The Men's Wearhouse strategy entails differentiating itself on the basis of service, not price, in a price-sensitive, competitive market. Its ability to be successful doing so suggests that simply competing on the basis of price may not be the only viable strategy even in supposedly "commodity-like" markets.
The company understands that talking about customer service, as so many companies do today, and actually delivering service that can provide real differentiation are two different things. What is unique about the Men's Wearhouse is its willingness and ability to turn its theoretical knowledge about how to obtain higher margins into action.
The actions the company takes, particularly its extensive investment in training, its use of a mostly full-time workforce, and its building of a culture in which people help each other sell and help each other learn and get better, all contribute to achieving its success. The mystery then becomes not why this company has done these things, but why so few have learned from its example.
As Eric Lane noted, "If you look at department stores and…the chain retailers, the emphasis isn't on the stores or on the people. It's more on the merchandising and the marketing." George Zimmer's insight that you only make money when you sell the merchandise, not when you buy it -- which has led to his emphasis on people and store operations -- seems incredibly obvious once stated. But it requires a shift in mind-set that apparently few other retailers have been willing or able to make.
The second mystery is also less of a puzzle once we think it through. The apparent paradox is how and why the Men's Wearhouse has succeeded by focusing on and doing things for a workforce that many companies would view as not very highly skilled and, in fact, not very high quality.
But that is the point. If you are a computer engineer in today's market, you expect to be wined, dined, courted, and pampered. If you are in retail, you expect to be treated badly. By exceeding people's expectations concerning the chances they will be given, the dignity and respect with which they will be treated, and the opportunism they will have, the company builds an incredible sense of loyalty and commitment. Doing the unexpected -- doing more than expected -- earns the company extraordinary performance from its people. If there is a lesson here, it is the power of treating everyone as if they are important and matter.
The Men's Wearhouse also illustrates a theme we have seen in Southwest Airlines and Cisco: Values come first. This is an organization that seems genuinely interested in helping people be better than anyone thought possible. It really is in the people development business.
The emphasis on people development has had the salutary effect of building organizational competence and capability that has permitted the company to execute a very demanding service differentiation strategy.
There is no question that the business results from implementing the Men's Wearhouse values -- lower shrink, achieved without expenditures on tagging and other security measures, lower turnover, and a higher level of motivation and energy -- have included lowering costs as well as providing a service edge. But there is also no question that the values are sincere and are not promulgated as a means to ends but as ends in themselves. In fact, George Zimmer speaks openly about doing things to retain his commitment to a set of ideals, to avoid becoming too materialistic and not spiritual enough.
Most of the Men's Warehouse's wardrobe consultants have worked for other retailers. Many came from competitors that went bankrupt. In fact, bankruptcy in retailing, particularly in the early 1990s, was quite common.
What the company has demonstrated is that it is possible to redefine the basis for competition within an industry, and to do so by building a set of competencies that come from how it has chosen to manage its people-management practices that are premised on its values and philosophy.
This article was reprinted with permission of Harvard Business School Press. Excerpt of Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People by Charles A. O''Reilly III and Jeffrey Pfeffer. Copyright 2000 President and fellows of Harvard College; All Rights Reserved.