Businesses are often perceived as a only shareholder-value-oriented, people at work and customers have lost any (positive) emotional connection. Especially big corporations seem always to be in a race to the bottom in customer service (honorary mention is O2/Telefonica in Germany, which has the absolute worst customer service known to me).
Authors Mackey (founder of WholeFoods supermarket in the US) and Sisodia offer another approach to capitalism that has more sides to it than just short term shareholder value - conscious capitalism. The term conscious capitalism means both to be more responsible in the sense of having a consciousness as well as to be more aware and awake.
Tenants of Conscious Capitalism
Conscious capitalism consists of four pillars that are making up the parts of the book.
Higher Purpose and Core Values
If the company exists only for the sake of generating short term revenue next quarter, it is very uninspiring for everyone. I personally find it quite ironic that at all startup events, people say you need to be passionate about something - solving a problem, making the world a better place, serving your customers - and that that is the most important thing. But then somehow in the transition to a large corporation that seems to disappear along the way and one seems to get caught up in quarterly numbers and stock options of C-level members.
I was for instance quite surprised to read that some industries were in high regard not so far ago: in 1997 about 80% of Americans had a positive view of pharma - in 2004 only 40%. Banking is another example that is often seen as evil nowadays.
And it is ironic because I think that most people in any corporation want to do good.
To counteract this the company needs to be aware of its higher purpose that is larger than the company itself - something good for humanity.
The example of Whole Foods is a good one as their purpose contains making the world a healthier place, educate people that they make better food choices, improve animal welfare, make agriculture more sustainable and so on (of course they cannot solve it fully).
This is what gives the company and the people working there a great sense of purpose but also a bar where people can measure their actions against.
How to find this purpose thing? Plato and the authors prose the following ends:
- The Good - Service to others, e.g. improving health, education, communication, quality of life and happiness. Service to others is usually very motivating and truly fulfilling because people like to help others.
- The True - Discovery and furthering of human knowledge, e.g. search for truth and pursuit of knowledge. Examples are Google’s quest to organize world’s information or companies that develop new technologies from which humankind can benefit greatly.
- The Beautiful - excellence and the creation of beauty: “True excellence expresses beauty in unique and inspiring ways that make our lives more enjoyable.” See Apple’s design.
- The Heroic - courage to do what is right. “To truly make the world better, to solve insoluble problems, to do the really courageous thing even when it is very risky, and to achieve what others say is impossible.” Example: Muhammad Yunus of Grameen Bank.
I finish this part with a section heading from the book: “Great Companies Have Great Purposes”
Stakeholder Integration
The next pillar is to take care of all the stakeholders that are involved with the business. This does not only include shareholders, customer and employees but also broadens the circle to suppliers, the community and the environment and outer members such as competitors (they call it a Win6 approach). Instead of looking for trade-offs one should rather look for synergies.
Good relationships with customers (but also with everyone else) can be developed “by dealing with them with authenticity, transparency, integrity, respect, and love”. Also in regards to customers, conscious businesses need to spend little on marketing because they don’t need to convince anyone to buy things that they don’t.
“Most people in the twenty-first century […] want to work for more than just a paycheck. They crave work that is stimulating and enjoyable. They’re looking for meaning; they want their work to make a difference, to make the world a better place. They’re looking for a community of friends. They’re looking for opportunities to learn and to grow and to have fun.” There is a lot what can be done at work to promote that. Examples are conscious hiring practices that find people who are really aligned with the purpose, empowerment instead of fear, team work, fair compensation. Some examples from the book are that at Whole Foods, employees have the same benefits as the leadership and that the leadership compensation is capped at max. 19 times of the average employee salary. This makes sure that leaders get compensated well but could get a better salary somewhere else, so only the intrinsically motivated ones stay. Also team fitness is promoted. Every year measurements are taken and those in good shape get further discounts and those in really bad shape get for a week to a camp where they can turn their health around and learn how to be more healthy and then return to a supporting environment at work.
In regards to investors it is recommended to communicate one’s long term vision and commitment and chose your investors carefully - as you would do with suppliers or employees. Also don’t try to fit your business to please stock traders and their models that consider just some mathematical part of the whole business (such as your profit margin).
You should also treat your suppliers well and build beneficial relationships with them. You can pay them fast, treat them fair and sometimes even support in bad times or partner with them. You can also teach them to be more conscious businesses too.
Good citizens usually do some service to the community, so can businesses. Not only through philanthropy but also through giving employees time off work to do something good (paid time so to say). Companies can create foundations that support the purpose put forward in the first part.
Conscious businesses also treat the environment as a (silent) stakeholder and make sure that one does not contribute unnecessarily to the challenges we face now. A lot harm has been done unconsciously so one has to take a good look at what the company’s impact is. “In the long term, as with all stakeholders, businesses must operate out of love and care for the environment. Operating out of fear, we can do very little. Care and love are far better strategies for solving environmental issues than continued fear and guilt.”
Further, there are less direct stakeholders such as competitors (of whom it is good to think as “allies in striving for mutual excellence”), activists (“Behind every activist is a new business idea.", unions (what are the problems how I treat my employees that they actually need unions and how to improve), media and government.
Conscious Leadership
The chapter starts right away with the following phrase: “Better leaders = Better world.” which one should commit to one’s mind. So what are the qualities of conscious leaders? They feel that work is their calling and energizes them instead of draining them. They “orientation toward servant leadership, high integrity, and a great capacity for love and care”. When one helps other people one does feel good. Also, they have four kinds of high intelligence.
- Analytical intelligence: Those things that are tested on IQ tests. However, ironically the other three factors matter more.
- Emotional intelligence: Popularised by Daniel Goleman, your EQ is how well you can understand your own and other people’s feelings and emotions (empathy).
- Spiritual intelligence: Hearing the first time of it, but there is a book called Spiritual Capital which writes “Spiritual intelligence is the intelligence with which we access our deepest meanings, values, purposes, and higher motivations. It is … our moral intelligence, giving us an innate ability to distinguish right from wrong. It is the intelligence with which we exercise goodness, truth, beauty, and compassion in our lives.” It also helps to discover one’s higher purpose. “Conscious leaders with high SQ have a remarkable ability to help align their organizations with their organizations’ higher purposes”.
- Systems intelligence: Also hearing about it for the first time, but it means that you are systems thinking who can see the big picture and I guess it is also good if you try to create synergies between different stakeholders. “Given their intuitive understanding of systems, conscious leaders are excellent organizational architects. They understand the roots of problems and how the problems relate to organizational design, and they devise fundamental solutions instead of applying symptomatic quick fixes.”
There is a whole chapter on how to develop those qualities. I found it very valuable and for me it was one of the most important chapters as throughout university I was rather using the IQ side of my brain which turned out is not the most important part outside academia but there is much more. So I will leave the chapter out as a cliffhanger and motivation to get the book. But there are no quick fixes but as all important qualities rather lifetime learning commitments.
Conscious Culture and Management
The last part is that company culture is very important and they put qualities that conscious organisations have under the acronym TACTILE:
- T: Trust inside the company between employees and also outside stakeholders (e.g. customers trust the company).
- A: Accountability means here that team members are accountable to each other and their customers and that the company is accountable to suppliers (and customers too of course) as examples.
- C: Caring for all stakeholders, “People in conscious cultures behave in ways that are thoughtful, authentic, considerate, and compassionate”.
- T: Transparency means that there are only as few secrets as necessary and strategic plans are widely discussed.
- I: Integrity: Adherence to truth and fairness, follow what they think is ethically right.
- L: Stakeholders are loyal to each other and have some patience and understanding (but not blind faith since there is accountability).
- E: Egalitarianism means that there are no special privileges for leadership and that to some extent all team members have something to say about how the company is led and managed.
The last chapters of the book describe how one can bring the things mentioned in the three parts above to live and how to transform or build a conscious business from scratch and what it means to become a conscious business.
Criticism
While I truly like all the ideas put forward in the book, there are two points which bothered me reading the book. First, he mentions many companies as examples for conscious capitalism that I can hardly imagine to live that. One example is PepsiCo (“At PepsiCo, Inc., CEO Indra Nooyi has been emphasizing “Performance with Purpose” by investing heavily in drinks and food products that are healthier for customers. “). It is quite hard to believe me that a company, which core business is to pest the world with its soft drinks, can be conscious. Amazon, that bought Whole Foods, is also frequently mentioned as a positive example. However, I wonder how that fits together with them squeezing their employees and the recent New York articles or frequent strikes that take place in Germany at the distribution centers.
Secondly, at the Amazon book reviews there is criticism towards whether Mackay lives what he preaches. I don’t know whether he or Whole Foods lives up to the ideals brought forward in the book, so that is something to consider, but I will definitely commit many of the ideas brought forward to my mind and hopefully live them some day ( living them even just outside of business is very valuable too). Overall, the book has a very inspiring and positive message.