Jom's of Maine: “Doing Business” $f sine we 20 of te fr on Tato dnrbute curse ra Means st natural health care com nal channels. The company pal sated more than three decades a {nro how a small firm can grow while staying wue tore ooo ing piinaples in the midst of competition Now thet Tears has been sold to Colgate, one wonders if these principles {an be sustained in a large corporate environment Getting Tom's of Maine Going rom and Kate Chappell, dreaming of a tine of all-nat- started Tom's of Maine in 1970, The company's iret oduct, a phosphate-free detergent. was environmen {ally iendly, Tom Chappell says, but “it didnt clean eo wrell”! But consumers Were interested in environmen, tall friendly products—and the toothpaste and soap Dat followed were more successful ‘Al of Tom's products were made with all-natural ingredients and packaged in recycled materials when- ever possible. New personal care products, including shampoo and deodorant, were developed without ani- mal testing? But the road to success wasn't always direct or fast. Tom's stand against “business as usual” made the company wait seven years longer and spend About ten times the usual sum to get the American Dental Association's seal of approval for its fluoride toothpastes. And mistakes were made. At a time when deodorant made up 25 percent of the business, Chap- pall reformulated the product for ecological reasons. Later, he realized that the new formulation “magnified the human bacteria that cause odor” in half its users. ‘After much agonizing, Chappell took the product from his shelves at a cost of $400,000. 30 percent of the firm's projected profits for the year. Dissatisfied con- sumers were sent refunds and a letter of apology. One pivotal event was the introduction of baking soda toothpaste. The gritty product had none of the sweetness of commercial toothpastes, and the marketing manager told Chappell, “In all candor, | don't know how we're going to sell it." Tom insisted that the product be test-marketed. It became « best-seller and was quickly copied by Arm and Hammer and Procter & Gamble.‘ As the company moved from experience to ‘experience it gained strength and customers butTom was still unhappy. saying he was tired of simply “creating new brands and making Money.” He felt that something was missing.° It Seemed to him that sales potential was becom 'gmore important than product quality. “We — Working for the numbers, and we got numbers, But I was confused by success. aeey With success,” said Chappel. He ‘rote, “I had made a real go of something Founder Doing Good" 8 fe {et Mt cane of my Ife?" Fotlowing thas oe 2 rection s se ay enn eilptieg it ae ener needed to debate my bean-counter Os ganguage 1 his company was ie ming aed that according to my principles,“!0 A. folding values for the company tare ESL Cesstal company: wile actingin a neat an manner."!! The company began donating 10 percent programs~and supported the Ranft allenns “Tom's also urged its employees to wrk wth thax table causes and allowed them to donate 5 percent of thelr work Une to volunter actives. Employees athe, siastically took advantage of the opportunity—when one ‘employee began teaching art classes for emotionally dis- turbed children, nearly all the employees got involved.'2 Others worked in soup kitchens and homeless shelters. The volunteer program required otter employees to cover for absent volunteers for an equivalent of 20 days each month, but Colleen Myers, vice president of com- maunity life, called volunteer activities valuable to the company as well as the community. “After spending a few a flected both busi.—OE aE al Behavior and Social Respo! " : you're happy to have atenen te translates hours at # soup: and better morale Celta she woman whe Iv ‘out, too"! etc 1 pees nore te ° yn eit ee ee reo se ofa projet manag ga were srt psyenolge “at day scheduling ane Nor all employee ime company offered flextble four subsidized day care, designing ee Giplovee. preference in mind. In ibe four-d sn coffee breal ndividual employees fwalency degrees positions.” rationwide. ks with Sure helped to earn high school au i for ne tix! to develop skills require Even as product distrib Tom's marketing efforts remained low isler, vice president of marketin Katie them our story.” she said, “We tell them why we HOT such a loyal base of consumers who vote with (he . ints appre dollars every day. A number of trade accou : 2a 1 Chappell agreed: ate our social responsibility.” re selling a ot more than toothps “We maste; were sell: protecting Ing a point of view—that nature is worth protect He stuck by those notions even in face of increased, competition. Tom's prices were similar to those of soda toothpaste, but jouthwash, national competitors for bakin 20-40 percent higher for deodorant and But Tom, unworried, beleved that “hats not the way rou're going to get market share—you're going (o get by betng who you are."* He explained his philosophy “if we try to act like commodities, act like a toothpaste, wwe give up our souls, Instead, we have to be peculiarly authentic in everything we do. ? When you start doing that, customers are very aware of your difference, says Tom, “And they like the difference." Selling the Company In 2006 Tom's of Maine entered into what Tom and Kate called a “partnership” with a global conglomerate, the Colgate-Palmolive Company. For approximately $100 million dollars—or 84 percent of outstanding shares— they sold the company and retained a minority interest, with Tom staying on as CEO of Tom's of Maine as a free- standing division of Colgate. The Chappells stated in letter to employees and stakeholders that “alter much soul-searching, and many conversations with our chtl- dren and trusted advisors. we realized that we cannot meet this growing demand alone. We decided to seek a partner (o help us. I's been a quest that we entered with trepidation and excitement because we wanted to find a company that would honor our values, and we were unwavering In our commitment (o stay intact in Maine as Tom's of Maine.”?? Afterward, Chappell com: pared Colgate to a big Tom’s of Maine: “I find that we have more jn common than we have differences. ‘They have an organization run by human beings, and they're very capable, savvy, and caring human beings."23 Tom's Future: A Different Kind of Company? Tom's of Maine stresses the “common and is passtonately concerned about product, community, environme ness, The firm uses the services of a wellness council, provides wellness education, ood” in everything corporate, customer, ental, and employee well- advisory and practices sibility sustainable, and res, ate, and packaging In prot ; ie ua als0 DEEN (efi pitalism 2 & 8 MHS go books—Te Soul of @ jj" Seven Intentions for Va, ization providing training! ‘ie foe Pol me ers. He vec 8 intentions!" ih goodnes: papel! cotter eid Centere! inet the Seven nett! 1S at spin Non-work discussions wy rn raw People C0 comme wsserarchical Utes thyself. DISCOVETINE and lappy, 1 renin gona wyself. Be 2. Know th assions, ples Passe enett creative enti esting, The company 18 better serveg : eiceflrts ie steered by strengths, instead off Towing market whims. Sook counsel, The journey 4. Seok tires absolutely Necessary: ror irvout The success of any BUSINESS hinges oy ing ‘oducts into the market, Js long, and assistance 5, Vent pushing value-enhanced pr 4, desess, Any idea must be regularly reviewed, ang fefined if necessary. pase it on. Since developing and incorporating val ease trial-and-error process. sharing ideas and sonetting feedback allows for future growth.2° ‘Tom's of Maine achieved financial success while follow. will the acquisition by a large 7 its principles. But profit seeking corporation make it hard to hol fast ta those principles in the future? Will ‘Tom's reputation for commitment to the environment and ethical behaviorbe threatened in the large corporate environment. or can a littic company from the Northeast teach a cosmeties want a thing or two about corporate responsibility? DISCUSSION QUESTIONS 1. Does the Tom's of Maine experience prove that one can “do business with principles.” or are there business realities that make it hard for others to copy this principled management model? 2, What examples and incidents from this brief history of Tom's of Maine illustrate how the personal ethics and values of founders can positively influence & firm and its culture as it deals with the challenges of start-up and growth? 3. What are the biggest threats that Tom's faces in {ts new life within Colgate’s global corporate struc- ture, and especially with respect to maintaining what Tom and Kate call “the character, spirit, and values of our company"? 4. FURTHER RESEARCH—Find news items reporting on what has happened at Tom's of Maine since being pur cont by Colgate, Has the firm been able to operate pith he ethics and independence that Tom and Kate wd hoped for? Is the company starting to lose Its way now that its part of a global corporate giant?