Inside This Issue - News
February 6th, 2012
NEW YORK – Admitting considerable variation in theory and practice, capitalism is anything but monolithic. One strain of the discipline was examined at the National Retail Federation’s Big Show here last month during a super session called Conscious Capitalism.
The validity of the approach was assessed in light of the experience of Whole Foods Market Inc. and The Container Store, two retailers that have long embraced it, and Leonard Green & Partners, a private equity firm that has a stake in both companies.
"It’s a way of thinking about business a little bit differently that accepts a wider circle of responsibility in the world and puts the team member at the center of it all," said Walter Robb, co-chief executive officer of Whole Foods, adding that different terms, including creative capitalism and enlightened capitalism, are used to describe the phenomenon. "Certainly you want to make money, but you have to have a larger purpose or mission to create this potential for your employees, your customers and your business."
Robb and Kip Tindell, chairman and CEO of The Container Store, who also is a Whole Foods board member, agreed that clearly defining the mission — and what it means for parities with an interest in the success of a company — is essential. Whole Foods formalized that commitment in 1985, five years after it was founded. Since then its core values have evolved to include selling the highest-quality natural and organic products available; satisfying and delighting customers; supporting team member happiness and excellence; creating wealth through profits and growth; caring about communities and the environment; creating win-win partnerships with suppliers; and promoting healthy-eating education.
"Purpose creates alignment between your employees, customers and vendors," Robb noted, "and that allows you to reach your deeper aspirations. Why shouldn’t a company accept this idea of a wider sense of responsibility and have the same depth of aspiration as individuals do?" The challenge for management, he added, is figuring out how to "create value for each and every one of the stakeholders as you make decisions and grow the business."
That sometimes requires trade-offs. Faced with steadily rising health care costs, which now total some $180 million a year, Whole Foods recently considered passing along an 11% rate hike to employees but in the end did not. In this instance, the interests of the people who staff the stores were put ahead of those of stockholders. The trick is to achieve an equitable balance overall.
"A lot of people believe business is a zero-sum game," said Tindell. "That’s simply not true. Synergies are the way to create the most value. This method of business really works."
That assertion was supported by financial results cited by Leonard Green managing partner Jonathan Sokoloff: One study shows companies that practice conscious capitalism outperformed the S&P 500 by 9 to 1 over a 15-year period.