Conscious Capitalism ~~ Raj Sisodia

 

In some quar­ters of the com­pet­i­tive busi­ness world, Raj Sisodia’s ideas are prob­a­bly viewed as rad­i­cal or, at best, severely lim­it­ing. Yet this award-winning author, pro­fes­sor and eco­nomic con­sul­tant is, in actu­al­ity, view­ing the busi­ness world in the only way it can be viewed if we are to sur­vive as a cul­ture and as a planet. In his new book Conscious Capitalism: Liberating the Heroic Spirit of Business, co-authored with Whole Foods Market co-CEO John Mackey, Sisodia describes com­pa­nies con­duct­ing them­selves with a higher pur­pose, con­scious lead­er­ship, and an eye to the impact of the com­pany on cus­tomers, employ­ees, the envi­ron­ment and soci­ety in gen­eral. An ever-growing num­ber of com­pa­nies and cor­po­ra­tions are listening.

 

An Accidental Discovery
Sisodia came across the need for these vital changes quite by acci­dent. “I’ve been a mar­ket­ing pro­fes­sor for twenty-eight years now,” he told Organic Connections. “For a long time I was very frus­trated with the mar­ket­ing pro­fes­sion, as it did not work very well. It was nei­ther effi­cient nor effec­tive, and in most cases didn’t cre­ate value for cus­tomers, com­pa­nies or even society.

“Because I was unhappy with mar­ket­ing, in 2004 I started a project called ‘In Search of Marketing Excellence,’ which was intended to find com­pa­nies that did mar­ket­ing right—not spend­ing too much money and yet hav­ing out­stand­ing results. Most com­pa­nies spend a lot of money, yet have cus­tomer loy­alty and trust lev­els that are very low; often the more they spend, the worse it gets. We wanted to iden­tify com­pa­nies where cus­tomers not only liked them but loved and trusted them, with­out the com­pa­nies hav­ing spent a lot of money on mar­ket­ing in get­ting there.

“We actu­ally found a bunch of com­pa­nies that had those char­ac­ter­is­tics. But in addi­tion to cus­tomers with high lev­els of trust, we also found that the employ­ees were equally loyal and trust­ing, as well as their sup­pli­ers. Their com­mu­ni­ties embraced them too. For these com­pa­nies it was about all of their stakeholders.

“The project really ended up not being about mar­ket­ing at all. There was a big­ger story—a dif­fer­ent way of think­ing about busi­ness. These com­pa­nies weren’t just there to make money. They had dif­fer­ent kinds of lead­ers who were about ser­vice and about a pur­pose and were not dri­ven by power or per­sonal gain.

“We uncov­ered a larger story about busi­ness, and then cap­i­tal­ism itself. We ulti­mately exam­ined twenty-eight com­pa­nies, and this project became my book Firms of Endearment: How World-Class Companies Profit from Passion and Purpose, which came out in 2007.” Sisodia has been work­ing in this new field ever since.

The Lessons of Adam Smith
The eco­nomic mar­ket model of today was actu­ally set in place back in 1776, with the pub­li­ca­tion of a work called An Inquiry into the Nature and Causes of the Wealth of Nations. The book’s author, Scotsman Adam Smith, is today viewed as the father of mod­ern economics—and Sisodia sees one vital ele­ment miss­ing from his philosophy.

“Adam Smith’s core mes­sage was really that cen­tral­ized plan­ning doesn’t work,” Sisodia pointed out. “You can’t have gov­ern­ment bureau­crats fig­ur­ing out who should make what and how much and what to price it at. He said that indi­vid­u­als make those deci­sions based on their own per­ceived self-interest; but that is far supe­rior to hav­ing some­body sit­ting some­where try­ing to decide all of that, because it essen­tially can­not be done.

“However, what did not hap­pen was the other side of our human per­sona, which  is the need to care; it is equally as pow­er­ful as the drive for self-interest. When it came to estab­lish­ing the foun­da­tions of cap­i­tal­ism, peo­ple ignored this dimen­sion, assum­ing that this is some­thing you do out­side of the con­text of work, that you ful­fill your need to care through your fam­ily and through your com­mu­nity, and that busi­ness can only be about self-interest.

“That’s like going into the world of busi­ness with half of your brain or per­sona shut off, the more human half. I think we should have inte­grated those two dimensions—the human need to care with the human drive for self-interest—into the same activ­ity of busi­ness. It would have cre­ated a foun­da­tion for cap­i­tal­ism that was much richer than what we ended up with.”

Not Just for Shareholders
In more mod­ern times, Nobel Prize–winning econ­o­mist Milton Friedman stressed that a company’s pri­mary respon­si­bil­ity was to its shareholders—a phi­los­o­phy that cor­po­ra­tions seemed to take as gospel. Sisodia also sees this view­point, of neces­sity, as hav­ing to greatly broaden.

“That’s a very nar­row per­spec­tive,” Sisodia said. “It sep­a­rates all of the human actors into two cat­e­gories: some who are a means and oth­ers who are an end. If you think about the peo­ple who get con­nected to a busi­ness, in a way all of them are investors in it. Employees invest a good chunk of their lives, health and capac­i­ties; cus­tomers invest their trust; sup­pli­ers entrust their suc­cess to it. With this idea that investors are the end, you then start to think it’s okay to squeeze oth­ers in order to ben­e­fit one. That’s fine as long as your view of a busi­ness is that it’s a machine and this money com­ing out here is the out­put for the owners.

“But a busi­ness is in fact like a com­plex liv­ing adap­tive sys­tem. Any part of it that is unhealthy can bring down the whole sys­tem; much as if one part of your body gets an infec­tion, the whole body can die. When you start to think about busi­ness that way, you rec­og­nize the inher­ent inter­de­pen­dence and inter­con­nec­tion of stake­hold­ers; and in the long run—and it’s always about the long run—investors can­not profit unless cus­tomers are truly happy and sat­is­fied. And cus­tomers can­not be truly happy and sat­is­fied unless employ­ees are ful­filled and have a sense of mean­ing in what they’re doing. And you can­not do any of that unless you have high-quality inputs, which is where the sup­pli­ers come in.

“Taking a broader view­point, no busi­ness can flour­ish as an island of pros­per­ity amidst a sea of despair; so the community’s health and well-being is very much a part of that as well.

“Recognizing all of this is, I think, one of the big men­tal shifts that has to hap­pen. Whole Foods Market has what they call a ‘dec­la­ra­tion of inter­de­pen­dence’ on their web­site, and that’s how they think of this—it’s all about inter­de­pen­dence with one another.”

The Worthwhile Purpose
“A worth­while pur­pose is like a North Star or a mag­net,” Sisodia explained. “You can think of it as some­thing that aligns everybody’s ener­gies in the same direc­tion. In a com­pany that does not have a pur­pose, all of the stakeholders—the cus­tomers, the employees—start to view each other as com­peti­tors try­ing to get their share of the pie.

“But when you have a shared pur­pose, that’s what dri­ves your deci­sion making—when you, your cus­tomers, your sup­pli­ers and your investors all believe in why the busi­ness exists. In the case of Whole Foods Market, it is about help­ing peo­ple improve the qual­ity and the longevity of their lives through bet­ter edu­ca­tion, nutri­tion and health­ier lifestyles. If every­body believes in that, it then becomes the dri­ver and it becomes a source of energy and inspiration.”

Fostering Creative Energy
Sisodia also sees such a pur­pose fos­ter­ing cre­ativ­ity among the employ­ees. “Ultimately I think that pur­pose really is a func­tion of how much energy one is able to elicit—and by that I mean cre­ative human energy, not just the phys­i­cal energy, the phys­i­cal force. The dif­fer­en­tia­tor across com­pa­nies is ulti­mately how much cre­ated human energy can you release and then har­ness. Companies that have a deeper, richer pur­pose are able to tap into those sources of energy that other com­pa­nies essen­tially don’t have access to.

“In the US over the last ten years, the aver­age level of employee engage­ment has fluc­tu­ated between 26 and 30 per­cent accord­ing to Gallup’s research. That means that any­where from 70 to 75 per­cent of us are sim­ply not engaged in our work; and in fact about 20 per­cent are hos­tile to their work. That’s the aver­age com­pany out there being run from a profit-maximizing standpoint.

“The kinds of com­pa­nies that have a sense of higher pur­pose have these won­der­ful, car­ing col­lab­o­ra­tive cul­tures. In these com­pa­nies you find 90 to 95 per­cent of peo­ple are pas­sion­ate about what they’re doing, and that makes an enor­mous dif­fer­ence in the company’s per­for­mance and ulti­mately finan­cial performance.”

Quality of Leaders
Since a com­pany is run from the top down, lead­er­ship qual­ity is also vital to Conscious Capitalism.

“In lead­er­ship we’ve gone through an inter­est­ing jour­ney over time,” Sisodia con­tin­ued. “If you look at the kinds of lead­ers who used to rise to the top, in the old days they were military-style lead­ers. It was com­mand and control—the gen­er­als who could make deci­sions and then get every­body to fall in line behind them. That is not a sur­prise, because busi­ness as an insti­tu­tion was actu­ally mod­eled on the mil­i­tary in terms of how it was orga­nized. A lot of the ter­mi­nol­ogy that we use—‘strategy,’ ‘tac­tics,’ and we talk about ‘cap­tur­ing mar­ket share’—was bat­tle­field ter­mi­nol­ogy adopted by business.

“At first, these top exec­u­tives were rel­a­tively mod­estly paid; it was really about power. That started to change some­time in the lat­ter part of the twen­ti­eth cen­tury when we began to see a lot more empha­sis on share­holder wealth cre­ation. We then started to have CEOs being paid not only high salaries but also large amounts of stock and stock options. We entered an era where the lead­ers were pri­mar­ily those indi­vid­u­als who were most moti­vated by money. They were promised that if they were able to raise the stock price, they could make tens of mil­lions, in some cases hun­dreds of mil­lions, of dol­lars. In fact we have bil­lion­aires who were cre­ated purely as employ­ees of large com­pa­nies, like Michael Eisner and Jack Welch.

“What we’re find­ing now is that nei­ther of those approaches works very well. They don’t serve to inspire peo­ple, they don’t release the ener­gies of the peo­ple who come to work for the com­pany, and they don’t cre­ate a lot of value for cus­tomers because that is not their focus; their focus is on the bot­tom line.

“The world has changed dra­mat­i­cally in the last twenty or thirty years. People are look­ing for mean­ing and pur­pose. People are more edu­cated and infi­nitely bet­ter informed because of the World Wide Web, and infi­nitely more con­nected because of telecom­mu­ni­ca­tions and social media. Those kinds of lead­ers sim­ply don’t cut it any­more. The lead­ers we have today are dri­ven by pur­pose, peo­ple and ser­vice. In a short­hand way we’ve gone from mil­i­tary lead­ers (dri­ven by power) to mer­ce­nary lead­ers (dri­ven by per­sonal enrich­ment) to mis­sion­ary lead­ers (dri­ven by pur­pose). And we’re now find­ing that those are the lead­ers who are truly effective.”

Beyond Price and Convenience
It’s not only com­pa­nies that must see to these changes; they must be dic­tated from the cus­tomer level as well.

“Customers today should actu­ally look at a broader set of fac­tors than just price and con­ve­nience,” said Sisodia. “They should look for qual­ity and the other things that the com­pany stands for. I think that’s already hap­pen­ing to a degree. There’s more empha­sis on edu­cat­ing con­sumers, and a lot of these com­pa­nies now are find­ing that not only are their cus­tomers there to be sold prod­ucts to, but they’re inter­ested in learn­ing and will­ing to learn.

“Two com­pa­nies in par­tic­u­lar, The Container Store and Panera Bread, are real­iz­ing that their cus­tomers are quite keen to under­stand what these com­pa­nies are like as places to work. Until recently The Container Store never said any­thing to its clien­tele about the fact that they’re one of the best busi­nesses to work for in America—they were num­ber one on that list two or three times in the last ten years. Now they’re dis­cov­er­ing that peo­ple really feel good when they find that out.

“With ris­ing con­scious­ness, we’re going to see more and more cus­tomers tak­ing this approach, and of course there are lots of tech­nolo­gies now that will enable that to hap­pen much more read­ily. We’ll be able to scan the bar­code of any prod­uct that we are con­sid­er­ing and find out a lot about it in terms of how it is sourced and how it’s produced.”

Change Must Come
“Today what we talk about as Conscious Capitalism and con­scious busi­ness is really the excep­tion,” Sisodia con­cluded. “The norm is busi­ness done with the view to max­i­mize prof­its for share­hold­ers. That is not even ques­tioned. It is gospel in busi­ness school and gospel in many com­pa­nies, espe­cially pub­licly traded com­pa­nies. We’re seen as a sort of alter­na­tive approach.

“We want to get to a point where the default becomes the good option, where this becomes the norm, where peo­ple say, ‘Well, of course busi­ness has to start with pur­pose.’ I taught busi­ness for twenty-five years and never used the word pur­pose, because the pur­pose was given to us: it’s to max­i­mize profit; okay, move on. Now we are say­ing, ‘That’s not enough.’ Profit is the out­come of doing a busi­ness well; profit can never be the pur­pose. If it does become the pur­pose, that busi­ness is headed down­hill in a hurry.

“Right now we have a very toxic nar­ra­tive about busi­ness and cap­i­tal­ism that is based upon greed, exploita­tion and self­ish­ness. It is about enrich­ing the few at the expense of the many.

“The real nar­ra­tive about busi­ness is that busi­ness, when it’s done right, is fun­da­men­tally good. It’s based in value cre­ation. It’s fun­da­men­tally eth­i­cal because it’s based on vol­un­tary exchange, and it is noble because it ele­vates our exis­tence above the level of sub­sis­tence where we can explore what it means to be human. It’s heroic because it lifts peo­ple out of poverty; it enables life to actu­ally flour­ish on this planet.

“It should be this way so that the most ide­al­is­tic of our young peo­ple would not auto­mat­i­cally shun the world of busi­ness, say­ing, ‘If I am ide­al­is­tic I can’t have any­thing to do with busi­ness.’ They would rec­og­nize that busi­ness actu­ally is the way for effect­ing change in soci­ety on a broader scale, in a more sus­tain­able way than work­ing strictly for prof­its.”

Resources
Conscious Capitalism is avail­able from the Organic Connections book­store.

For more on Raj Sisodia, check out www.rajsisodia.com.

To delve deeper into Conscious Capitalism, visit www.consciouscapitalism.org.

 

source:

http://organicconnectmag.com/wp/raj-sisodia-conscious-capitalism/#.Udczcm2JmSo