John Mackey’s book, Conscious Capitalism (written with Raj Sisodia) gives some interesting stories. It has inspired a movement so that is wonderful. The core idea in the book, mainly that stakeholders matter, is a great message. Next post I’ll explain that some things Mackey says don’t work for me. That said, if it does persuade some business leaders, and they are inspired to work for a better world, then I am very happy to admire the successes.
Conscious Capitalism As Stakeholder Management
Conscious Capitalism is an approach to management that emphasizes that business is about making the world a better place for its stakeholders, rather than just maximizing profits. This mirrors the thinking of Paul Polman (see here and here). Business isn’t there just to make its owners rich at everyone else’s expense. Business is there to help a wide range of people. This is a reiteration of the ideas of stakeholder management, which is a good thing.
For those who are more dubious about capitalism, Mackey does explain that what people don’t like about capitalism is not really capitalism in his mind. To his way of thinking, any bad bits are distortions of capitalism — crony capitalism. (It reminded me a bit of Andrew McAfee, see here, in defining away some awkward elements that we see in markets). He does explain what he means and much of it makes a lot of sense. Indeed, Mackey lays out the four tenets of conscious capitalism which make sense to me.
The Virtuous Cycle
Where the book is strongest is in noting that a business can consider the needs of its stakeholders while also being a successful business. For example, Mackey talks of the benefits that come from paying workers more. This isn’t just charity, it isn’t just about being nice to the staff. Instead, relatively high pay creates a better business.
…a virtuous cycle: well-paid team members with true passion for their work and for serving customers help create a superior experience for customers.
Mackey and Sisodia, 2013, page 284
There was a great story of free goods being given out at a Whole Foods store (Mackey’s company) when the cash registers broke with a snowstorm coming in. The manager had been empowered to help customers and saw that getting the customers home quickly and safely, i.e., not waiting for the registers to be fixed, was vital to that. Though not done with an eye to the profits this choice was also great business from a financial perspective.
The Hartford story was seen by numerous people all over the country and created great goodwill for the company — something no amount of paid advertising can buy and certainly worth far more than the $4,000 it cost.
Mackey and Sisodia, 2013, page 244
Transparency And Other Qualities
I would also echo the call for transparency in the book. Having a culture where information is freely shared is important to serving stakeholders. Stakeholder management involves getting people to work towards a common goal. It isn’t possible to fully coordinate unless people have the sort of trust that comes from the sharing of important information.
I also loved the way management myths were dismissed. “Only the paranoid survive” has to be one of the worst things ever said about business (see here) and Mackey has no time for it. You can’t be a stakeholder manager if you don’t trust the people around you. He was also great about the benefit of not having arbitrary employee turnover rules. If, like GE did for a while a generation ago, you need to fire 10% of your staff a year maybe you aren’t hiring very well? In such cases, is it that your senior managers are just not very good at running the firm and they should be the ones leaving?
Stakeholder management has a lot of plusses. Mackey’s work to drive people towards it is certainly a positive.
For more on stakeholder management see here, here, and here.
Read: John Mackey and Rajendra Sisodia (2013) Conscious Capitalism: Liberating the Heroic Spirit of Business, Harvard Business Review Press