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  • Conscious Capitalism – How to get it right

    Published on Saturday, November 12, 2011

    The Spring 2011 issue of California Management Review (Vol. 53, #3) presents a series of articles on the topic of conscious capitalism.

    The ones I really like are from the practitioners – John Mackey, co-founder and co-CEO of Whole Foods Markets, and Doug Rauch, former President of Trader Joe’s.  Mackey does some defending in his essay – in part because he wants to clarify what he sees as a notable flaw in the main article – confusion between the concepts of corporate social responsibility and Conscious Capitalism® as practiced at Whole Foods Market.  Yet he also promotes what he sees as the very positive benefits that come to practitioners of conscious capitalism in general – namely successful business operations.

    There are no false promises that conscious capitalism will save the world, yet Mackey does make the point that commitments to higher purpose, stakeholder interdependence and conscious leadership create a culture in which value creation for all major stakeholders will be higher than in a business operating under a different philosophy. This is what he has found at Whole Foods, a 30-year old 10 billion dollar company with over 60,000 team members who work there.

    Trader Joe's former president Doug Rauch provides a second practitioner written piece that is refreshing for its clarity of thought, language and perspective. Rauch offers practical examples of ways in which the principles of conscious capitalism have been implemented at Trader Joes, and of the success that has accrued to the company’s stakeholders as a result. His ‘feet on the ground’ stories should prove useful and inspiring for leaders seeking guidance as they face the daily challenges of organization life.   

    Both Mackey and Rauch are clear that a leader’s commitment to follow the principles of conscious capitalism him or herself is key to its beneficial application inside the organization. Mackey states that, “It doesn’t matter if an organization has a higher purpose if the leadership doesn’t understand and seek to serve that purpose… It is especially important that the CEO and other senior leadership embody the higher purpose of the organization rather than seek to maximize their own personal power and compensation.” Practical evidence of Mackey’s own commitment to his comments comes in one example of a practice in place at Whole Foods. Whole Foods uses a wage cap system that limits the maximum annual cash compensation (wages plus bonuses) of any Team Member, including executives, to 19 times the average of all full-time Team Members who work there during the year.  

    Rauch provides his own examples of the ways in which he displayed a commitment to conscious capitalism as president of Trader Joes. His strongest points focus on the importance of forward thinking leadership saying that a leader who tries to ‘manage the business by the bottom line [is] driving by the rearview mirror’.  A forward thinking leadership approach that recognizes the interdependence of all stakeholders leads to a focus on ‘and’ rather than ‘either/or’.  Maximizing the benefits to all parties avoids the simplicity of a trade off mentality that too often has allowed the more powerful to win all the trades.

    Whole Foods and Trader Joes are two of the many organizations known to be great workplaces, great community members, and financially successful business ventures. They are both active practitioners of conscious capitalism. Are they perfect?  Absolutely not, and neither leader claims that the practice of conscious capitalism has made their organization untouchable. What they do claim though, and what other business leaders would be wise to pay attention to, is that the practice of conscious capitalism has contributed mightily to their organizational success.

    Rajendra Sisodia, professor of Marketing at Bentley College sums up the thinking behind the success that many businesses have found by following the principles of conscious capitalism.  Conscious capitalists, he says, are aware of the consequences of their actions and they take ownership of those consequences. They spend money where they believe it will make a positive difference – perhaps by raising the wages of hourly workers rather than building an executive dining room. They connect people with a higher purpose, engaging customers as well as workers in the success of the organization. They are positive beacons within their communities of healthy economic activity. This kind of capitalism that operates with a commitment to promote well-being for all is the way forward.

    Update: Kip Tindell, CEO of The Container Store, talks about how he practices conscious capitalism.

    Amy Lyman is a co-founder of Great Place to Work® Institute and author of The Trustworthy Leader

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