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Making it in New Zealand

Monday 1st October 2001

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For more than two decades Macpac has been the brand of choice for serious outdoor enthusiasts, its name synonymous with quality and innovation. Rebecca Macfie finds out just what it is that makes this company rock.

In the early 1970s Bruce McIntyre dropped out of university, bought a virtually unknown backpack label from a local saddler and started a one-man pack manufacturing operation from his parents' garage. It was called Macpac.

Around the same time, Shelley and Geoff Gabites were juggling babies, varsity and teachers college studies, along with running an outdoor clothing, tent and sleeping bag manufacturing outfit called Wilderness from the spare room of their Dunedin home.

These were humble beginnings for a pair of companies that would one day merge and become an exemplar of the "new economy" long before anyone in New Zealand ever heard the phrase. It is paradoxes like these that are integral to the Macpac Wilderness Equipment story. And there are lots of them. Like the fact the company leadership espouses a philosophy that sounds like it's been taken from a Values Party manifesto, yet has marshalled the organisation through a history of spectacular corporate growth. Or that in an era of planned obsolescence, it makes products designed to last for years. Or the fact it operates in a market increasingly dominated by cheap Asian imitations, yet it does all its manufacturing under one roof in Christchurch. And that the stated purpose of the company is not, as you would expect, to create shareholder wealth, but to "inspire people to explore the natural world".

"Macpac is less a company than a community," says Paul McGuigan, owner of McEwings Mountain Sports in Christchurch and a retailer of Macpac gear since 1979. Ah, what's that about community? And what's it got to do with innovation, corporate success and the creation of outdoor gear internationally recognised as among the best the market has to offer? Lots, actually. But first, take a look at the figures.

Macpac will turn over around $20 million in sales this year. Around 70% of its output is exported to Australia, the UK and continental Europe. Average annual growth over the life of the company has been around 10%. As a private company it doesn't have to reveal its profits, but it's made money in every year of its existence (although in a couple of those it managed to stay in the black only because of export subsidies). It employs 250 people. In short, this is one successful company. So successful, in fact, that McIntyre was co-winner of the manufacturing category in the Ernst & Young Entrepreneur of the Year Awards last month.

To help understand that success and what McGuigan means when he talks of the Macpac "community", a short history lesson is required.

Aged just 19, McIntyre bought Macpac from a man named Charlie McCormick in 1973, and started making the traditional external H-frame packs that had been making trampers' and climbers' lives hell for years. His business credentials were minimal. He'd been taught to sew by his father, who ran a small bag-making business, and as a keen tramper he had an insight into the needs of his market.

Meanwhile, Wilderness was beginning its operations, with Shelley stitching together climbing clothing for Geoff that he either couldn't get in Dunedin or couldn't afford.

Macpac's first big break came a couple of years later, when a climbing expedition bound for Patagonia asked him to develop an internal-framed pack. By then, McIntyre was retailing his packs through the Gabites' Wilderness outlet in Dunedin. He sought the input of Geoff, an accomplished climber, and the Torre Egger was born. It was New Zealand's first internal framed pack and it set the standard for the consumer-designer-manufacturer collaboration that has defined Macpac's innovation ever since.

Later, Macpac and Wilderness developed a joint marketing label - a courtship that eventually lead to the marriage of the companies in the early 80s, with McIntyre becoming the managing director. There was still vast room for improvement in the quality and comfort of outdoor gear in those days. Remember oilskin parkas and pup tents?

The revolution

The combined company earned a cult following because of its innovative designs. It developed New Zealand's first tunnel tent, put bungy-cord on the outside of packs to allow climbers to carry their crampons, and pack harness design got better and better.

But the Macpac culture of innovation was, and is, about more than just the product. Even in the 80s, when conventional corporate thinking was that the best way to get performance and productivity out of staff was to sack a few of them and screw down their working conditions, Macpac was running against the tide. The traditional "command and control" business model repelled McIntyre.

"I'd tried being a manager in the conventional sense and I'd failed. I'd bring people into the office and say, 'You need to do this, this and this, now go away and do it.' And they never did it the way I thought they should. So I thought maybe my instructions should be more detailed, but that still didn't work. In the end I thought, this sucks, it doesn't achieve anything, and you don't get what you want."

Just as there had to be a better way of making a pack or a tent, McIntyre reckoned there had to be a better and more humane way of running a business. Either he found a way, or he was out of there. In fact, he did take time out for a year, taking a second-rung role as marketing manager. When he returned to the hot seat, he did so with a resolve to run the company in a way that allowed the staff to bring the best of their ideas and aspirations to the job, and ensured the company rewarded and nurtured that creativity.

"Over a period of about three to five years we changed the culture of the company," McIntyre says. Among the raft of initiatives introduced during that time were monthly open-book staff briefings on company performance, participative company planning and a profit-share scheme. McIntyre describes the introduction of the profit-share scheme as a defining moment. Since he didn't have a clue how to design a scheme, he asked for representatives from the office and the factory to get together and work something out.

"Initially I had a fear that they might ask for the world and the company would go broke. But my faith in humankind grew hugely out of that experience. The whole process was that someone would make a suggestion, we'd gather information, then we would make a decision. The interesting thing was that when we gathered the information we were able to agree on decisions very easily. I realised it didn't matter whether you worked in the office or the factory, whether you were Maori or Pakeha - if you have the same information, you are going to make pretty much the same decision as someone else." The product of that consensus was a profit-share scheme that sees Macpac distribute 20% of pre-tax profits to staff each year.

The evolution

The modern Macpac hasn't departed from that bedrock culture laid down in the mid- to late-80s, but it has evolved to accommodate the company's constant growth. Since the early 90s Macpac has operated around a series of small self-managing teams. Each is based around an operating system (design, IT, marketing, product support and so on). Each has a clearly defined role and discretion to run things the way they see fit. Leadership is shared. Teams set their own budgets, do their own recruiting and make operational decisions they believe will support the company's overall strategic direction.

At the interface between operating systems, teams work in cross-functional groups to make sure they have the information they need to make the best possible decisions, and solve problems that require multi-disciplinary input. Overseeing this web of teams is the guidance team (GT), a group of nine that includes McIntyre, Shelley Gabites and general manager Dennis Parker. Members of the GT, says McIntyre, are coaches rather than bosses.

Parker believes the development of the self-managing team concept is a key factor in the Macpac success story.

"It's had a huge impact on our ability to make it a place where people want to come and work and deliver the kind of product people want to buy. People are incredibly inquisitive; they want to work out the best way of doing things, sometimes almost to the point of re-inventing the wheel many times over. You could go through every facet of the company and identify that. It creates an enormous amount of energy."

To get a feel for how well the team structure operates, Unlimited sat in on meetings of the order fulfillment team (OFT), which takes orders from retailers and looks after dispatch, and the co-ordination, capacity and delivery team (2CD), which schedules production flows in the factory and oversees teams of machinists.

At the OFT meeting, there's an update on the impact of the foot-and-mouth epidemic on UK sales, news from other markets, a briefing on an upcoming trade fair, discussion about the recruitment of a new team member and an update on a trial freight-forwarding contract the team has organised.

At the 2CD meeting, factory output numbers are crunched, variances from target are analysed and there's discussion about fabric supply and staff configurations in the factory. Time is allocated at the end of the meeting for "relieving frustrations" (not that there are any the day I visited).

It all feels like a cross between a meeting of the local cricket club and a commune. Parker prefers to think of it as - you guessed it - a community, or perhaps a medieval village. "Not so much in that everyone knows their place, but that everyone belongs. Not a tight, restrictive village, but one where there is respect and love. I think that's what we are trying to create … The key element that binds it all together is having trust in people. What we are trying to do is build strong enabling systems to allow people to make the best possible decisions."

Yes, McIntyre agrees, company management has relinquished a great deal of control to the teams, and yes, the whole system relies on people doing their best, working hard and having goodwill towards the company. "But I think it's in the nature of people to do those things. Maybe not all the time, but I would suggest that 99% of us have it 99% of the time. So it's a very, very safe bet."

Of course, all this self-management could easily dissolve into anarchy if it wasn't nailed down by good process, which it is. Representatives of every team meet with the GT every quarter to review progress and receive feedback. Each team is supported by a member of the GT. Every team has an annual activity plan aligned to the strategic goals of the company. Huge effort has gone into equipping teams with the recruitment, communication and conflict resolution skills they need to operate effectively. And while teams and individuals have considerable decision-making discretion, the culture of open discussion that has been nurtured since the 80s means most decision-making is the product of consensus.

Even the design of the Macpac building supports this lateral company structure. Small rooms with big white boards are filled with huddles of people engaged in team meetings, and cross-functional groups are scattered throughout the building. Not only is this corporate structure incredibly flat, it's also highly fluid. Think of the globules in a lava lamp and the way they merge, pull apart and merge again, and you get a feel for the Macpac way.

If all this sounds far too positive to be credible, listen to what the staff say.

Nerissa Hicks, who joined the 2CD team six months ago, describes the environment as "open and trusting", a stark contrast to her previous employer. Having seen Hicks take her team through an analysis of factory production levels, it's obvious this young woman is thriving in her new environment.

Margaret Brough, an eight-year veteran, says Macpac "has always been a culture, rather than just a place to work". Steve Haase, who joined the OFT team four months ago, says Macpac is like no other place he's ever worked. And Aiden Craig, who is responsible for supporting Macpac's UK retailers and is one of the company's aptly named market'ears, says Macpac has done what few companies dare to do.

"Most chief executives fear letting the reins go, but by not doing so they stifle the business. If you empower your employees they will make some bad decisions, but they will also make lots of good decisions, they will be willing to learn and they will take responsibility. I've had three or four different career jobs, and I have never felt so supported from my peers and bosses - except they are not really bosses, they are more like colleagues."

Outdoor lovers

But how does all this translate into innovative products that outdoor enthusiasts love to buy? Take a look at how it all works in the engine room of the company - product design. Remember that collaborative design process that produced the Torre Egger? Well, the underlying principles haven't really changed. First, there's the question of what the market wants and needs. This information comes from a variety of sources, including the masses of feedback received from customers and opportunity scanning by "market'ears" like Craig.

All this information is crunched down to a small number of product briefs outlining what the design team needs to come up with. With the seamlessness of a Mexican wave, the design process then moves into the hands of the next team, dubbed Alchemy. These are the hardheaded engineering types who make sure what the creatives in design come up with is manufacturable. Then it's on to Avant-garde, a team of highly skilled machinists who come up with the prototypes that will go out to trade shows and retailers for feedback. Along the way there's input and trialling by a raft of experts like mountaineer Guy Cotter, who Macpac sponsors. Every so often the production people are enticed (with ice cream sundaes, usually) into the design arena so they, too, can critique the latest concepts.

What comes out of this intensely collaborative process is gear that, says Macpac customer Jenn Bestwick, is highly functional, durable, reliable and fits well. It's the detail that makes the difference - such as the drainage in the shorts pockets to ensure you don't emerge from a river crossing with your pants around your ankles, and the way a sleeping bag hood is shaped to keep your head warm in sub-zero temperatures without suffocating you.

"The more serious the user, the easier it is for them to see these points of difference," says retailer Paul McGuigan. Which is why Macpac has carved itself a reputation as a "technical" outdoor brand, and withstood the onslaught of mass-produced Asian-made gear by the likes of North Face and Kathmandu.

There are other elements to this success, of course. Like the fact that the people who are the company's representatives in the market-place are hardened outdoor enthusiasts who lend immense credibility to the brand. People like Aiden Craig and Mark Foster (also known as Ox) who, between them, have raced in 17 Coast-to-Coasts and 13 Southern Traverses, and been invited to compete in the Discovery Channel's world adventure racing championships in Switzerland this year.

Access to the brand is tightly controlled; retailers have to come up with a sound business case before Macpac will let them join its exclusive list of outlets. Ox, who looks after the Australian market, says he gets about 20 applications a month from retailers. He's let in just two over the past two years.

After-sales service, according to customers like Bestwick, is swift and efficient. Marketing is well targeted - exquisite pictures of the South Island back country and remote Third-World destinations adorn every page of Macpac's product catalogues, and prickle the neck hairs of anyone who's ever trudged up a glacier or supped chai in a Nepalese tea shop.

And, as we all know, success begets success. Motivated staff making fine products with a clear purpose in mind are likely to go on making fine products and feeling motivated. I ask Shelley Gabites if she can sum up what makes Macpac rock.

"Oh, I don't know," she laughs. "There's just so much trust and challenge and respect and motivation and enjoyment. It's all those things rolled up. I just find it inspiring to work here." Sounds like a pretty good explanation to me.

Macpac magic

How to unleash your staff's creative energy

Be generous with information: If people have information they will make a good decision.

Listen up: Staff need to know any problems they have will be listened to and respected.

Treat mistakes as a learning experience: If you're not allowed to make mistakes then you're not being allowed to learn.

Trust people: They'll reward you with their best efforts.

Let them make decisions: They probably know more than you do about how to do their job. When you let people be the expert in what they do, the care and the passion they will give that role is far more than you could do by learning how to do their job yourself.

Reward effort: Macpac distributes 20% of its profits to staff. When a staff member contributes a bright idea that makes or saves the company over $500, he or she gets a day off.

Encourage staff to understand your product: Macpac has an adventure club to encourage staff into the great outdoors, and it lends them the gear they need to do it.

Ditch the power dressing: It does nothing to inspire openness and trust. You won't see a suit anywhere at Macpac.

Source: Macpac's guidance team

Rebecca Macfie

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