global Human Capital Trends.