Conscious Capitalism - Qfactor Performance Consulting

Conscious Capitalism is transforming business – for Good – the Collective Good!

The old mindset in business, and the stereotypical capitalistic mindset has a bad brand, for good reason.

However the tide is turning, and the Good businesses, the future Great businesses are embracing Conscious Capitalism.

A New Era has Dawned – Conscious Capitalism

The world is changing rapidly, challenging many old business ideas and methods committed to the Industrial age of thinking. This isn’t to say that they don’t work rather than to say, companies are maturing around what works from the industrial age and extending into an era of connected thinking – serving aligning motivations and empowering wins for all stakeholders.

Customers
Shareholders
Employees
Communities

With direct stakeholders: employees and customers looking for more meaning in their lives, organizations today are reconsidering how they conduct their business, and many are turning to a new approach called Conscious Capitalism.

Raj Sisodia is a distinguished Professor of Global Business and Whole Foods Market Research Scholar in Conscious Capitalism at Babson College, and one of the founders of the movement, describes Conscious Capitalism: “We see business in a much broader way. It should have a sense of purpose that goes beyond profit.”

Conscious Companies are forward about their mission in life [for instance, Empowering leaders, Transforming Communities and lives to thrive]

Conscious Companies are forward about their Values
Conscious Companies are forward about their Principles
Conscious Companies are forward about their impact on their Community
Conscious Companies are forward about their Leadership

Growth in consciousness

Over recent decades, the world has undergone many dramatic changes. In the last 25 years alone:

The web has brought a profound increase in information access, transparency and connectivity. This has created a world with more conscious and connected employees and consumers, who are more aware than ever before of the behaviour of businesses.
The increase in the mean age of adults to well above 40 in many western countries has resulted in a shift in values, because people tend to become more driven by meaning and purpose once they enter middle age.
More emphasis has begun to be placed on values traditionally thought of as feminine — nurturing, caring and collaboration.

“Conscious Capitalism asks whether business can be done with a much broader set of values and with a sense of purpose that goes far beyond making a profit.”
John Mackay

The rate of change is only likely to increase in the coming years. The Millennial generation (comprising those born between the early 1990s and the early 2000s) is highly aware of the problems facing the world. Millennials want their work to be part of a solution to these problems and are not just motivated by the thought of maximizing their own salaries.

Together, these big trends mean that people are increasingly conscious of the cultures and working practices of different organizations. They are less likely to want to work for or purchase the products of, businesses whose values are in conflict with their own.

What is Conscious Capitalism?

The traditional way of thinking about businesses is that they exist in order to make money and maximize profit and that everything else they do must only be a means to that end.

Of course, companies must be profitable in order to survive and grow. But Conscious Capitalism asks whether a business can be done with a much broader set of values and with a sense of purpose that goes far beyond making a profit.

Conscious Capitalism’s concept of what a business should be centered on four main tenets:

Higher purpose
This is the idea that every business should have an overarching purpose that guides its activities. For example, EY’s purpose is “Building a better working world.”
Stakeholder orientation
Conscious Capitalism posits that businesses should create value for all their stakeholders, not just for shareholders.
Conscious leadership
Conscious leaders care about the purpose of the enterprise and about the well-being of all the people touched by the organization. Rather than being driven by power, the bottom line and personal gain, they are motivated by serving others.
Conscious culture
Many companies have high-stress environments, which tend to be a source of anxiety for their employees. At conscious companies, the aim is to build a more caring culture, based on trust, authenticity and transparency.

Conscious companies try to think of all stakeholders more holistically, recognizing first and foremost that stakeholders are people who just happen to be playing particular roles.
John Mackay

Conscious Capitalism holds that, by adhering to these core tenets, businesses can not only have a more positive impact on their customers, employees and communities, they can also be more successful as businesses, increasing the sustainability of their activities and harnessing the creativity, commitment and passion of their workforce.

Jacto: a Brazilian company on a conscious journey

Jacto was founded by Shunji Nishimura, a Japanese immigrant, in the Brazilian state of São Paulo more than 60 years ago. He started the business with the proposition “We fix everything.” In the 1950s and 1960s, during an agricultural boom in the region, the company started building fertilizer equipment and planting machines.

Today, Jacto has five business units and annual revenues of over US$400m. Mr. Nishimura died in 2010, but the company remains in the hands of his family, and is now a third-generation family business. Jacto’s success was recognized in 2013 when it was named the best company in the agribusiness sector by Exame, a Brazilian business magazine.

Unique values

Since the beginning, Jacto and its leadership have had very strong values, which still guide the whole organization. For example, the company refuses to hire people who are already employed. The idea is that, just as we should not covet someone else’s spouse, Jacto should not pursue other organizations’ employees. This rule has helped to make Jacto strongly committed to the development of its own people.

The company’s strategic planning processes provide another example of how Jacto’s values shape its actions. Rather than being the responsibility of the leadership team alone, these processes involve more than 600 people, including employees, suppliers, community members and shareholders.

A broader contribution

The company’s commitment to agriculture goes beyond its own business. Jacto has sought to boost the quality of education in the agricultural sector by adopting and investing in two statecontrolled technical schools — Fatec and SENAI. But because the schools remain, in part, publicly funded, Jacto has also invited its main competitors to participate in guiding the schools. Jacto places students at the schools under no obligation to join the company after the conclusion of their studies.

Lending a hand in a crisis

Some years ago, a strike among employees in the Brazilian customs service stopped the importation of a crucial raw material. Jacto happened to have excess inventory of the material, but its main competitor did not.

On learning that its competitor was going to have to stop production because of this shortage, Jacto’s leadership decided to lend the competitor the excess inventory at no extra cost. The reasons were simple:

Its competitor was not to blame for the problem.
It would be wrong to win market share merely as the result of another company’s misfortune.
If the opposite had happened, that is how Jacto would have liked to have been treated by its competitors.

This action also showed those customers the two companies shared that Jacto was willing to work to ensure that all products were delivered with no disruption. This helped create a trusting and caring culture along the value chain.

No one grows alone

Jacto can give many other examples of its efforts to do the right thing. Given the company’s great success, these show that there need not be a trade-off between doing what is right and achieving exceptional results.

A phrase of Mr. Nishimura’s sums up Jacto’s core values: “Ninguém cresce sozinho” — no one grows alone. This clarity about the interdependence of all stakeholders plays a huge role in differentiating the company from its competitors, and it guides Jacto in its efforts always to act sustainably and responsibly.

Running a conscious business

Every business is unique, and each conscious business understands and applies the tenets in its own way. So it is worth considering just what it is that conscious businesses share and what makes them different from traditional businesses.

Putting purpose at the heart of the business

Conscious companies have a purpose that has been articulated and that is frequently communicated to customers, employees and other stakeholders. A company’s purpose establishes its whole reason for being, answering key questions, such as:

Why do we exist?
Why would we be missed if we disappeared tomorrow?
What is our unique contribution?

A company’s purpose cannot just be a slogan created by an advertising agency. “A purpose is something that truly energizes, motivates and attracts people to be part of an enterprise, whether as employees or as customers, suppliers or investors,” says Professor Sisodia.

Once established, the purpose should inform all aspects of the business, from strategic decision-making and long-term planning to innovation and R&D.

Creating value for all the stakeholders

Traditional businesses tend to treat each stakeholder group (customers, shareholders and members of the local community) very differently. In contrast, conscious companies try to think of all stakeholders more holistically, recognizing first and foremost that stakeholders are people who just happen to be playing particular roles.

Conscious companies also aim to build more cooperative relationships with the businesses that they work with. By aligning their interests with stakeholders, conscious companies seek to avoid making trade-offs between competing interests. They instead look to make decisions that simultaneously benefit the company and all its stakeholder groups.

This requires the careful selection of stakeholders, such as suppliers, to ensure that all parties share values and can create shared value. “If you look at the suppliers of a conscious company, they’re almost treated like they’re within the organization,” says Professor Sisodia.

Putting employees first

For a conscious company, perhaps the most important stakeholder group is its employees. Employees are the stakeholders with the most invested in the organization, and they are the group upon which the success of the organization most depends.

Conscious companies work hard to ensure that employees have a sense of meaning and purpose in their work. Employees have to be truly empowered and given a great deal of autonomy, respect and freedom. And conscious companies tend to offer generous pay and benefits to employees outside the leadership.

A different kind of leadership

Conscious leaders are servant leaders — they are there to serve, not to use other people as objects to further their own success. In contrast with the traditional, aggressive image of executives, conscious leaders are notable for their emotional intelligence and their strong systems intelligence — the capacity to understand and think about the business’s whole ecosystem.

“You’re not just pulling one lever and looking for one effect,” says Professor Sisodia, speaking about the importance of systems intelligence for business leaders. “You’re recognizing that every decision actually impacts the whole system and asking, ‘How can we make decisions that add to the flourishing of the whole?’”

Taking a lead on strategic thinking

For conscious companies, it is possible for the strategic direction of the business to become the responsibility of more than just the leaders at the top. It can be opened up to people at different levels within the organization, as well as to other stakeholders.

Every five years, US organic supermarket chain Whole Foods Market holds an event called Future Search. Over a few days, the company brings together employee representatives, customers, suppliers, committee members, investors, the leadership and the board. Together, they consider what new initiatives the company should embark upon for the next stage of its evolution.

A more caring culture

Generally, conscious companies have cultures with high levels of integrity, transparency and employee empowerment. They also tend to have a very creative, caring and high-energy environment, which leads to greater employee engagement and far lower levels of employee turnover.

“In a conscious company, you’ll find the level of engagement is way higher,” says Professor Sisodia. “You can even describe it as going beyond just engagement. People in these organizations have a passionate commitment to the company, to each other and to their work.”

Learning to listen

Most traditional businesses already recognize the importance of communication skills for the leadership. But conscious companies often go to far greater lengths to ensure they have good two-way conversations with all their stakeholders. US manufacturing company Barry-Wehmiller offers its own course on communication skills — starting with a focus on authentic and deep listening — which is mandatory for all aspirants to leadership roles.¹

Making the transition

To start the transition to a more conscious approach, the first step for any company should be a period of deep introspection within the leadership team. The leaders must consider whether they genuinely believe in and are committed to the change they are proposing.

If the leadership only views Conscious Capitalism as a strategy or tactic, then it will be unlikely that significant changes take root. As Professor Sisodia says, “You cannot have a conscious business without conscious leaders.”

Once the leadership has committed itself to a conscious approach, the next step is generally to start thinking about purpose. With that established, the company can begin to address tasks such as:

Creating greater value for each stakeholder
Building a more conscious culture
Working out how to assess the core values

For those seeking to implement a conscious approach, having a clear vision and being able to communicate it are vital to securing some of the required patience within an organization and among the shareholders.

Overcoming the challenges

The board of directors can be one of the biggest obstacles to a company becoming conscious. For a conscious transformation to succeed, the board must recognize that such a fundamental change is not something that can happen overnight, or within a quarter or even a year.

For larger companies, making a significant transformation requires at least a two- or three-year journey. The directors must have patience and understand that, although there might be some short-term costs, there will also be many long-term benefits.