Better business: Meet Conscious Capitalism
There’s something in the air.
McDonald’s announced in February it was working with its pork producers to phase out gestation crates for its pigs.
In March, at the annual Starbucks company meeting, chairman and CEO Howard Schultz told the gathering, "The value of your company is driven by your company’s values."
In the broader business arena, Greg Smith, a former Goldman Sachs executive, took to the op-ed page of The New York Times and eviscerated his former employer, writing, "It makes me ill how callously people talk about ripping their clients off."
And, of course, leading this embrace of values-driven business practices, in 2010 Panera Bread launched its Panera Cares initiative; Panera units—three currently—where customers pay what they can afford for a meal.
There’s a reason these headlines stand out, isn’t there? They are not what we expect from profit-obsessed corporate America, a group with a lower approval rating than the U.S. Congress, a recent survey showed.
Last October, Ron Shaich, co-CEO of Panera Bread and Guest Editor of this issue of Restaurant Business, wrote for the Harvard Business Review, "By serving narrow self-interests, we—the business people of this country—basically facilitated this mistrust. We have been purveyors of our own doom. There’s a reason the Occupy Wall Street movement was hatched and a reason why its message is growing more pervasive."
With that in mind—and drawing on his own business success—Shaich decided, as editor, he wanted to see this issue of Restaurant Business focus on something called Conscious Capitalism.
"Conscious Capitalism is an expression of how I’ve always found success in the restaurant industry," Shaich says. "I think that our whole society, our corporate society would be… better served if they think about their businesses in relationship to it. My greatest hope is just to open people’s minds to better ways to do [business]."
Restaurant Business editors worked with Shaich and his team to develop and edit stories in the MonkeyDish section and feature well of the magazine. Skills and Menu R&D are not part of the guest editor issue.
While the flickers of humanity some businesses are beginning to show in the headlines above point to a general trend, Conscious Capitalism represents a business strategy, a way of running every aspect of your company that brings profits as a byproduct of bringing greater value to all a company’s stakeholders—employees, vendors, customers, the community—rather than just the shareholders.
Profit as a byproduct—rather than a central concern—is a revolutionary concept, but one that seems to make more sense every day as Conscious Capitalist companies like Whole Foods, Trader Joe’s or Panera itself show industry-leading profits.
The main tome of the movement is Firms of Endearment, written in 2007 by Rajendra S. Sisodia, a professor of marketing at Bentley College with PhDs from Columbia.
The book can be off-putting to the traditionally minded businessperson, with its focus on things like how "corporate America has too few leaders who open their mental ears to their inner voices." Or its unabashed use of "love" as a guiding business principle.
However, with charts showing the performance of an index of Conscious Capitalist firms producing an aggregate return of 1,026 percent over 10 years—far surpassing the S&P 500—it becomes easier for the uninitiated to appreciate the concept.
You’ll get a deeper understanding of that concept as you read this issue. But the basic idea is that by bringing value to shareholders—looking after employees beyond what is required, making sure vendor relationships are win-win, returning capital to the community rather than just taking—you create a deeper, more meaningful relationship with customers. You earn a level of trust with them that translates into a level of brand loyalty you can’t acquire through traditional business means. And, as Sisodia points out, it "is not about corporate social responsibility. It is about sound business management."
Sisodia argues that Conscious Capitalism has gained a foothold in today’s market due to societal pressures. Primary among them is the Internet, and its ability to make businesses more transparent whether the business wants it or not. The uproar over "pink slime"—the processed beef product chemically treated to kill off bacteria and used as a hamburger additive—is a prime example. It is hard to imagine the product being exposed or the kind of brush-fire response before social media.
Customers are armed with more information about your business practices, and they are acting on their values. If you share their values, great; if you don’t, look out.
Sisodia also points to the aging population as a contributing factor, arguing that the attributes of older Americans—mainly a greater reliance on subjective determinations of values rather than relying on "the ‘herd’ behavior that is so prevalent among youth"—is driving people toward fulfillment based on what they feel is really important in life.
Whether he has correctly identified the triggers for this "Age of Transcendence," as he calls it, his idea of firms of endearment has found many adherents through the Conscious Capitalism Institute, where he is an "ambassador." See the story on page 44 for some examples of businesses who’ve bought into the concept and their advice for you.
"You often hear CEOs say that their first obligation is to their shareholders," Shaich recently wrote. "I agree, but shareholders are served best when CEOs focus on serving the range of stakeholders involved in a company first. We have to remember that public companies are chartered to serve our society, not simply the shareholder. In the end, long-term shareholder value is delivered when companies relish their broader role. Today we call it Conscious Capitalism; tomorrow a new term will emerge. Whatever the name, we need more of it."