Companies Practicing "Conscious Capitalism" Perform 10x Better
by Tony Schwartz for Harvard Business Review
If you had told me, when I was attending college during the height of the Vietnam War, and the heyday of the counterculture, that several of the most inspiring days of my life would someday be spent with a group of CEOs of large companies, I would have said you were nuts. But that's exactly what I experienced last week, at a small gathering sponsored by an organization called Conscious Capitalism Inc. and held at the Esalen Institute in Big Sur, California.
Even today, "conscious" and "capitalism" remain unlikely bedfellows. Both are freighted words that have come to stand for fundamentally different worldviews. Capitalism is associated with individualism, personal ambition, the accumulation of wealth and power, and an identity grounded in external accomplishment. The word conscious, or more specifically consciousness, is associated with self-awareness, personal development, the greater good, and a worldview that eschews competition, hierarchy, and materialism.
The thesis of conscious capitalism — outlined in a new book of the same title by John Mackey, founder and co-CEO of Whole Foods, and his thought partner, Raj Sisodia, a business professor — is that capitalism can be a force both for economic and social good. Or as Bill George, former CEO of Medtronics, puts it in the book's introduction: "Well run, values-centered businesses can contribute to humankind in more tangible ways than any other organization in society."
I don't kid myself about the unenlightened and even cruel ways capitalism has been practiced by many companies: accumulating wealth for a few while paying most employees subsistence wages; fighting regulation while blithely degrading the environment; avoiding taxes and ignoring responsibilities for the communities in which they're based. The truth is I meet few CEOs or senior executives at large companies who seem to have a vision much beyond the next quarter's earnings, or a sense of responsibility and commitment to their employees, customers, suppliers, and communities that equals their focus on their shareholders.
But I did last week. Even more than anything the eight CEOs I met had to say — and much of it was inspiring — I felt moved by them as people. They made no demands to be treated as "special" during the conference. We all stayed in simple quarters, with no access to cell phone service. They listened when others spoke. And they invested three days with one another for no other reason I could discern than to learn, and build a community of like-minded colleagues.
At the most basic level, consciousness simply means being conscious of more. That begins with self-awareness — the willingness to look inside, to acknowledge our limitations, uncertainties and fears, and to take responsibility for our actions. Mackey has drawn some critical attention for his libertarian views, and I found myself debating with him frequently over the three days. But I also found him to be open, real, vulnerable, and deeply committed to growing and becoming more conscious. How many leaders would be willing to say, as Mackey does: "The company was unable to grow until I was able to evolve — in other words I was holding the company back. My personal growth enabled the company also to evolve."
I also admire leaders who put their money where their mouths are. The Container Store's CEO Kip Tindell explained why he pays full-time sales employees a minimum of nearly $50,000 a year — approximately double the average for retail stores. Put simply, Tindell believes the best and most motivated employees, which he says the store is consistently able to attract, are three times as productive as an average worker. One of the payoffs is a turnover rate under 20 percent — a fraction of the turnover that most of his retail competitors endure.
Consciousness is also about being socially conscious — recognizing and taking responsibility for the needs of the larger community. Blake Mycoskie, who founded Tom's Shoes at age 26, talked about the profitable business he's built on a model of giving a pair of shoes to a child in need for each pair of shoes the company sells. Shubhro Sen, who leads people development for Tata, the huge, privately-owned Indian conglomerate, described the founding tenet of the company that endures to this day: "We earn our profits from society and they should go back into society." Most of the company today is owned by philanthropic trusts.
I took away from these three days a very clear and inspiring message. It's not necessary to choose up sides between consciousness and capitalism, self-interest and the broader interest, or personal development and service to others. Rather, they're each inextricably connected, and they all serve one another.
Raj Sisodia looked at 28 companies he identified as the most conscious — "firms of endearment" as he terms them — based on characteristics such as their stated purpose, generosity of compensation, quality of customer service, investment in their communities, and impact on the environment.
The 18 publicly traded companies out of the 28 outperformed the S&P 500 index by a factor of 10.5 over the years 1996-2011. And why, in the end, should that be a surprise? Conscious companies treat their stakeholders better. As a consequence, their suppliers are happier to do business with them. Employees are more engaged, productive, and likely to stay. These companies are more welcome in their communities and their customers are more satisfied and loyal. The most conscious companies give more, and they get more in return. The inescapable conclusion: it pays to care, widely and deeply.
Reprinted from my April 4, 2013 post in HBR.org.