What is conscious capitalism?
Organic Connections, the magazine of Natural Vitality, talks with conscious capitalism expert Raj Sisodia on how companies are conducting themselves with a higher purpose and changing the way business is done.
July 17, 2013
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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.
Discovering a new way of doing business
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.”
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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.