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Raj Sisodia | The yin and yang of business

To be efficient and effective, the purpose of a business has to go beyond profit. It has to create value for all stakeholders, not trade-off one for the other
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First Published: Sun, Feb 10 2013. 04 29 PM IST
Raj Sisodia believes that business done well is noble, heroic and adds value to life.
Raj Sisodia believes that business done well is noble, heroic and adds value to life.
Updated: Sun, Feb 10 2013. 04 35 PM IST
In a narrative of business that’s different from its moneymaking, exploitative, blood-sucking avatar, authors John Mackey and Raj Sisodia’s book, Conscious Capitalism: Liberating the Heroic Spirit of Business, shifts the focus to its inherent goodness. The duo believe that capitalism creates value, it is an activity that has got the wheels of human society turning, made us productive and alleviated us from subsistence living.
Conscious Capitalism builds the case for free market enterprise, driven by a purpose other than profit. The authors suggest a model where the needs of all stakeholders—investors, employees, customers and communities—are aligned. They illustrate the success of such a system by giving examples of companies like Whole Foods Market and Southwest Airlines. Sisodia cites Indian examples like Cipla—“that has had a great sense of purpose, bringing affordability to life-saving drugs”—and Fabindia—“it has had a clear purpose in creating a sustainable community for artisans and a wonderful retail experience for customers”.
While Mackey is co-CEO of Whole Foods Market, Sisodia is a professor of marketing at Bentley University, Massachusetts, US. They are also both co-founders at Texas-based non-profit Conscious Capitalism, Inc., an organization that aims to promote this very practice.
Sisodia has previously authored seven books, including Firms of Endearment. In a phone interview, he tells us that the traditional business model may have worked in the past but with a more conscious and intelligent society, business leaders won’t be able to do it much longer or sustain themselves in the long run. Edited excerpts:
Did you write ‘Conscious Capitalism’ as a reaction to the financial crisis?
Conscious Capitalism—Liberating the Heroic Spirit of Business: By John Mackey and Raj Sisodia, Harvard Business Review Press, 344 pages, Rs 1,250.
It’s got nothing to do with the financial crisis. This is a movement that’s under way for about five years now. We looked at a number of companies that were loved by all of their stakeholders and had certain elements in common: like a sense of purpose, a reason why they existed, their leaders were motivated by that purpose and by service and not by power or personal enrichment. And they had a certain culture that was built upon trust, authenticity and caring for all stakeholders. We found that those companies, which we now describe as conscious businesses, not only elicit greater loyalty, support and trust from their customers, employees and others, but also perform better financially in the long run. It’s because they align all their stakeholders, so they work in a synergistic way. Rather than having a lot of friction and unproductive systems and spending.
What is the core message of the book?
The core message is that businesses should operate with a higher purpose that goes beyond profit. Profit is not the purpose, it’s necessary for the business to survive and grow but it’s not the purpose. It’s like saying that I need to produce red blood cells in order to survive, but that does not mean that that is the purpose of my life. A purpose should be something that matters in the world, that resonates with people. Secondly, serve the interests of all the stakeholders and create win-win-win outcomes for all, rather than trading off one versus the other. Even worse is exploiting one for the benefit of others. A lot of companies will say we squeeze our suppliers, our communities, our employees in order to please our customers and make money for our investors. That approach does not work.
In a larger context, let’s say emerging economies for instance, isn’t Darwin’s survival of the fittest at play? Is it unrealistic to expect companies to think of anything other than profit?
This is a broader definition of what it means to be fit. I can become fit by taking steroids and winning a race. Or I can build my health and well-being more sustainably. So survival of the fittest does not mean to be the most vicious, the most unscrupulous, the most ruthless to survive. It means the ones who are best equipped to handle all of the complexities of their environment. And the current business environment is such that the traditional approach to business that is based on exploitation of some for the benefit of others, might have worked in the past for a long time, but it will not work in the future, because people are more intelligent, more informed, more connected. They care about more things today. They will not allow you to be successful as a business if you’re based upon exploitation.
The other part of reality is that these companies are eventually more profitable. We’re not saying that any of this comes at the expense of financial performance. But it matters how you’re making money. Focus on doing the right thing consistently for all your stakeholders, be efficient and effective, and have a well thought out business model.
So business is not the enemy, it’s how you go about doing it.
Absolutely. That’s an important message to communicate here that business as an institution has been vilified over the years, and for good reason, because there are businesses that have been greedy and unethical. But look at the institution of capitalism, what we’ve seen in the last 200 years, after the industrial revolution. If you look at human life before that, 90% of the people of the world lived on less than $1 (Rs.53.54 now) a day, people had life expectancy of about 30 years, the world population was a few hundred million. It all started changing with the beginning of the 19th century. With the planet now supporting billions of people, their per capita incomes have risen more than 15 times, life expectancy has risen to 67 years. I believe that a lot is to do with free markets and free people. So you have to realize how much has been accomplished by business and capitalism in a very short amount of time. Two centuries is nothing in the expanse of human history.
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First Published: Sun, Feb 10 2013. 04 29 PM IST