Christopher hails the consultants as the company’s “crown jewel,” stating they are “by far our most valuable asset” and the “heart and soul of our business.”6 She stresses that they are independent, not employees of the Pampered Chef, “an army of self-employed businesspeople.”7 They have no fixed hours or sales territories. Most direct-sales organizations conduct weekly sales meetings, but at the Pampered Chef, monthly meetings suffice. The monthlies are low-key pep rallies rather than the pressure cookers found at many corporate sales meetings. They are social as well as professional, which helps morale and offers the opportunity to exchange useful ideas.8
The Pampered Chef also uses the multi-level marketing model. Consultants can recruit other consultants and earn commissions on their sales, too (called “overrides”). The opportunity to generate overrides encourages people to build a sales team. The Pampered Chef ensures that these arrangements ultimately drive sales to consumers, and are not, as some have alleged about other multi-level marketers, merely used by larger distributors to extract sales from smaller and smaller ones down a daisy chain, amounting to no more than a pyramid scheme. In multi-level marketing programs, the trade-off between autonomy and authority is stark. Give distributors business power, and most will embrace it responsibly and profitably; restrain the sales force by strong internal control, and many will not perform as well.
Christopher is by nature a hands-on manager and built the Pampered Chef by working around the clock, immersing herself in operational details. The business model, however, required giving consultants autonomy, and scale eventually required delegation to colleagues at the corporate level. Christopher believes in the principle of “responsibility with authority.”9 She explains: “People don’t like being dictated to.…Give [employees] the freedom to run with the ball.”10
The Pampered Chef’s greater problem had been managing revenue growth.11 In the late 1980s, for example, recruiting multiplied so quickly that sales volume outpaced capacity for inventory management, order fulfillment, collections, and payment processing. The company faced a dilemma familiar to many successful entrepreneurs: sustain growth at some cost in service quality or cede growth and maintain standards. In direct sales, a recruiting freeze is often a death knell—a bad signal to consumers and a morale downer to the troops. But in 1990, the Pampered Chef opted for quality over quantity and imposed a temporary freeze on new recruits. This controversial and gutsy move meant putting fundamental values ahead of short-term profit, but it ultimately translated into economic gain. As Christopher reflected years later:
Looking back, the recruiting freeze augmented our reputation with our sales force, customers, and vendors. People saw us as an honest company that was trying to do the right thing and not overestimate its capabilities. We are very conservative in our business practices by nature, and our people knew that. When we told them something, they knew it was the truth.12
By 2002, annual sales exceeded $700 million, thanks to sixty-seven thousand kitchen consultants.13 Christopher cemented her plans for the company’s future by contacting Berkshire and arranging a meeting with Buffett in Omaha. Eying her squarely, Buffett explained that selling to Berkshire would not increase her net worth and could decrease it.14 The transaction involved trading an asset she owned outright for cash that she would invest in diverse assets. In the future, he advised, the company would likely be worth more than the asset portfolio. So, he wondered, why would she sell?
Christopher explained her decision in terms of the value of values: she wanted to sell to Berkshire in order to protect her sales force and employees and to maintain the culture they had built together. Christopher had considered a public offering, which can yield rich paydays for accomplished entrepreneurs. (Remember Jim Clayton noting how the millions he netted going public explains why so many entrepreneurs consider an IPO.) But Christopher valued Berkshire because it did not interfere with operations and promised permanence.15 Buffett, who has an uncanny ability to measure character in brief meetings, liked Christopher instantly. The two made a deal within three weeks. As in many other Berkshire deals, employees received a thank-you bonus of $1,000 for each year they had worked for the company.
An example of the support and consideration for these consultants was the way Berkshire addressed a political controversy that led to the termination of Berkshire’s shareholder charitable contribution program in 2003. At most corporations, boards choose which charities receive corporate beneficence, but that goes against Berkshire culture. Conceived by Munger in 1981, Berkshire’s program let shareholders name the organizations, with the aggregate amount set by the board.16 The program was popular with Berkshire shareholders, not only because it allowed for effortless philanthropy, but also because this type of giving was modestly more tax efficient than direct philanthropic contributions. Shareholders designated a wide range of recipients, from Catholic Social Services to Planned Parenthood.