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Conscious Capitalism’s Execution Trade-offs: Do Real Heroes Compromise?

Referenced by a board member of several consumer businesses who attended the NACD Global Board Leadership Summit.

Raj Sisodia delivered an interesting keynote presentation at the NACD Global Board Leaders Summit about “Conscious Capitalism”.  Sisodia co-authored with Whole Foods’ Co-Founder John Mackey the book, Conscious Capitalism: Liberating the Heroic Spirit of Business.

The business world is definitely in need of a richer, integrative and more ethical narrative than its dominant greedy and exploitative one – where profit and business leaders are seen at best as a ‘necessary evil’. We are highly empathetic with the consciouscapitalism.org movement and subscribe to most of its main ideas. Still, it’s the least heroic part of the “liberating the heroic spirit of business” storyline that caught our interest. What makes Whole Foods an amazing and exemplary story – the cornerstone of the whole book,  is the way they somewhat “compromised” the fulfillment of its mission in order to achieve “purposeful” impact.

What are Conscious Capitalism’s (as expressed in the book and Sisodia’s presentation) key tenets?

  1. Business can and should be done with a higher purpose, not just maximizing profits. Purpose is definitely a board issue. It matters how companies make their money;
  2. Conscious businesses are explicitly managed for the benefit of all their stakeholders. In the future, companies will not be able to survive by only focusing on driving shareholder wealth;
  3. Directors should focus on the corporation – not just the shareholders. We (board members) do not work for the shareholders, but for the corporation;
  4. Conscious leaders are driven primarily by service to the firm’s purpose and people, rather than by power or money;
  5. These leaders create a conscious culture, which enables and empowers employees.

What do we see differently?

  1. Stakeholder integration/harmony is a very nice ideal, and yet very tough to operationalize. It’s impossible to please all stakeholders: you actually need to choose who you will serve first and be wise and diplomatic to accommodate their sometimes incompatible needs and demands throughout time. All stakeholders are not made equal. Some boards do a “forced ranking of stakeholders” to make things clear. Although not exactly a holistic, all-inclusive approach, this pretty simple exercise brings very important stuff to the surface.
  2. For your ‘purposeful business’ to ramp-up and reach critical mass, to have real impact, you need to be very wise and pragmatic in the trade-offs you make between your idealized goal and what your fellow key stakeholders are ready to cope with. 

One of the most interesting takeaways from the book is the fact that Whole Foods has had to deal with a lot of trade-offs and contradictions between purpose/ideology and real world execution in order to transform itself from a small shop into a $12 billion behemoth. Even though the company is called “Whole” Foods, it started in 1980 with less than 5% of its sales from organic food. Even today “whole” products represent little more of 30% of its sales. Whole Foods sells red meat even though it explicitly condemns it from the health & wellness standpoint. How come? Because their service offering demands it (customers rank high as stakeholders in Whole Food’s list)  and their competitive frame of reference requires it (they are targeting a much larger market than “whole/healthy foods consumers”). Their customers were not ready to fully embrace or even frame 100% of their lifestyle as “whole” or “healthy”. What should John Mackey have done? Should he have stayed in Austin running a couple stores and stick 100% with the purist health and wellness concept or should he have compromised with regard to some key aspects the original concept and ipsis litteris view of their mission? 

This is not a critique to Whole Foods. In fact, it’s a compliment. Execution-wise, in a world where it’s currently quite common to propose your business story from an heroic standpoint/ideal narrative, sometimes your explicit, deliberate, well-crafted “purpose” and “values” become an operational straight-jacket. But they are also crucial guidelines – and the little things that we and our team do to endorse or compromise them slowly becomes our “culture”. Whole Foods made concessions and adapted itself in order to keep playing – in the neighborhood of its original “purpose”. In hindsight and ex-post it all looks and sounds grandiose and intentional. Back in the early days, in foresight (where it’s usually where we are when running real businesses), the trade-offs between purpose and execution were most likely pretty tough. That’s the beauty of it: Whole Foods looks de facto heroic in “failing” to be 100% coherent and consistent with its deliberate purpose.

John Mackey’s colleagues from his long gone commune-days might think that he became one of the bad guys – 100% profit-oriented of the extract and exploit kind. But in order to have deep social IMPACT and achieve his evolved educational (teach people better eating/drinking habits and redesigning and developing a big part of the healthy food supply-chain) purposes, he needed to adapt and compromise (execution-wise, purpose-wise and time-wise). Maybe that’s what real conscious capitalist “heroes” do to cope and survive, keeping themselves afloat and therefore still eligible to fulfill and achieve great but different purposes and objectives that they sought out to pursue in the first place. 

The NACD presentation:

Highlight: from 31:23 to 35:25 Sisodia focuses on board issues. 

Find the books’s first chapter here.