The End of Business as Usual: A Case for Conscious Capitalism
February 4, 2019
"This is what we know to be true: business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity. Free-enterprise capitalism is one of the most powerful ideas we humans have ever had. But we can aspire to even more. Let us not be afraid to climb higher."
– John Mackey, Conscious Capitalism: Liberating the Heroic Spirit of Business
Conscious capitalism is quickly becoming the new status quo for modern business. It’s no secret that Millennials and Gen-Z are using their purchasing power to support businesses that align with their values. They are “activist” generations who also want to do good though their work. In fact, 88% of Millennials feel their job is more fulfilling when they have the opportunity to make an impact. But it’s not just Millennials. Overall, 93% of employees want to work for a company that cares about them as an individual.
The businesses these younger generations support, both who they buy from and who they seek to work for, are outstanding at creating value. They care deeply about the welfare of their people and about the overall impacts on all stakeholders.
There is a growing movement among many young people to avoid organizations who do not promote progressive policies and ethical practices. So much so that business leaders need to create a compelling reason why people should want to work for their organization.
What is Conscious Capitalism?
Capitalism is the greatest system of wealth creation in recorded human history. However, most businesses miss the point and potential of such a powerful tool. These businesses view their existence purely as a means to maximize profit to shareholders and treat all participants in the system as a means to an end. In his book, Conscious Capitalism: Liberating the Heroic Spirit of Business, founder and Co-CEO of Whole Foods Market, John Mackey, provides a different view. He explains,
This approach may succeed in creating material prosperity in the short-term, but the resultant price tag of long-term systemic problems is increasingly unacceptable and unaffordable. Too many businesses fail to recognize the significant impacts they have on the environment…and on the physical health and psyches of team members and customers. Many businesses have created stressful and unfulfilling work conditions…The myth that profit maximization is the sole purpose of business has done enormous damage to the reputation of capitalism and the legitimacy of business in society. We need to recapture the narrative and restore it to its true existence: that the purpose of business is to improve our lives and create value for stakeholders.
The view that money is the only measure of value is a narrow one. Businesses can create value for many different stakeholders: employees, customers, vendors, the environment, their community and so on. This type of value creation extends the limit on human ingenuity, collaboration, trust, as well as material wealth.
There are numerous types of wealth that are either generated or destroyed by business practices. These include financial, mental, physical, spiritual, emotional, environmental, social, and intellectual wealth. Mackey writes, "A business that generates financial wealth but destroys other forms of wealth (which can have greater impacts on people’s well-being adds far less value to the world than it is capable of. If it destroys enough of the other kinds of wealth, the business has a negative net impact on the world."
Shifting perspective to a more conscious vantage point allows leaders to look at their operations as a piece of an interconnected system. Doing so reveals opportunities to capitalize on value for stakeholders that would otherwise have gone unnoticed and unmaterialized.
Conscious Businesses Get Results
Conscious businesses like Southwest Airlines, IKEA, Warby Parker, Patagonia, Costco, The Container Store, and Whole Foods Market provide quality products at a fair price while also building causes into their mission and business model. These types of companies perform extraordinarily well in comparison to the S&P 500.
Conscious business practices are not simply about doing what is right or nice. The benefits elevate the well-being of those in the organization while simultaneously benefiting the bottom line through reducing turnover, increasing engagement, attracting the best talent, reducing negative conflict, and sparking innovation. Better employee health and well-being means less of what we all don’t want: burnout, turnover, and negative workplace interactions; and more of the good stuff: engagement, fulfillment, and happiness.
These positive outcomes are important because companies with highly engaged workforces outperform their peers by 147% in earnings per share. Additionally, in a review of over 200 studies, 88% showed that good environmental, social, and governance practices result in better operational performance and reduces the average turnover rate by 25-50%.
Leading with Conscious Capitalism at the core of the business inspires, motivates, and energizes an organization. This can lead to extraordinary results for a business. Studies show that “Inspired” employees are much more productive than employees who are merely satisfied. By focusing on adapting your business management operations to align with Conscious Capitalism, leaders will be better equipped to bring their team to their highest potential.
Integrating Conscious Capitalism
Conscious organizations foster:
- A deeply meaningful, higher purpose
- Loyal customers
- Engaged and passionate employees
- Collaborative and innovative suppliers
- Healthy communities and environment
Here are some questions to work through:
- What are the ways in which your business currently creates value? Where are the opportunities to increase that value to your system of customers, employees, the community, and other stakeholders?
- What are you investing in? Are you working toward increasing your employee happiness, engagement, and fulfillment through initiatives like onboarding and continuous personal and professional development? How are you creating a great customer experience? Study after study shows that happy employees usually means happy customers.
- Are you promoting and developing Conscious Leaders?
You can’t have a conscious business if your leadership is not conscious. Mackey says, "Leadership in the third millennium must be based on the power of purpose, love, caring, and compassion. Conscious leadership is fully human leadership; it integrates the masculine and feminine, the heart and the mind, the spirit and the soul."
Who doesn’t want to work for a company that has soul? Leaders have a responsibility to become more conscious. As leaders evolve and grow, so will the organization.
We live in a rapidly changing, interconnected world where the solutions of the past will not work for the problems of the present and future. The changing culture and growth in popularity of conscious business practices leaves businesses with a clear choice. Leaders must adapt a more conscious way to operate if they want to continue to grow, develop, and lead the 21st-century. That road starts with finding the right people to help you get there.
We can settle for the way we’ve always done things, or we can harness the power that Conscious Capitalism brings to create meaningful value in ourselves, our teams, our organizations, and all stakeholders involved.
Let us help your business create a more cooperative, humane, and positive future. To learn more about how to become a more conscious business, contact Sprout Leadership today.