Interface recruited Jay Gould as the CEO heir apparent mainly because of his track record of financial turnarounds and brand globalization; the flooring manufacturer needed a lot of both. But in assuming the chief’s role at Interface in February, Gould also had to balance the company’s strong commitment to corporate purpose, and the importance of that attribute to its millennial workforce, with its need to boost returns to shareholders.
And Gould already has learned some lessons about how to succeed in that tricky endeavor.
“In finding purpose, you need to find the intersection between what the world needs and what your company can be the very best at,” he told Chief Executive. “You have to earn the right to pursue your sense of purpose.”
Under former CEO Dan Hendrix, Interface had made its reputation in the commercial carpet-tile business for being environmentally friendly and driven by sustainability. But financial returns lagged. Hendrix brought on Gould in 2015 as chief operating officer after Gould had turned around bath and kitchen products maker American Standard, following a career of helping build global brands including Minute Maid, Dasani, Graco and Rubbermaid.
Hendrix, who was entering his 15th year as CEO, charged Gould with launching a strategic and financial overhaul of the company. After sufficient progress, Hendrix moved to chairman earlier this year and tabbed Gould as his successor.
“In finding purpose, you need to find the intersection between what the world needs and what your company can be the very best at.”
With Gould as COO, Interface quickly began improving earnings and diversified into flooring tiles even as he maintained the company’s commitment to sustainability practices, priorities and projects. That commitment included creating a global supply chain for poor coastal villages to collect junked fishing nets and recycle the nylon for fiber, an initiative launched by Hendrix.
“We’d always been purpose-driven around sustainability, and most employees have come to the company around that,” Gould said. “But we’d lost a bit of our competitive edge. Part of what I did is say that we’re going to be true to our role in making a difference with sustainability around the world, but significantly increase value creation for other stake owners, including shareholders.”
Here’s what Gould has learned about helping a company achieve both purpose and profits.
1. Make your mandate clear. Gould wanted to make sure employees understood why he was compelled to add a profits emphasis as well as purpose to his strategy. So he shared a chart with employees which showed how the company had underperformed financially, versus its competitors, for 10 years. He explained how that hurt, among other things, Interface’s access to the capital that would help it survive and thrive.
“One competitor is owned by Warren Buffett,” Gould said. “We couldn’t continue to underperform the market. It was a call to arms to remain an independent company.”
2. Cast the threat to independence. And speaking of that, Gould had some educating to do just to remind employees of the importance of remaining a distinct enterprise so that they could promote Interface’s higher purpose—and why they needed to change their approach to do so.
“The world is a better place if we’re an independent company,” he said. “And so while it’s not a stirring notion for an employee to get out of bed every day just to create shareholder value, if we don’t do that, we won’t remain independent.”
3. Use a multi-stakeholder model. Employees might say, “We’re here for sustainability,” Gould explained. But my point was, if you want to do that, you have to make sure you create value for other stakeholders.” One move he made out of that conviction was to extend Interface’s business into luxury vinyl tile, its first hard-surface product line. The diversification move has proved promising so far.
4. Balance the two factors. “Purpose and profits can work hand in hand,” Gould said, “as long as you don’t see them as a trade-off. For one thing, that requires taking a different time horizon in looking at business decisions.”
For example, Interface’s fishing-net supply chain “is taking the long road for our business model” because of current low oil prices, which create a price disadvantage for the recycled fibers. “But we know we’re building a better business model for the future environment we’ll be in.”
5. Bring business partners into the purpose. Interface’s emphasis on sustainability isn’t just a recruiting and retention tool for loftily-minded millennials: The company’s commercial customers care as well.
“It was actually a customer asking Ray [Anderson] about sustainability that started us on this journey in 1994,” Gould said. “So this emphasis is completely customer-oriented.” In fact, he said, about one-third of architects make decisions about sourcing flooring and other materials “based on a company’s position on sustainability. So this is actually central to our position in the market.”
6. Pick a worthy purpose. One reason Gould felt strongly that he could meld profits with purpose at Interface is that the company, under Hendrix and previously under founder Ray Anderson who died in 2011, had adopted a highly worthy and substantial purpose in promoting sustainability.
“I see companies that are perhaps a bit esoteric in their purpose,” he said. “You don’t want to discourage people from the journey. Anyone trying to make a difference in the world, I want to support. But pick a purpose that’s important.”