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BW Businessworld

Human Touch

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A striking ye­l­­­low cover that you can’t miss on the racks, Conscious Capitalism by John Mackey and Raj Sisodia, I am told, is a bestseller already. Mackey is the chief executive and co-founder of  food chain Whole Foods Mar­ket, while Sisodia is the co-founder of the non-profit Conscious Capitali­sm Inc. Reading the book was  of slightly greater interest to me as HCL is one of the firms mentioned in it.

The first thing to catch my attention was the credo on the inside flap. “We believe that business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can ele­­vate our existence, and it is heroic because it lifts pe­ople out of poverty and cre­ates prosperity…” I started rea­ding about the philosophy of conscious capitalism through the journey of  Wh­ole Foods and others. The book makes an interesting case for the inherent good in both business and capitalism. Featuring some of today’s best-known firms, it shows how firms can create value for all stakeholders, including customers, employees, suppliers, investors, society and the environment. Conscious capitalism is about companies such as Whole Foods, Southwest Airlines, Costco, Google, Patagonia, The Container Store and UPS. They use four specific tenets — higher purpose, stakeholder integration, con­scious leadership and con­scious culture and management — to build strong businesses and help advance capitalism toward realising its highest potential and creating a meaningful society. Mackey and Sisodia feel that aspiring leaders need to continue on this path of transformation — for the good of business and society as a whole.

 Shiv Nadar
The book reminded me of an iconic enterprise in India — Amul. It was started in 1946 with the purpose of creating a fair enterprise for farmers st­­ru­­ggling to free themsel­ves from intermediaries and offering consumers af­fordable products ensuring value for money. The bo­ok makes an interesting ref­erence to  Jeff Bezos of Amazon. According to Be­zos, “In a typical company, if you have a meeting, no matter how important it is, there is always one party who is not represented: the customer. So it’s easy inside the company to forget the customer.” So he started put­ting an empty chair in eve­ry meeting to remind par­ticipants of this. Walk into any office of Amul or the Gujarat Cooperative Milk Marketing Federation (GCMMF) and you will see a picture of women waiting patiently for GCMMF’s truck to arrive and collect milk. The message is clear: never forget your customer. The four tenets of conscious capitalism have been the inadvertent pillars of success for Amul. Today, it is a $2 billion wellspring of loyalty, innovation, personal fulfillment, which has led to greater profits, improved social capital and a better society, and is a family of over 2 million farmers delivering to 500,000 outlets.

Stakeholders make up a company, says the bo­ok. True. Stakeholder inte­gration, a key tenet of the book, advocates the need for innovation and en­trepreneurship to get all the interests going in the same direction. The book makes  interesting references to stra­tegic initiatives of companies. For example, a core value for Whole Foods, and highly relevant for all enterprises, is the need to treat suppliers with respect, thereby “creating win-win partnerships with suppliers”. A partnering mind­­­set derives higher value for the business. Referring to a struggling GM in 1992-93, Lopez, the then global purchasing head of the company, made a unilateral decision to cut price for suppliers and terminate business with them if they did not agree to this decision. There was a phenomenal short-term gain of $4 billion, but in the long term, GM lost some its best suppliers. The book is Mackey’s exploration of his out-of-the-box model that challenges all conventional business con­cepts to become a  huge success. It talks about why free enterprises, despite enabling large-scale prosperity, have earned little respect  from intellectuals and the masses. According to the Institute of Policy Studies, the ratio between the pay of a CEO and an average employee was 42:1 in 1980, 107:1 in 1990, 525:1 in 2000 and was 325:1 in 2010. Whole Foods’ policy is no one can be  paid more than 19 times the average salary of its full-time employees, all of whom work in teams.

I believe that conscious capitalism is really a directive for a sustainable future for not just business but mankind as a whole
Mackey challenges the myths about profit maximisation. He trashes classical economic models that rationalise that traditional business  models are based on a narrow view of economics of self-interest to the exclusion of all else. A credo for conscious capitalism — how companies with higher purposes that serve the com­mon good of all their stakeh­olders — will become the norm and help societies evolve towards more freedom, harmony and prosperity. Mackey sums up the culture of conscious companies as TACTILE: trust, accountability, caring, transparency, integrity, loyalty and egalitarianism. He says conscious businesses are driven by conscious leadership that can articulate a compelling vision and purpose to stakeholders and drive a cultural transformation.

Stakeholder integration, a key tenet of the book, advocates the need for innovation and entrepreneurship to get all their interests in the same direction
The book is an exceptional guide to best practices in organisational leadership. It is refreshing, high on ideals and has a fair dose of prescription for creating and operating enterprises with a conscience. Even though the book talks primarily about American companies, conscious capitalism is being practiced in various forms in India and globally for decades now. Take the Tatas. A $100-billion enterprise today, the group was founded with the purpose of nation building, while driving operational efficiency and profitability. From creating one of India’s tallest institutions in business, the group is most respected for being in the business of conscious capitalism for over a century, and creating immense value for every stakeholder, community and the society.

Still an evolving story, FabIndia has huge potential. Employing artisans at the grassroots is a revo­lutionary business idea where, eventually, the artisans will own a piece of the firm either directly or through supplier companies. Another model is the ability by individuals and corporations to create wealth and then take a conscious approach to return it to society through institutional philanthropy, something that many of my colleagues and I try to do.  I believe conscious capitalism is really a directive to a sustainable future for not just business but the mankind. It is a  prescription of hope, care, compassion, responsibility and a better tomorrow. I would like to see it gather breadth in a sequel and encompass different models and philosophies being practiced by indi­viduals, corporations and  institutions worldwide.

Nadar is the founder- chairman of HCL Group

(This story was published in Businessworld Issue Dated 11-03-2013)