Posted by Ally Batty on February 14, 2017
Launched in 2012, the Social Impact Leadership Series (SILS) brings prominent speakers to the Chicago Booth campus each year to talk to students, alumni, and the community about issues in the social sector. Paul Grangaard, ’83, spoke at a recent SILS session about his role as president and CEO of Allen Edmonds and how he led a major turnaround at the high-end shoe brand that emphasizes superior quality American-made products. Grangaard, who has a wealth of leadership experience in business and consumer investment banking, sat down with the Rustandy Center for Social Sector Innovation's Ally Batty to explain how business can positively impact local communities as a form of corporate social responsibility.
AB: Corporate Social Responsibility (CSR) seems like an unusual idea to incorporate into running a luxury shoe company. How does the concept fit into your overall business model?
PG: Here’s a stunning statistic -- less than two percent of all the shoes bought in the United States each year now are made in this country. So when I took over at Allen Edmonds, it felt like we were the Blues Brothers on a mission: to save jobs, to save one of the last two remaining dress shoe manufactures in the United States. By keeping our manufacturing here, I was thinking not only about the people who are employed by Allen Edmonds, but the livelihood of the communities they live in, like Port Washington, WI [where Allen Edmonds is located] and other communities in northern Milwaukee. A great deal was at stake in Allen Edmonds’ survival. Someone once said the greatest social program you can give a person is a good job.
AB: I’m curious how this view of CSR manifests in your relationship with consumers?
PG: On the customer side, we don’t charge nearly what the vast majority of shoe companies charge for our quality of shoes with their high quality calfskin leathers and their Goodyear welted construction. If we’re going to be the great American shoe company and sell these made-in-the-USA shoes, then we have always believed and continue to believe that we need to be accessible to people. So I resist it when someone says we’re a “luxury” brand. We’re a brand with a very high-quality shoe that does cost more than lower quality shoes, but it doesn’t cost anything close to what the true luxury brands charge.
AB: What do you think distinguishes the Allen Edmonds brand from other brands?
PG: We actually make shoes the same way many luxury brands do; we buy our leather from the same tanneries. I’m not against luxury positioning in consumer businesses, but in our view, it’s not an American ideal to be aristocratically priced. With our brand and what we’re trying to accomplish, we don’t believe in having that elitist positioning.
AB: A large part of the restructuring plan since you came to Allen Edmonds included keeping production here instead of moving it overseas. How do you think the manufacturing industry and the companies involved should change the conversation about domestic versus overseas production?
PG: I’ve got two answers. First, change the tax code. Simplify our taxes and make our corporations more competitive. We don’t have very good industrial policy in this country; we don’t even talk about industrial policy in this country.
We’ve also got to expect companies to do something in return. Companies need to gain something in the tax code rewrite, but they also need—really, we as a society need— their leaders to think more about their communities.
Reflect on the great retailers and regional banking organizations of the 1950s, 60s, and 70s; they were run by local people. The retailers were owned by families who realized the health of the community would have a lot to do with the health of their business, so they gave back to their communities in a lot of different ways. In my hometown of Minneapolis, and I know it’s true here in Chicago, working for Dayton’s department stores or working in Chicago for Marshall Field’s was one of the best things you could say in your neighborhood. And the Dayton family was revered and Marshall Field here was revered for what they did for their cities in the arts, for charities, for quality of life.
AB: So how did all this change?
PG: I think it started with the crash of 1987 that drastically lowered stock valuations and then led to whole “barbarians at the gate” hostile takeover era. In order to defend against hostile raiders, business leaders worried way too much about achieving lower-cost production and about shareholder value as a singular focus, and not enough about the whole value of a company.
I think that’s what has to change, and boards need to embrace that kind of change in balancing the goals of all the constituents of a business. And what will drive boards to change their priorities is their customers. Customers will have to stop looking for the lowest price all the time; they’re going to have to think about societal value when they buy. And important, also, is the competition that’s going to come from small entrepreneurial companies that actually bring back manufacturing to the United States.
AB: Have you seen any signs of companies moving to domestic production?
PG: The percentage of shoes and apparel made in the United States is going up. It used to be generally regarded that you couldn’t get fabric that was made in the United States. You could make clothing in the United States, but you couldn’t find any mills that were weaving cotton or woolen fabrics anymore. But small mills are making a comeback. There are mills being reopened. There’s one just outside of Minneapolis –Faribault Woolen Mills. They make blankets and scarves, but they’re also making wools for other people.
AB: Is the message getting out that there are businesses bringing jobs back?
PG: For me, the success marker I’m most proud of at Allen Edmonds is that we’ve almost doubled US employment in the last six years. Yes, we’ve drastically increased sales and we’ve increased earnings, but the data point I’m most proud of is that we’ve increased U.S. employment by 90 plus percent. “Those jobs won’t come back,” is what smart people are writing in the newspaper, and I want to say instead, “Yes, they can!”