“Capitalism leads to exploitation which isn’t sustainable. It creates economic inequality, it is anti-democratic, it leads to death of human rights and it increases likelihood of war.”
It is likely that many of us would have heard something along these lines. So how exactly can capitalism evolve?
Conscious capitalism is a philosophy which is of the belief that businesses can improve their corporate performance whilst improving the lives of every stakeholder. Conscious capitalism goes way ahead of Corporate Social Responsibility as it puts society needs at the very reason for the company’s existence. The efforts are naturally driven rather than being reactive.
The founder of Whole Foods Market, John Mackey, states that business can have huge success as well as improving the world around them.
John Mackey states that conscious capitalism is based on four key pillars:
· Higher Purpose: Businesses must have a higher purpose than just making money.
· Conscious leadership: Companies require leaders to want workers to work for a greater goal.
· Conscious culture: Values, principles and practices that allow businesses to have an atmosphere where there is a possibility for success to everyone.
· Stakeholder orientation: Businesses must create value for every stakeholder (customers, suppliers, investors, employees and communities)
TACTILE is a term used to help create a culture for conscious businesses to succeed:
People should be able to instantly feel this culture upon arrival of work. Businesses who adopt this culture would view their suppliers as partners as they are a vital part of achieving the owner’s purpose.
There are various examples of companies that use this sort of conscious culture which is both profitable to the company and society. These companies prove that conscious capitalism, if adopted across the world can help change the world. Take Southwest Airlines for example.
“The business of business is people — yesterday, today, and forever.” The co-founder and former CEO of Southwest Airlines explained in a 2008 speech: “Among employees, shareholders, and customers, we decided that our internal customers — our employees — came first. The synergy, in our opinion, is simple. Honour, respect, care for, protect, and reward your employees regardless of title or position, and in return they will treat each other and their external customers in a warm, in a caring, and in a hospitable way. This causes external customers to return, thus bringing joy to shareholders.”
A Conscious business uses its purpose to make decisions and actions. An example of this can be seen by the purpose of Southwest Airlines: — “We exist to connect people to what’s important in their lives through friendly, reliable and low-cost air travel.”
Herb Kelleher explained “The things you can’t buy are dedication, devotion, loyalty — the feeling that you are participating in a crusade. Do your employees feel as though they are participating in a crusade? Do they have a sense of purpose beyond receiving a pay-cheque twice a month?”
Healthy stakeholders lead to a healthy business system similarly to an ecosystem as conscious businesses focuses on value creation for every stakeholder.
As Herb Kelleher stated, “A motivated employee treats the customer well. A customer is happy so they’ll keep coming back, which pleases the shareholder. It’s just the way it works.”
More recently, Southwest Airlines has become one of the leaders in environmental consciousness with them having their “Green Plane” as well as a “flying laboratory” for environmentally-friendly products.
Southwest’s 50,000 employees are paid well, with stock options, bonuses, profit-sharing and a very progressive culture. This culture helps to understand why 371,202 people applied for 6,370 positions. Southwest Airlines for the past 22 years has been listed in the Most Admired Companies list by Fortune. 17 times out of the 22 they have been listed in the top 10 which is a very impressive record in the struggling airline industry.
“If you can’t have fun,” he said, “you don’t fit in at Southwest.”
Whole Foods Market
Conscious Business has shown when executed correctly that it works. John Mackey of Whole Foods explains “Although it may sound counter-intuitive, the best way to maximise profits over the long term is to not make them the primary goal of the business.”
There is a growing shift to the left who believe in stronger union power and government regulations as they have sold the idea that this would be better for employees. Mackey is a libertarian who has strong anti-union and anti-government regulations views. Mackey has his salary capped to the average employee pay with his employee able to enjoy benefits such as health care saving plans. This has led to reports of very high levels of happiness at the workplace. The company encourages promotion within and is regularly listed in Fortune’s “Best 100 Companies to Work For.” He is a clear demonstration that capitalism can work for everyone. Local and regional managers have the ability and autonomy to decide what products they choose to use and which suppliers they prefer.
In 2006, Whole Foods purchased wind energy credits that covered the full 100% of their building energy needs. Furthermore they refuse to stock any products that have come from endangered species and habitats.
Mackey states Whole Foods Market was initially meant to just sell healthy food and have fun. However, their purpose extended to educating people to eat healthier, reduce obesity and to protect the environment. They have further expanded to help end poverty throughout the world through Planet Foundation as well donating 5 to 10% of their profits to good causes. When a business like this is able to communicate its value and purpose, it naturally attracts stakeholders (customers, suppliers, investors and employees) that also align with their vision and philosophy.
The Container Store
The Container Store has their own philosophy which is based on ensuring their employees and customers are valued highly and treated with respect. The company hold events such as “National We Love Our Employees Day” and that is not all. Full-time sales staff earn around $50,000 per year which is more than twice the minimum wage and this has led to a staff turnover rate of less than 20%. Unsurprisingly they are ranked very highly in Fortune’s “Best 100 Companies to Work For.” They are involved in the local communities of where the stores are located and host a number of events for charities and local organisations in need.
CEO Kip Tindell says, “We put the employee first because we think that if you take better care of employees than anybody else, she’s going to take better care of the customer than anybody else. If those two people are ecstatic, then wonderfully enough, your shareholder’s going to be ecstatic too.” Conscious business builds value by reinvesting in their communities. By doing so they can solve social problems and this goodwill brings loyalty to their brands.
Costco may be penny-pinchers with regards to stock but they are generous in giving to communities and labour expenses. The company starts employees at $13 per hour which is more than most retailers but cashiers through bonus schemes can earn up to $56,000 a year. They view long-term employees as vital people to their franchise.
Costco write: — “With respect to expenses relating to the compensation of our employees, our philosophy is not to seek to miniseries their wages and benefits. Rather, we believe that achieving our longer-term objectives of reducing employee turnover and enhancing employee satisfaction requires maintaining compensation levels that are better than the industry average for much of our workforce. This may cause us, for example, to absorb costs that other employers might seek to pass through to their workforces.”
Unsurprisingly, Costco too ranks as one of the top companies to work for with around 6% staff leaving the company each year. Paying above-market wages is good for the company too as hiring is an expensive process and it enables employees to make Costco more productive.
Conscious Capitalism enables you to embrace capitalism, free markets, seeking profit but at the same time build a business with a higher purpose as well as the other three pillars stated above.
This is not industry specific as demonstrated with the companies listed above.
The world is changing, global pressures, very uncertain economic times and the growing environmental issues call for a new age of capitalism. As we seek to find new ways of combating the economic issues we currently face, we should look to encourage businesses and companies to adopt more conscious capitalistic policies. Of course not all businesses or companies are going to have leaders such as Herb Kelleher or John Mackey so standards must be put in place. Whether it is Governments putting forward legislation to reward and encourage businesses to adopt conscious businesses practices or whether its individuals around the world pressuring businesses, changes can be made.
As we see the alarming wage disparity, it is vital for people to understand that modernisation of capitalism has the answers.