Building Conscious Capitalism by Inspiring People and Stakeholders

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1 Book Summary L06/2014 Public Affairs Building Conscious Inspiring People Profits for a company are like red blood cells for people, but are profits the only thing that matters? Life needs other motivation reasons that would inspire stakeholders to trust and love those companies that have a superior life purpose that determines their behaviour. The sixth President of the United States John Quincy Adams once said If your actions inspire others to dream more, learn more, do more and become more, you are a leader. For the founders of conscious capitalism (an idea that developed into a new social movement in the United States), a leader is someone conscious of developing and using one s emotional and spiritual intelligence in order to love and care about people and the environment. Top executives of famous companies such as Whole Foods Market, Google, Starbucks, Tata, Southwest Airlines, Patagonia or UPS, support Conscious Capitalism and take part in the activities aiming to implement the model, where the fundamental value is not gaining profit, but accomplish a social mission and by doing this achieve superior returns. Social Consciousness on the Rise The role of social consciousness in the management and performance of companies becomes crucial at the moment when a consumer decides what to buy and where to do it: according to NPS Group s market study published by Bloomberg in April 2013, only 25% consider social consciousness of companies unimportant as opposed to 34% who consider it very important and 40% who believe it is somewhat important. Another study by Nielsen published in March 2012 confirms that almost half (46%) of 28,000 consumers below the age of 40 in 56 developed countries are ready to pay a premium to the price for products and services produced by socially responsible companies. The importance of conscious and responsible behaviour is increasing, it meets the social demand of citizens who no longer content themselves with the quality of products and services, and a good quality/price relationship. Consumers appreciate the presence of such values as integrity, transparency and care about the stakeholders. The New Credo of Conscious Capitalism Conscious capitalism inherited features of different movements and currents in the United States. It argues that the idea of capitalism is above purely economic considerations, meaning that the passion and commitment of business leaders and employees in the process of managing companies and creating value for different stakeholders is a solid base for building a new business model. This document was prepared by Corporate Excellence Centre for Reputation Leadership, and contains references to Conscious John Mackey, Co-CEO of Whole Food Market, and Raj Sisodia published by Harvard Business Review Press in 2013.

2 Conscious capitalism implements the model, where the fundamental value is not gaining profit, but accomplishing a social mission and by doing this achieving superior returns. Graph 1: Importance of Company s Social Consciousness In Choosing Where to Shop, What to Buy Very important Somewhat important Not at all important Source: Bloomberg, % 34 % 40 % Based on the ideas such as those published by Raj Sisodia several years ago in Firms of Endearment: How World-Class Companies Profit from Passion and Purpose, by Jim Collins in Good to Create, or by John Kotter and James Heskett in Corporate Culture and Performance, as well as international organizations such as Great Place to Work (GPTW) and Gallup working in the area of talent management or Ethisphere in the area of CSR, conscious capitalism aims to achieve superior financial results by implementing equally superior business vision and philosophy. For John Mackey, the Co-CEO of Whole Foods Market, a chain of supermarkets operating in the United States, Canada and the United Kingdom that revolutionized the sector with its emphasis on natural and organic foods and turned into the leading international retailer in the this category, conscious capitalism may be integrating by implementing four elements: 1. Create a business and become a conscious capitalist: encourage the entrepreneurship spirit, free will and beneficial exchange for all involved parties. 2. Care about your stakeholders and recognize the power of love: support your stakeholders in their needs and they will support you when you need it. 3. Bear in mind that business contributes to personal development: it develops inner creativity and thus helps to change the world. 4. Understand that life is short and think what you will leave behind, enjoy life and fill it with creativity and love for people. Four Steps and Essential Principles In order to make these principles operational, it is necessary to develop the model of conscious capitalism: a virtual community open to all groups and communities and based on four principles: 1. Higher purpose: a company should aim for something higher than pure business. 2. Conscious leadership: leaders should be aware of emotional and spiritual intelligence. 3. Conscious culture: creating trust based on mutual respect. 4. Social dialogue: stakeholder orientation and integration. Superior Purpose Based on Values The search for purpose different from business mission and vision is fundamental for justifying our existence, the reason for doing our job, and understanding in what way our existence and presence on the market makes this world better, i.e. how we contribute to the well-being of people. Below are some examples of companies with a superior purpose: Southwest Airlines: Give people the freedom to fly. Disney: Use imagination to make people happy. Johnson & Johnson (J&J): Relieve people s pain and suffering. The same focus and promise was also adopted by Procter & Gamble (P&G), when the company aligned its strategic focus developed by CEO Robert McDonald with a higher purpose, expressed in the tagline What s good for everyone is good for business, and what s good for business is good for everyone. P&G believes that four prerequisites are needed to make this true: 1. Results: return for shareholders as well as value for commercial brands and the corporate brand. 2. Humanity: freedom of choice and health for consumers. 3. Environment: protection of the planet and efficient use of energy 4. Talent: investment in people and their development. In any case, values guide companies on the path towards achieving the objective in their day to day operations, in their relations with the stakeholders and more importantly, in their internal organization, in how leaders manage talent. Book Summary 2

3 Graph 2: Four guiding principles Stakeholders are the essence of business, they contribute to creation of shared value and its efficient and fair distribution in the society. Source: Boothster, Emotional and Spiritual Leadership This approach points to the need to overcome the traditional model of next-to-military or mercenary leaders and move towards the model of missionary leaders able to accomplish the business mission by means of emotional and spiritual leadership as well as combining the knowledge of oneself with the knowledge of others. According to conscious capitalism, the capacity to love and care, as opposed to the capacity to intimidate and punish is one of the competencies required of conscious leaders, which helps them to work towards the common and shared purpose described above. This means that they don t need to be charismatic, but they do have to be effective in achieving their objectives especially by avoiding a model where an organization depends on his or her presence. A Conscious and Trusted Culture In the 1970s, famous business strategist Peter Drucker said that culture nurtures strategy. Today this statement is supported by Gary Hamel, an expert on innovations in management, and Mark Field, Ford s CEO in That s why Conscious Capitalism stresses that conscious culture is important at the time of implementing changes in the mentality and action framework of companies. Conscious culture draws on seven basic principles described by the world tactile : 1. Trust: both internally and externally, with all stakeholders. Trust in people. 2. Accountability: to the colleagues and customers. Fulfilling one s promise. 3. Care: key motivation for humans to love and to be loved. Care about people. Book Summary 3

4 4. Transparency: secrecy in business almost doesn t exist. Information is shared. 5. Integrity: ethical standards are more stringent than official legal requirements. Always tell the truth. 6. Loyalty: getting rid of the approach what have you done for me recently?. Stand by your promise. 7. Equality: do not divide the company into leaders and the rest. Avoid privileges. Conclusion: Social Dialogue With the Stakeholders Finally, in the conscious capitalism model, stakeholders are considered to be the essence of business. Stakeholders include all those who affect or are affected by business and contribute to creation of shared value and its efficient and fair distribution. Below are the six most important groups of stakeholders and the qualities that should describe them: 1. Loyal and trusted customers: they may become the company s ambassadors. 2. Motivated and inspired employees: happy in their workplace. 3. Patient and purpose-driven investors who avoid speculation. 4. Suppliers who cooperate and innovate partners, not adversaries. 5. Prospering and respected communities who are treated as citizens. 6. Healthy and vibrant environments that may become sustainable over time. Book Summary 4

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