Raj Sisodia on Conscious Capitalism (Awesome)
June 19, 2010 · Print This Article
Session 10, Raj Sisodia on Conscious Capitalism
EO/MIT Entrepreneurial Masters Program
Year Two, June 19, 2010
I am getting so much value from this session by Raj Sisodia on Conscious Capitalism. Wow this was awesome!
Raj an annual conference on Conscious Capitalism called the International Research Conference on Concious Capitalism. The next one is coming up May 24-25, 2010. This is focused more on thought leadership than the C3- Catalyzing Conscious Capitalism in Lake Arrowhead October 19-22, 2010.
Here are my notes from the session…
Raj’s book is Firms of Endearment: How World-Class Companies Profit from Passion and Purpose with co-authors Jag Sheth and David Wolfe. I just ordered 8 copies for my senior team to read in July.
Double Bottom Line Means a Bigger Bottom Line
He has data showing companies get a better financial bottom line when you focus on getting a double bottom line (social and financial) and create an awesomely engaging work environment. Companies with humanistic profiles are outperforming the S&P by 9 to 1 over 10 years.
Example companies from the data set are: Google, Southwest, WholeFoods, Costco, CommerceBank, Amazon, Ebay, Johnson and Johnson, Timberland, UPS, Carmax, JetBlue, HarleyDavidson, CAT, Honda, Starbucks, Toyota, BMW
Good to Great companies that have suffered:
- Circuit City
- Fannie Mae (got involved in mortgage crisis)
- Phillip-Morris (this year 6 million people will die directly from tobacco and this is growing)
He says don’t define greatness only by financial performance, but by the net impact of the business on the world.
“The majority of the public believe that executives are bent on destroying the environment, cooking the books and lining their own pockets.” New York Times
There’s a collective price we pay for the cynicism and mistrust of business.
“The dogmas of the quiet past are inadequate to the stormy preset.” – Abraham Lincoln
The Case of Whole Foods
100 years ago: 16% on food and 8% on healthcare
Today: 8% on food and 18% on healthcare
Whole Foods have 1800% return to investors in 10 year period.
John Mackey, the CEO of Whole Foods, took salary down to $1 in 2006 and decided to donate future options to foundation. Signed letter ‘Much Love. Here’s the actual letter.
John Mackey wanted to build a business based on love not fear.
No one at Whole Foods gets paid more than 19x the average employee (average $40,000 highest $750,000). Typical ratio at publicly traded company in 500 to 1.
Make your employees live for the work week not just for the weekends.
You are most alive when you are in a state of flow. Create a work environment where the team can enter a state of flow.
Link your personal passion and your corporate purpose.
Get rid of people who infect an atmosphere with negativity.
At end of training at Zappos, they offer employees $2000 to quit if they don’t want to be there.
Business is more and more about caring. If you don’t care you won’t be in business.
- The Future of Management by Gary Hamel.
- Peak: How Great Companies Get Their Mojo by Chip Conley
- Delivering Happiness by Tony Hsieh
- Thank God’s It’s Monday by Roxeanne Emmerich
- It’s Not What You Sell, It’s What You Stand For, Why Every Extraordinary Business is Driven By Purpose by Roy Spence
- The Dream Manager by Matthew Kelly (class recommendation)
- Man’s Search for Meaning by Viktor E. Frankl
- The Theory of Moral Sentiments by Adam Smith
What is a Great Business?
A great business maximizes “total value created” on a sustained basis and distributes that value in an equitable and enlightened manner among all its stakeholders.
Be a company that is on the right side of society, that is good for the world.
Businesses create or and destroy many kinds of wealth.
What is Concious Capitalism?
It’s about a higher purpose (not just profits), stakeholder orientation (not just shareholders), conscious leadership (not command-and-control), and conscious culture (you can feel it/see it).
Be about mission and values and purpose. Why? Employee engagement.
Concious Capitalism is: relationship-driven, holistic, characterized by compassion, empathy, love, authenticity, and transparency, and reflective of more feminine energies and competencies.
Women are often better leaders. See this Atlantic piece on The End of Men.
From the Book ‘It’s Not What You Sell, It’s What You Stand For’ by Roy Spence
- Purpose is a definitive statement about the difference you’re trying to make in the world.
- It drives everything you do
- It matters to all stakeholders
- It is your reason for being that goes beyond making money
- Yet… it almost always results in making more money than you ever thought possible
Examples of Companies with Purpose
- Johnson & Johnson – Alleviate pain and suffering
- Southwest Airlines – Give people freedom to fly
- Whole Foods – Make people, the food system, and the planet more healthy
- Google – Organize the world’s information and make it accessible
- REI – Reconnect people with nature (kids spend 55 hrs per week in front of a screen and 1 hour per week out in nature)
Four Company Purpose Archetypes
- The Good – Service to other ethical evolved
- The True – Based on science, analytics
- The Beautiful – Excellence and perfection, aesthetics, delight
- The Heroic – Changing and improving the world
The Purpose Motive: Compensated engagement is going down, uncompensated effort going up, volunteer work is nourishing people in a way that paid work simply is not. Need to shift the focus from profit maximization to purpose maximization.
Be about doing something meaningful in the world.
The Search for Meaning
From ‘Man’s Search for Meaning’ by Viktor E. Frankl
“Happiness is the outcome of living a life that has meaning and purpose.
“Happiness cannot be pursued; it ensues from living a life of meaning and purpose.” – Viktor E. Frankl
Meaning comes from:
- Doing work that matters
- Selfless love
- Finding meaning in suffering
The formula: Despair = Suffering – Meaning
- “Leading by intimidation, by rank, or even by charisma alone is insufficiency because those who are supposed to follow are becoming self actualized and they won’t accept this outmoded style of leadership any more.
- The more self-actualized people become, the more we’ll need seal-realized leaders who demonstrate mastery at serving some higher purpose and choose the right action.
To Build a Conscious Culture
Make it tactile (visible and touchable). Transparency, authenticity, caring, trust, integrity, learning, empowerment.
Paraphrasing a video from Gary Hamel shown by Raj: The management model from the industrial age is outdated. Create an environment the preserves passion. This will drive value creation in the creative economy. The question is how to reinvent management to enable team members to bring passion to work. Create companies where employees can bring all of themselves to work. Build companies that are fit for human beings.
“You can’t command imagination, creativity, or passion!” – Gary Hamel
Stakeholder Acronym: SPICEE = Society, Partners, Investors, Customers, Employees, Environment
In our world, we are all in the same boat.
In the future, you will have to operate with all stakeholders in mind to be successful.
A Historical Look
1776 – Same year Wealth of Nations and Declaration of Independence published. For the first time in human history man was in charge of their own destiny within a world of law. Age of Empowerment.
1850 – Age of Industrialization
1900 – Technology breakthroughs. Einstein, electricity, Marconi, telephone, radio, television. The birth of modern marketing. Age of Knowledge.
1989 – Berlin Wall collapses, Tienanmen square, Exxon-Valdez spill, Fatwah against Salman Rusdie. Fukayama’s essay “The End of History” The debate was what type of free market, what type of democracy. A new cultural age has emerged in which the consuming focus on materialistic gain that marked the Age of Knowledge is ebbing. Now we are in the Age of Transcendence.
The Zeitgest is Shifting
The zeitgeist is shifting from the strong self-indulgent me orientation of the 20th century society toward a stronger sense of interdependence with others.
In USA, there are now more adults over 40 than under 40. The Internet was invested by Tim Berners-Lee in 1990, which has shifted balance of power and making the world more transparent.
We are moving up Maslow’s hierarchy from survival, to success, to meaning.
Why New Balance is growing faster than Nike. Nike appeals to self-centered masculine-dominated youth. New Balance appeals to self-actualized older more feminine oriented individuals.
Human beings are not a resource. Coal is a resource. Turned on, a human being is like the sun. A source of regenerating energy.
“I would not give a fig for simplicity on this side of complexity, but I would give my life for the simplicity on the other side of complexity.” – Oliver Wendell Holmes, Jr. US Supreme Court Justice.
Humanity is one spirit. Natural resources are finite. Our inner resources are infinite.