To be conscious means to be awake, mindful. To live consciously means to be open to perceiving the world around and within us, to understand our circumstances, and to decide how to respond to them in ways that honor our needs, values, and goals…. A conscious business fosters peace and happiness in the individual, respect and solidarity in the community, and mission accomplishment in the organization.
Fred Kofman, Conscious Business
Business today needs a new paradigm because “business as usual” is just not working any more. Public distrust of business is at historic highs; many employees, customers and other stakeholders of businesses are disconnected from the companies they interact with. At the same time that its reputation is deteriorating, the reach and impact of business in the world is growing. Business today has greater power than ever before to enhance or to diminish overall well being in society.
The world has changed; human beings have steadily evolved towards higher states of consciousness, but companies have not kept pace. As a species, we did not stop evolving when we got up on our hind legs. Evolution continued, but its focus became more internal rather than physical. A number of factors have contributed to this rise in consciousness. One is the aging of the population. As a result of more people in more societies being in midlife and beyond, the psychological center of gravity has shifted upwards. The values of midlife and beyond now dominate many societies. These include a greater concern with the meaning of life, a focus on giving back, declining materialism, concern with legacy and greater interest in spiritual themes.
A second dramatic shift is the rapid rise of feminine values in society. The direct reason for this is that women around the world are gaining greater access to education, employment and public service opportunities. A century ago, only 2% college enrollments in the United States were women; today that number is over 60%. In a few decades, most white-collar professions will be dominated by women. What's more, the women who do rise to positions of power today are fundamentally different than their counterparts from just a few decades ago. In the old male dominated world, the only women who rose to the top in countries or in companies were those who could be tougher than the toughest men. Women who rise to positions of power today are far more comfortable with their own femininity, and recognize the wisdom inherent in their softer, more caring and nurturing approach to leadership.
The third factor is the spread of the World Wide Web, the single most significant innovation of the past century. It has transformed the lives of billions of people by democratizing access to knowledge, so that a common person today has easier access to more information with greater ease than even the richest person in the world could have just a few decades ago. The Web has also enabled hundreds of millions of people to connect with each other around shared interests and concerns, ushering in an era of unprecedented transparency, so that the actions of governments and corporations can rarely be shielded from public scrutiny.
In response to this radically different world, businesses today need to practice “conscious capitalism” in order to achieve sustainable success. This has three elements:
1. Companies have a purpose that transcends profit maximization;
2. They are managed for the benefit of all stakeholders in their ecosystem, not just shareholders; and
3. They are led by spiritually evolved, self-effacing servant leaders.
Companies that practice conscious capitalism embody the idea that profit and prosperity go hand in hand with social justice and environmental stewardship. They operate with a systems view, recognizing and benefiting from the connectedness and interdependence of all stakeholders. They tap into deeper sources of positive energy and create greater value for all stakeholders. They utilize creative business models that are both transformational and inspirational, and can help solve the world’s many social and environmental problems.
Some of the characteristics of companies that practice conscious capitalism are:
1. They have a higher purpose than simply the maximization of profits or shareholder returns. A well thought out purpose energizes the enterprise and infuses it with passion and creativity.
2. They are managed for the benefit of all stakeholders. Company leaders seek to optimize the health of the overall “ecosystem,” recognizing the connectedness and interdependence of all stakeholders.
3. Beyond just achieving a better balance of emphasis across stakeholders, leaders strive to join and align their interests. Accomplishing this reconfigures business into a positive sum game, rather than the trade-off dominated zero sum game that it is usually seen to be.
4. They do not engage in exploitation of any kind, e.g. taking advantage of some stakeholders to advance the interests of others or playing on people’s fears and addictions. They view each stakeholder’s well being as an end in itself, not just as a means to better satisfy investors.
5. Society is seen as the ultimate stakeholder; companies view themselves as existing to advance the well being of society as a whole. They are motivated by a genuine desire to help solve large societal problems in partnership with governments, other companies and NGOs. They do not externalize costs on to society, even when it may be legally permissible to do so.
6. They treat the environment as a crucial if silent stakeholder and take responsibility for their full environmental impact. At a minimum, their objective is to “do no harm” to the earth; ideally, they seek to have a net positive impact on the environment.
7. They approach the marketplace with a “whole pyramid” model that seeks to uplift rather than ignore (or worse, exploit) the poorer sections of society.
8. They believe that doing the right things ultimately brings good results. Profit is seen as the natural outcome of doing the right things, not the single-minded focus of all company activities. They understand that when a company states its objectives in profit-maximizing terms, it causes all stakeholders in turn to seek to maximize their own profits by giving as little as possible and taking as much as possible. The performance of the system rapidly deteriorates and profits soon evaporate.
Conscious Capitalism and CSR
Conscious capitalism is not the same as corporate social responsibility, or CSR. Companies that focus on CSR are often engaged in businesses that create significant harmful effects on society. Such companies often graft on a CSR department that seeks to alleviate some of the negative effects. They do not have a higher purpose beyond profits, are managed primarily from a shareholder perspective, and are led by command-and-control oriented chief executives. Conscious businesses, on the other hand, start with the premise that society is an important, even the primary, stakeholder in the business. Being socially responsible is fundamental to such businesses. The idea of CSR is a laudable intermediate step; ultimately, a societal orientation must become part of the DNA of the company.
Conscious Capitalism and Ancient Wisdom
As Debashis Chatterjee has said in Leadership Sutras, “What is oldest is often most valuable. When an idea has persisted for thousands of years, we can have some confidence in its truth.” The tenets of conscious capitalism are very similar to the precepts for living and working written about thousands of years ago in the timeless Vedic wisdom literature of India – the contemplation of a higher purpose, focusing on the right actions rather than being driven by an objective, the interconnectedness of all sentient beings, the ideal of servant leadership, and so forth. This wisdom exists within the DNA of people in the Indian business world; however, it has become obscured by nearly two centuries of subservience to Western thought. Today, the West is coming to recognize the profound gaps and many negative second order consequences of its approach to business. The move towards conscious capitalism, in which many Western firms are now taking the lead, actually represents a great opportunity for Indian business to return to its own roots and harvest the rich vein of eternal wisdom that has been lying largely untapped for so long. We have the potential to enter a golden age of leadership thinking that blends the best of modern Western practice (geared towards efficiencies) and ancient Eastern wisdom (focused on effectiveness) to arrive at a grand synthesis, a common framework to guide individual and corporate development in the future.
The Path to Success – and the Right Thing to Do
Conscious businesses succeed in the long-term at a much higher level and with a much broader definition of success than traditional business. In our study, Firms of Endearment: How World Class Companies Profit from Passion and Purpose (Wharton School Publishing, 2007), such businesses outperformed the overall stock market by a 9 to 1 ratio over a ten-year period. However, even this measure understates the extent of their performance. Businesses not only generate financial wealth, they can also generate (or destroy) emotional, spiritual and intellectual wealth. Conscious businesses spread well-being and happiness among all of their stakeholders. They continuously innovate to create and deliver ever greater value each and every one of their stakeholders. They succeed so outstandingly at doing this because they are able to tap into the full potential of all the people -- not just employees – they touch. As Gary Hamel has commented, companies cannot buy peoples’ creativity, passion and enthusiasm; they have to earn these gifts, and most have not proven worthy of them. Conscious businesses release this enormous source of renewable, generative human energy into the world. This, more than anything else, is the secret of their sustained success.
The Simplicity on the Other Side
I would not give a fig for the simplicity on this side of complexity but I would give my life for the simplicity on the other side of complexity.
Oliver Wendell Holmes, Jr., US Supreme Court Justice
In every sphere of human life, one can operate at a simple, almost simplistic level – a straightforward way of looking at reality that appears to capture its essence. However, as we think more deeply about the phenomenon and strive to achieve true mastery, we soon detect hitherto unseen nuances and relationships. Eventually, some of us are once again able to see a simple, elegant higher order reality that truly captures what is in fact going on. Isaac Newton gave us simple equations (such as Force = Mass x Acceleration) that appeared to explain the reality of physical phenomena. Centuries later, Albert Einstein came along, and having navigated incredible depths of complexity, give us equally simple equations (such as E = MC2) with profound consequences that promised to unlock the incredible power of the universe.
At first glance, business is really quite simple. We have been told that the goal of business is to maximize profits. Profit equals revenues minus costs. Therefore, to maximize profits, one must maximize revenues and minimize costs. In order to maximize revenue, we must sell as many people as possible as many of our products as possible charging as high a price as we can get away with. This is the goal, regardless of whether the people we are trying to sell the products to actually need them or would benefit from them. To minimize costs, companies seek to lower the costs of the factors of production. Thus, they look to pay their employees the bare minimum, continuously squeeze their suppliers to lower prices, externalize as many costs as possible onto society, avoid paying taxes by setting up tax shelters, cut corners in customer service, and so on. The problem, of course, with this simplistic rendition of business is that it is ultimately self-defeating. Over time, it erodes the company’s ability to make profits as the consequences of its treatment of its stakeholders reveal themselves. It also buries problems out of sight, where they gradually accumulate and grow until they eventually swallow the whole business.
Conscious businesses too operate with a high degree of simplicity, but this is simplicity on a higher plane. These companies have discovered that they don’t have to pay their people as little as possible, they don’t have to squeeze their suppliers, they don’t have to damage the environment, and so on – and yet dramatically outperform profit-obsessed companies over the long run. Having designed a system in which the energies of all the constituent parts are aligned in the same direction, the leaders of these companies find that these companies essentially run themselves on a day-to-day basis, leaving them free to focus on longer term, bigger picture issues. Command and control gives way to enlightened empowerment, and employees rise to the challenge in extraordinary ways.
The proponents of shareholder wealth maximization say that this discipline is essential because managers need to know what it is they are ultimately responsible for. They thus need to be told to maximize a single thing. However, business is not a simple math problem; it is a rich, nuanced multidimensional undertaking. Rather than look to maximize profits or even optimize stakeholder value creation, leaders need to focus on improving the overall long term health of their business ecosystem.
Of course, getting from the simplicity on this side of complexity to the simplicity on the other side is not easy. Most companies remain mired in the simplicity on this side, or they get bogged down in the complexity of transformational change without ever making it to the other side. A useful metaphor for this is the caterpillar, which goes through a complex metamorphosis to become a higher life form – a butterfly. It is the only creature capable of changing its genetic structure during its dramatic process of transformation; the DNA of a caterpillar is quite different from that of a butterfly. Traditional businesses are like caterpillars: slow, plodding, uninspiring, stuck with obsolete behaviors and ideas. In the chrysalis stage, though not a lot appears to be happening, there is a great deal of internal change within the cocoon, as ideas gestate and change subconsciously and consciously. Finally, a beautiful colorful butterfly emerges from the difficult process, soaring high in the world and seeing and doing things from a completely different perspective. The butterfly is thus a powerful symbol for transformation and change, representing elevation to a higher consciousness and a higher performing state. The delicate beauty of the butterfly also symbolizes the courage and perseverance necessary for personal and organizational transformation.
It is no exaggeration to say that as a species, we are at a major turning point, a tipping point, a discontinuity. Today, we must question every mental model, every assumption, every parable, every truism about how the world works and what really matters. Everything is up for grabs. It is exciting in a way; scary too, of course, for those without a compass to guide them. Business can and should be a noble calling, capable of inspiring and elevating all those that it touches. However, we have made it into a rather pedestrian, even ignoble calling, by thinking too narrowly and constantly proclaiming that it is only about profits. It is time for businesses to break free of this way of being and find ways to become truly human entities. This means growing a heart and developing a soul. It means having a higher purpose that transcends profit maximization. It means understanding the corporate body is only healthy if all its parts are healthy, and thus managing for the benefit of all stakeholders. It means having leadership that understands that the highest ideal is to be of service, not to megalomaniacally accumulate power and privilege. It means becoming conscious capitalists.