One of the four core pillars of Conscious Capitalism is “Stakeholder Orientation.” Why? Because it’s impossible to have a Conscious Business when you make choices all day, every day, that are UN-conscious — particularly when those choices are harmful to one or more of the stakeholders in your business.
From a Conscious Capitalism perspective, there are six primary stakeholders in a business:
3) suppliers / vendors;
4) shareholders / investors / owners;
5) community; and
6) the planet / environment.
Many (if not most) businesses view some of these stakeholders as more important than the others. For instance, plenty of companies make it their top priority — and it sometimes seems like their only priority — to deliver a good return on investment for shareholders. Others make customer satisfaction their top priority, even when it comes at the expense of employees.
Conscious Businesses take a very different approach. They make sure that every business transaction delivers a Win for all of the company’s stakeholders. Always.
A Typical UN-Conscious Approach
Let’s take a quick look at a typical UN-conscious company. This company is not a Goliath like Walmart. It’s just a basic American business that sells some products to consumers. Let’s call this company Acme.
Charlie, the CEO at Acme, is getting a lot of pressure from his shareholders (who just so happen to be Charlie’s father-in-law and brother-in-law, neither of whom really likes Charlie). These shareholders are demanding that Acme generate a higher return on their investment.
So, Charlie does what so many people do in this situation: He decides to pressure his suppliers to give him better terms and better prices. Basically, he says, “Instead of paying you in 30 days, I’m going to pay you in 60 days, and I’m going to pay you 20% less than what I’ve been paying you.”
Sadly, not uncommon. (Remember J. Ignacio Lopez de Arriortúa, General Motors’ global purchasing czar back in the ’90s, aka the “Basque bully”?)
How do Acme’s suppliers respond to this unilateral change in terms and pricing? Odds are, some of them tell Charlie to pound sand: They refuse to do business with Acme anymore.
But let’s say one of the suppliers decides to stick around. Maybe Acme is that company’s biggest account, so they can’t afford to quit cold turkey.
The thing is: Now they’re making WAY less money from working with Acme AND they’ve got cash flow problems.
So, what do they do? Do they turn out higher-quality products for Acme? Uh, no.
Maybe they lay off some of the people who were doing quality control for Acme’s product line. Maybe they reduce the quality of the raw materials they’re using. Somehow or other, they need to find a way to remain profitable. They have to find the money somewhere. So, they wind up selling Acme a lower-quality product.
And then what happens?
Acme’s customers complain, and the cost of customer service goes up. The product breaks and customers return it under warranty, so the cost of warranty returns goes way up. These unhappy customers complain to their friends and their family. They Tweet about it. And what happens to Acme’s reputation? Do you think maybe sales start to decline? Naturally. So now the salespeople are unhappy too, and they start quitting.
Now Acme has declining sales, increased warranty returns, increased customer service costs and increased turnover. With all that going on, what happens to Acme’s bottom line?
It’s quite likely that Acme is making less money now than it was before Charlie decided to squeeze his suppliers.
Clearly, there has to be a better way, right?
A Conscious Capitalism Approach
Now let’s consider a Conscious Capitalism approach to this exact same situation. Rather than giving suppliers an ultimatum, Charlie embraces his company’s suppliers as partners and collaborators in business. Perhaps he goes to his largest supplier and says, “I’ve got a problem. I’m getting so much pressure from my shareholders that I have to do something about it. I need to give them a larger return on their investment. How can we work together to make this happen?”
Maybe this supplier has some pet project on a back burner: a brand-new product that they’ve almost finished developing ... something that would be a totally unique offering in the market. Maybe Acme can invest in the final development of this product in exchange for getting an exclusive. That way, Acme is no longer selling a commodity product. Instead, Acme has something unique to sell.
By partnering with its supplier in this way, Acme doesn’t have to try and squeeze more profits out of its existing product line. Instead, Acme is able to introduce a new higher-priced product that has higher profit margins. Acme even gains some new customers in the process, as buzz builds about the new offering. And the sales team is happy, because they’ve got something unique to sell.
This time around, Acme’s supplier wins. Acme’s shareholders win. Acme’s employees win. And Acme’s customers win.
That’s just one of many potential Win-Win-Win-Win solutions to this age-old business problem, and it comes from doing business consciously.
Sometimes doing business consciously and finding a Win for all stakeholders looks collaborative, like having an authentic conversation with suppliers in our Acme example. Sometimes doing business consciously and finding a Win for all stakeholders looks “green” — like when a winery that’s having rodent problems in the vineyards decides to puts up owl boxes, instead of using poison and risking the health of its employees, customers, community and the environment.
Like Two Different Worlds
Unconscious businesses live in a land of Win-Lose. It’s a land of lack and limitation, where scarce resources must be fought over and hard-won. There’s never enough data to feel safe making major decisions (hence the need for ever-more committees and reports and research projects). And leaders often have to make choices that feel like deciding between the lesser of two evils.
In the unconscious land of Win-Lose, a company’s leaders, managers, employees and suppliers (and yes, often its customers, investors and the community, too) experience feelings of resistance and constriction. They experience tremendous stress, tension, fear, anxiety — energies that block creativity, collaboration and innovation.
From this space, what may seem like one minor “tradeoff” can have a huge domino effect, just like Acme’s decision to squeeze its suppliers.
Of course, Conscious Businesses have to make difficult decisions too, just like unconscious companies. But by involving all of the stakeholders who are affected and invested in the outcome of a particular decision, Conscious Businesses can tap into a tremendous reservoir of brainpower and experience, not to mention diverse perspectives. And that translates into immense opportunity.
The land of Win-Win, where Conscious Businesses live, is a land of abundance. There, creativity, collaboration and innovation unleash unlimited possibilities. The land of Win-Win feels expansive, exciting and energizing.
Employees want to work in this land. Customers like it so much they become brand ambassadors — heck, they may even become investors, and investors may even become customers. Local communities are proud to have these businesses in their town, too.
It has been proven by company after company (think Zappos, Whole Foods, Southwest Airlines) that caring about all of a company’s stakeholders — and finding opportunities for all of those stakeholders to Win in every decision, large and small — really pays off. It feels good. It does good. AND it generates considerable wealth in terms of revenues, profits and growth.
Sue Elliott is the Co-Founder and Chief Energy Officer of Workplace Energetics, an international firm that empowers businesses to release fear, release resistance, generate forward momentum and create lasting change (Sue.Elliott@WorkplaceEnergetics.com).