One of our favorite CEOs, Dov Charney of American Apparel, just received some love from The Independent of Ireland.
Promoting his company as “sweatshop free”, Charney is a man with a social
mission. The company boasts that the clothes are “made in downtown LA”,
shunning the outsourcing by other American clothing lines to poorly run
Asian factories with poverty stricken employees.
Unlike most of his business competitors, Charney argues it’s possible to
produce goods in the US, treat your staff well and still make a profit.
He pays his manufacturing staff twice the minimum wage, provides
subsidised healthcare, meals, English language classes — and even free
His contented employees are the key to his success, says Charney, who
believes that treating his staff well means they are less likely to leave.
But he also stops short of seeing himself as a philanthropist.
“American Apparel is not an altruistic company,” he says. “I believe in
capitalism and self-interest. Self-interest can involve being generous with
"Self-interest can involve being generous with others"… interesting concept. I think I get it. Maybe. Dov is one of our favorite CEOs because he dares to buck popular business opinion and just do what makes sense.
Brief background on why I like them so much: this is a $500 million
manufacturer of t-shirts, underwear, and the like. Typically low
margin products, the kind of thing that usually comes from Asian and
Central American sweatshops. Not American Apparel. This company makes
over 1 million articles of clothing, per week, from their one factory
in Los Angeles and they grew 40% this year. They pay their
5,000-person workforce significantly above minimum wage (average is
$12-$15 per hour), give them full subsidized benefits (such as high
quality health care insurance for $8 per week), and they turn a profit.
I say each time, this should basically embarrass the heck out of any
company executive that thinks they have to outsource in order to find
cheap labor. Or at least call into question their fundamental
competence as a leader. If American Apparel can manufacture low margin
clothing efficiently enough at a U.S. factory (California no less) to
beat the sweatshops, then anyone should be able to. If they try hard
Here's my final and perhaps most important lesson: do what
works. It's that simple. Tools, even lean tools, are just tools.
Leadership requires people. At American Apparel there are no cheesy
signs with "Teamwork" and "Challenge" on them. There are no glitzy
glass lobbies. There is no sign of lean manufacturing in the
traditional sense, and they don't profess to be lean. No heavy lean
training of employees, no overwhelming visual controls besides the
metrics charts at the cells, no Shingo Prizes or Baldrige Awards.
there are bunch of people recognized and compensated for their
knowledge, creativity, ideas, and experience. A group of people that
realize that speed creates value, knowledge creates ideas, ideas create
profit. They figure out what works, then they do it exceptionally well.
I know I repeat this story every chance I get, but that's because it's important. Dov may have a lot of other interesting ways in how he bucks traditional business, many of which most of us would agree really do cross the line (read the article if you don't already know this aspect of his "style"), but he also finds what works, then does it well.