Conscious Capitalism: New Models for 21st Century Business
by Gael O'Brien
I heard a CEO recently say that his company has had a compound annual growth rate for sales of 29% since 1978 and an employee turnover rate of about 5% compared to an industry average of 110%. Those are numbers that get your attention.
When the same CEO talks about the trust that has been built in business relationships and characterizes the energy felt in the company as “joyful,” it is pretty evident his company isn’t Toyota, Goldman Sachs, Massey Energy, BP or a number of other companies that have recently been working out of crises.
Actually, he is talking about The Container Store. While many companies tout the importance of their people, Chairman and CEO Kip Tindell explains that for the Container Store “putting employees first is a profit strategy.” Employees are the #1 stakeholder. Paid 50% to 100% above industry average, Tindell says they receive about 240 hours of training compared to the industry average of seven hours. “You have to have a high level of service,” he explains, “to sell empty boxes.”
At the heart of his comments is the importance of the Foundation Principles Tindell created when Container Store was 10 years old and expanding. He wrote the principles so that new employees could better understand the culture. One of the principles is “communication is leadership.” He uses words like “consistent, reliable, predictable, effective, thoughtful, compassionate and courteous” to describe what communication looks like in the company. He says unabashedly, “We tell employees everything.”
Tindell characterizes the relationship with employees, suppliers and customers as being fun for everyone, where everyone is engaged. A byproduct, he feels, is that people identify with the brand so much they feel a part of it, passionately interested in helping the Container Store succeed. That was evident, for example, during the worst of the recession when suppliers gave the company better deals than they did others.
Tindell shared his stories at a conference on Conscious Capitalism at the end of May 2010 sponsored by the Conscious Capitalism Institute (CCI) and Bentley University. He was joined by Gary Hirshberg, founder and CE-Yo (yes, that’s the title) of Stonyfield Farms, which is the world’s largest organic yogurt producer, and Doug Rauch, who served as president of Trader Joe’s for the last 14 years of his 31 years with the company.
Stories about how purpose drives the business, how customers connect with the emphasis put on saving the environment, and how customers and employees are treated begin to create a different definition of “business as usual” for these companies.
Hirshberg tells those in attendance that he started Stonyfield 27 years ago with a question: “Is it possible to create an enterprise where everybody wins?” Stonyfield’s compound annual growth rate of over 24% in the last 18 years has successfully blended the company’s social, environmental and financial missions, he says. Trader Joe’s, explains Rauch, operates a purpose-driven business where employees know their opinions, as well as their advancement, matter; customers have made it more profitable than Whole Foods. (John Mackey, Whole Foods Co-CEO, is also one of the leaders of the Conscious Capitalism movement.)
CCI, established a year ago, needs a broader array of stories going forward from leaders in other industries to illustrate the principles of companies driven by more than profit making a difference in the world. CCI wants to be the “knowledge hub” for the movement offering collaboration between corporations, research faculty at business schools, and thought leaders from consulting organizations.
Obviously, the idea behind a purpose-driven company didn’t start with Conscious Capitalism. Decades ago companies like the ones mentioned and others like Johnson & Johnson, Levi Straus, the Body Shop, and Ben & Jerry’s created strong brand loyalty around the quality of their products, loyalty to their customers, and the commitments they made to the world in which they lived. Fathers and mothers of operating with clearly expressed values and modeling the benefits of corporate social responsibility, they created a higher playing field for business.
However, as James O’Toole of the Daniels College of Business, University of Denver pointed out at the conference, a virtuous company is hard to sustain over time and especially if leaders change. Companies like Johnson & Johnson, Xerox, and Herman Miller are still around and their commitments regarding how they want to operate are intact even if interrupted or watered down at various times.
O’Toole, Daniels Distinguished Professor of Business Ethics, raised a critical question CCI and others will need to address: How can a “virtuous company” be made to last beyond its founder’s involvement with the company?
Conscious Capitalism is emerging at a time when how business operates is at a crossroad. It advances an approach by which a company can be profitable while also safeguarding trust, reputation, and credibility with stakeholders. It supports leaders in achieving their human potential and through that their business potential.
Raj Sisodia, co-founder and chairman of CCI and a professor of marketing at Bentley University, observes that traditional leadership models have outlived their usefulness. “The more self-actualized people become, the more we’ll need self-realized leaders who demonstrate mastery of serving some higher purpose and choosing right action.”
Conscious Capitalism is also at a crossroads. If it can learn from the success and missteps of other movements its voice will have more weight. It will need to determine what is a realistic bar for companies to measure themselves against as CCI seeks to change the way companies do business.
It will also need to address how founders pass on their purpose-driven passion to successors, and beyond that, how, from CEO to the next leader, cultures can maintain the focus on operating from a purpose bigger than delivering profit to shareholders, while keeping employees engaged, customers loyal, trust high, and reputation and financial strength intact.
In developing relevant research and providing a credible forum for the stories that demonstrate what is working and what isn’t, CCI has the opportunity to shape the future of the movement. It is a tall order but more than most people the leaders of Conscious Capitalism subscribe to the notion that the greatest opportunities emerge from the biggest challenges.
Gael O’Brien joins Business Ethics as a columnist. Gael is a thought leader on building leadership, trust, and reputation and writes The Week in Ethics, a weekly column at http://theweekinethics.wordpress.com