UNC Kenan-Flagler Sustainability Blog

Strategies in Sustainable Enterprise, Lessons From the Classroom

February 6, 2012 By Carol Seagle

This is the first in a series of student-written submissions reporting on speakers inChapel_Hill_Tire_Small_reasonably_small MBA 815B.  The course is designed to increase students’ understanding of the strategies undertaken by corporations to advance the traditional goals of business—profit generation and growth—while strategically taking into account environmental and societal impacts. 

Adam Bruckner, MBA 2012 writes here about Marc Pons of Chapel Hill Tire

Executive Summary:  Several business megatrends have occurred over the last 50 years which “force fundamental and persistent shifts in how companies compete.” Chapel Hill Tire (CHT), owned by the Pons family, is a leading adopter of the next business megatrend, sustainability.  By being a proactive member of the local business communities, CHT has benefited from loyal customers, superior employee performance, and sustained profitability.

Critical Ideas:  Marc Pons, CEO of Chapel Hill Tire, established that financial prosperity is integral to sustainability.  Without it, a company will be unable to be a going concern and, therefore, unable to provide employment, services to the community, or contribute to society.  As such, sustainability and profitability often go hand-in-hand.  For instance, CHT has a recurring stated goal for each of its six location general managers to reduce utility bills 10% annually.  One way in which this has been achieved in the Carrboro location is through the use of solar panels, which typically not only eliminate the need to buy electricity, but in fact generate revenue by selling power back to the grid.  Furthermore, upon instillation, CHT was able to achieve significant tax credits, reducing the cash flowing out of the business, and out of the community.  Other utility saving initiatives include dual flush toilets and high efficiency lighting, both of which have further potential savings on the tax front, depending on jurisdiction. 

Another key to CHT’s sustainability approach, and general success, is a focus on employee satisfaction.  This is critical because employees perform all the work, are customer’s primary touch point, and are integral to building a company’s reputation.  Therefore, they must all be moving in the same direction and working for the same goals.  Marc enhanced his employees’ morale by providing them with expensive training to service hybrid vehicles, and being closed on Saturdays.  Furthermore, he always takes the time to hear his manager’s ideas for new initiatives, empowering them to modify the business as they see fit.  As a result, his employees are motivated to come to work each day and are committed to providing CHT’s customers with best in class service.  On the other hand, companies without motivated workers can quickly deteriorate.  A Georgia based peanut butter factory provides a prime example of what can go wrong if employees lack morale and a sense of company pride.  Here, “dozens, maybe hundreds, of workers and managers walked past [a] leaky roof every day and never cared enough or felt empowered enough to say or do anything about it.”  This leak ultimately led to an outbreak of salmonella.  Should employees have felt empowered, this would likely have been resolved prior to the contamination. 

Idea Implementation: Since Marc Pons took control of CHT, it has roughly followed the four stages of value creation, as outlined by Lubin and Etsy, but with stages one and two done simultaneously. As an example of stage one, performing old tasks in new different ways, Marc utilized solar power to run one of his shops.  In stage two, he altered and expanded the company’s offerings, which led to a focus on the servicing business as opposed to tires.  This included new services like used oil changes and carbon offset purchases.  Through these initiatives, the core business transformed (stage three) into a sustainable, and popular, lube shop.  Currently, CHT is on the cusp of stage four by exploiting the sustainability megatrend through all its product offerings, employee treatment, branding to create a lasting advantage over its competitors.

Challenges:  Despite CHT’s success, there have been many challenges it has overcome and many it continues to face.  The critical element of employee buy-in was not always there when Marc took over the family business.  He had to work for the better part of a decade before he felt the employees fully trusted him and his greener vision for CHT.  This buy-in required years of Marc listening to his staff, showing tangible results of new initiatives, and the aforementioned free weekends and advanced training programs offered.   Ultimately, “most people want to work at a company with a purpose that goes beyond” profitability, and “people become engaged when their workplace activities connect to what matters in their lives and what makes them happy,” but this does not come without resistance to change.

An issue that Marc and CHT continue to face is the lack of a green supply chain.  Much of the infrastructure to provide his clients with greener products, like steel wheel weights (as opposed to lead), is not in place.  As a result, CHT must special order many parts at increased costs from specialty suppliers instead of using traditional, and more efficient, distributors. 

Another problem is margin.  Because CHT pays its employees higher wages, disposes of wastes in an environmentally sound way and uses greener products, its profitability suffers.  As of now, the customer base is simply not willing to pay the significantly higher costs the service would require if it were to have comparable margins to other local competitors.  This is a trade-off that is easier for CHT to make, as it is a private company, but none-the-less a painful one. 

Conclusion: Marc Pons’ capacity for strategic execution and the value he created from his green initiatives have transformed CHT from a traditional tire / lube shop, to a financial, community and environmental success.  As a result, CHT is on its way to becoming a “Winner,” as defined by Lubin and Etsy, due in no small part to its initiatives which bolstered customer and employee loyalty, instilled a sense of community and required environmental stewardship. 

 


References to :  David A. Lubin and Daniel C. Etsy. “The Sustainability Imperative” (Harvard Business Review, May 2010) 3.

Adam Werbach. Engaging Individuals: People Want to Help – Sustainability Fosters Engagement, Which Fosters Sustainability (Harvard Business Press 2009)