This article discusses a Case Study from the Stanford Graduate School of Business that is subtitled: Success in A Declining Industry.

The founder, George Zimmer, opened his first store back in 1973, at a time when competitors were closing their doors. From opening to the time of the article (1997) the Men’s’ Wearhouse enjoyed 30% growth. Between 1991 and 1996 they grew from 113 stores to 345 and from $133.4 to $483.5 in net sales. This Case is a study of some of the things they did right.

Some of the things that I think they did right:

  • Humanism. George Zimmer said: “I’ll tell you the last thing most MBA’s probably think of as value is the untapped human potential…the culture says, ‘It’s got to be quantifiable’.” They understood that their people were not disconnected from the rest of their lives when they were at work and had holistic views of their people. In terms of sales and their salespeople they understood that customers could unconsciously tell the difference between a “fake” salesperson and a salesperson that is being part of a genuine human interaction. They saw their salespeople as “consultants” who could expand off someone’s initial request but not sell them something they didn’t want or need for their own benefit. They used the term “selling with soul” and “becoming an artist as a salesperson” as well as “make an emotional connection” (a la “Linchpin” per Seth Godin which actually came more recently). They understood that sales involved understanding and serving people.
  • Servant Leadership. In contrast to the ubiquitous ‘shareholders first’ mentality, they said that employees came first and shareholders last (my cynical side says ‘is this real or just lip service?’). Management treated the people they managed and worked with as their customers as well, which is a great policy. Zimmer set an example of his servant mentality by making a comparatively smaller salary than his industry counterparts. They also seemed to have a mentality of managers doing all jobs when needed, similar to Southwest Airlines; if a regional manager was visiting a store and saw a customer that needed help they would jump in and help.
  • Open Door Complaint Policy. They encouraged employees to point out problems. Encouraging complaints and allowing problems to surface goes a long way toward improving the business’s structural systems.
  • Abundant Training. Zimmer characterized training as the same thing as mentoring, just that it reached more people. He also tried to give his employees a sense of being connected to something with a higher purpose. However, all training was ‘in-house’; see “wrong” section below for the other side of the training subject.
  • Tailored Performance Evaluations. While I’m generally not a fan of the Performance Eval, Men’s Wearhouse did do one thing that is worth applauding, if even for the effort: they, at least somewhat, tailored their Evals to the specific job, rather than using a “one size fits all”. This was a step in the right direction. On the down side their Evals did not have any team incentives which probably would have helped preclude inter-company competition and stealing of customers which they seemed to have some problem with.

Some of the things that I think they did wrong:

  • Nepotism. Most of the management team and board of directors were George Zimmer’s relatives and boyhood friends and nepotism was not discouraged. While it can be personally nice to work with friends and family it can substantially increase the risk of such negatives as groupthink and lack of fresh ideas.
  • No Outside Training and Promotion Only From Within. Men’s Wearhouse said that their “managers did not have the time” to do outside training. In-house training and promotion from within are nice in moderation but too much could create a stagnant situation of sparse levels of new energy and ideas.

Commentary on a Harvard Business School Case Study about Extrinsic Motivators: specifically monetary compensation.

People sometimes do exactly what they’re paid to do, oftentimes to the detriment of company goals, such as the top line, getting new customers and retaining existing customers, as evidenced by the example of a car salesperson turning away a potential future sale simply because they are not ready to buy “today”. The salesperson saw their energy better directed to immediate and more achievable, short-term sales that would directly affect their commission, rather than fostering client relations.

In the case, the City of Albuquerque, in an attempt to incentivize their garbage collectors to be more efficient, instituted a policy of paying their garbage truck drivers for an eight-hour day regardless of whether they finished in more or less than eight hours. The City believed this would encourage their drivers to work more efficiently and finish quicker. In reality, it caused a lot of undesired and unintended consequences such as missed garbage pickups (City had to send trucks back out on second trips to pick up) and speeding tickets and increased vehicle accident rates. The City’s solution to its garbage collection cost problem ended up being more expensive than the original problem!


  • Financial incentives can actually lead to undesirable behaviors. Companies who set themselves up with extrinsic motivation systems (e.g. pay) often experience failure in retaining talent, getting performance and avoiding ethical failures such as the ends justifying the means and the means can include “bad” behaviors.
  • Companies need to shift their beliefs that financial incentives (external motivators) will be a better expenditure of energy than doing the more involved work of identifying and removing roadblocks to performance that exist in the architecture of the company’s systems.
  • Financial and non-financial incentives need to be given as rewards for good work, not to entice good work or performance. This is easier said than done and the road to implementation of an effective pay-for-performance system of extrinsic motivators is laden with potential landmines.

Compensation-based “quick-fixes” (and other externally-based motivators) for various performance problems are certainly very prevalent today. However, other, intrinsic, motivators have been found to be more powerful. Take look at Dan Pinks’ book “Drive: The Surprising Truth About What Motivates Us“.

The storyline for this case study goes that the SAS Institute was facing increasing competition, etc. and the question was: “Could and should the Institute maintain its unique approach to pay and other practices?” Had their success been a product of their approach or achieved in spite of their approach?

Attraction and retention of talent was certainly a key to SAS’s continued success. Some of the perks that their employees enjoyed included healthy retirement, bonus plans and a lot of autonomy, freedom and control over their day-to-day schedules. SAS was of the philosophy that if they made their employees happy, great revenue and customer service would follow. They employed a trickle-down philosophy—”if you treat your people well, things will take care of themselves.” They believed that motivation was largely intrinsic. One interesting example, in the case study, was of a SAS employee who quit after 2 weeks because when she arrived at 9 in the morning, she wanted someone to tell her what her job responsibilities were for that day. SAS is not set up that way; they assume that their employees have talent, creativity and initiative. Their approach is to “give people the tools they need to do their job then get out of the way.” They believe that management “…should be a relationship instead of an infrastructure.”

SAS’s philosophy of assuming that their employees are intrinsically motivated works well (and should continue to work well) for them because of their particular type of employee (i.e. professional, educated, self-starter, etc.) but would probably not work well with, for example, many non-professional, hourly-type employees.


  • There are different (and distinct) levels of professionalism among different types of employees (i.e. professional, salaried versus non-professional, hourly). Each has different expectations of their work environment, need different levels of supervision and guidance and are motivated differently (intrinsically versus extrinsically). It is important to keep the two clear in management’s head, so to speak, to foster employee performance.