Malden Mills: When Purpose Isn’t Enough

The Malden Mills textile mill was founded in Lawrence, Massachusetts in 1909, weaving wool knits to outfit American soldiers through two world wars. In 1981 they created PolarTec, a synthetic fleece made from recycled plastic bottles, named one of the 20th Century’s greatest inventions by Time magazine. They supplied Patagonia and other cutting-edge performance apparel companies for the next decade.

Then, in December 1995, a boiler at the plant exploded, causing a catastrophic fire that destroyed three of the factory buildings. Faced with the possibility of putting 3,000 people out of work, Malden Mills owner and CEO Aaron Feuerstein made a decision that shocked many: Two days after the fire he announced he would extend pay and benefits for all workers for 30 days. And then 90 days. He eventually extended benefits for 180 days. In all, that decision cost the business $25 million. “I think it was a wise business decision, but that isn’t why I did it,” Feuerstein told 60 Minutes. “I did it because it was the right thing to do.”

And when he decided to use the insurance payout (and $100 million more) to rebuild his mill in his hometown, bigger and better than before, he was able to re-hire all displaced workers … welcoming them back to a new plant designed with them, and the environment, in mind. “It was our obligation to rebuild,” he said. “I have a responsibility to the worker, both blue-collar and white-collar. I have an equal responsibility to the community. It would have been unconscionable to put 3000 people on the streets and deliver a deathblow to the cities of Lawrence and Methuen. Maybe on paper our company is worthless to Wall Street, but I can tell you it’s worth more.”

His commitment created tangible business results (written about in many books and blogs since):

Business grew 40 percent from pre-fire levels
Customer and employee retention reached 95 percent
Off-quality products dropped from 6-7 percent pre-fire to just 2 percent
Production increased from 130,000 to 200,000 yards per week

And yet, these results were relatively short-lived. Highly leveraged, the company fell into Chapter 11, twice. And Feuerstein was removed as CEO. Anyone who follows American textile manufacturing would have to agree with David Gill of ethic.org: good ethics is a success factor, not a guarantee. Gill rightly points out, “For a business to have enduring success it needs more than a happy, loyal workforce and good ethics: it needs a product desired by customers and available at affordable prices. This is what drove Malden Mills bankrupt: not its ethics or employee care but shifts in market conditions, competitive pricing, and the like.”

We believe that purpose leads to profit, but profit is necessary for a company to fulfill it. Feuerstein recognized his responsibility to the community his family business had been a part of for three generations, but he focused on the short-term benefits over long-term sustainability. Without purpose, profit is meaningless – but without profit, purpose is just a dream. [Tweet “Without purpose, profit is meaningless – but without profit, purpose is just a dream.”]

Although the mill is gone, the world continues to benefit from the revolutionary fabric Feuerstein and his team created. PolarTec lives on, and Feuerstein’s legacy is remembered in an industry award the company bestows for creativity, skill and innovation: The Malden Award.

Haley Boehning is a principle at Storyforge. Building on 20+ years driving change for Fortune 500 clients, non-profits and start-ups, Haley has developed a pragmatic approach to change through storytelling, developing relevant, consistent and emotionally compelling messages and targeted communications strategies that help brand and culture triumph in times of great change.