Conscious capitalism has society as a primary target

The founding director of the Centre for Marketing Technology and an associate professor at Bentley College in Waltham, Massachusetts, US, Rajendra Sisodia is the man behind the ‘Conscious Capitalism’ movement.

His most recent book, co-authored with David Wolfe and Jagdish Sheth, Firms of Endearment: How World-Class Companies Profit from Passion and Purpose, received critical acclaim across the world. In a free-wheeling interview with DNA, he talks about the need for a passion beyond money inbusinessmen.

You are saying that businesses need to be more conscious about society… Don’t you see this as a difficult thing to do? Do you know of anyone who has put his organisational goal as social responsibility and in the process created a profitable business?
The Tatas, to some extent, at least in the initial years, have done it. From the beginning they have tried to do what India needed. When India needed steel, they invested in steel; when India needed power, they invested in power and so on. At the time of investment, they didn’t think about a higher return on investments. Some of the companies we studied also started with a sense of purpose.

How do you compare the different operational philosophies of businesses like Whole Foods with Walmart?
I think the main difference is that Whole Foods (which is into selling organic foods) operates with a sense of higher purpose, Walmart with that of providing low-priced products to its customers.

The other difference is that Whole Foods has an explicit commitment to intra-dependence. The system runs in such a way that there is no exploitation. At Walmart the philosophy is about low prices for customers so that they can deliver superior return to investors. Their target is to capture more of the market. Nobody can compete with them. Therefore, they don’t pay their employees much. Business is also about taking responsibility.

Has Walmart become so big that they can make manufacturing shift from US to China, just by focusing heavily on prices?
Yes. They went to China in search of cheap inputs. Their strategy is like this — first year they offer their suppliers a handsome price. Next year, they place bigger order but at a reduced price. When one supplier resists, they move to another.

Walmart has an attrition rate of 45-50%, whereas Whole Foods’ has a rate of 5%. In Walmart, management cost is much higher and the employees are not self-motivated. In Whole Foods’, the case is just opposite — the employees are motivated, self-organising, and self-managing.

Do you think that companies in US or in Europe are accepting this new way of working?
We are coming to a point where we start questioning the basics. But sadly, it’s not happening enough in the financial sector, where people are making money by manipulating the system, rather than by creating value.

There is a higher purpose to everything. The higher purpose of finance is to allocate scarce resources of society to the most productive uses. But it never happens.

Can you give an example of a company that became defunct because of operating in the traditional way?
Enron, to some extent. Even BP is an example. They (BP) had created a public image of being a highly conscious company but the reality was different. In a span of three years, there were almost 900 safety violations in the entire industry and BP alone had 800 of them.

Is it the traditional conflict between the head and heart?
I really believe that ultimately there is no conflict between the two. You can have a body in which everything is working and playing its role. It’s sort of having two different engines — one is business discipline engine and another is consciousness engine. You must make them work together in harmony.

So what should an enterprise think to really become sustainable?
Start with the purpose: why does the world need this company? Will the world become a better place because of this business? Am I on the right side of society? If you can’t answer these questions in the affirmative, then you need to re-think. Ultimately, as a society, we won’t allow businesses that cause harm.

In Firms of Endearment you have written that in most companies, employees feel manipulated and exploited.
People burn out when they are treated like a resource. If you are empowering them, giving them autonomy and freedom to work, then you are giving them the opportunity to be part of something larger.

So how should entrepreneurs treat their employees?
First, if you can get employees to say “Thank God, it’s Monday”, then you are doing something right. Second, the employees should say, “I am part of something good”. Third, the employees must be given flexibility and autonomy.

Isn’t CSR (corporate social responsibility) just an effort to sell one’s image?
That’s the big difference. Conscious Capitalism is not CSR. CSR is grafted on existing business model which is shareholders-centric and profit driven, whereas conscious capitalism starts with society as your primary target.

Do you think one should start not from CSR, but from the financial part assuming that financial goals would be met through this route?
See, most entrepreneurs I know actually have a passion for what they do because they have found something great that they want to bring to the world. They have to make money in order to become viable.

But most don’t look at the viability of the product. They just want to make more money.
That’s chasing after the wrong thing. Noted Austrian neurologist and psychiatrist Viktor Frankl had said, “Human beings pursue happiness, but happiness cannot be pursued”. Happiness is actually the outcome. I shall be happy if I work for what matters. Same goes for business.

But to them, personal wealth may be the number one goal in their life.
One must realise that success is not running after the biggest bank balance. Success is about having a positive impact. Some 150 years ago, slavery was accepted. Hundred years back women didn’t have the right to vote or work. We also had child labour. Over time, more and more of such practises have become unacceptable. If we keep doing business the usual way, then we are hurting the planet, we are damaging the future.