January 19, 2015 – by Jeroen Geelhoed &samhoud consultancy
Good companies create value for all stakeholders: employees, customers, investors and society. This way of thinking makes more and more sense over time. Professor Raj Sisodia proves that companies operating with this paradigm outperform all other organisations by far. “We are talking about the power of love”, states Sisodia. Read more in this interview with the author of remarkables books like Firms of Endearment and Conscious capitalism.
What does love have to do with business?
That is the most important question you can ask. In contemporary management we have this notion that business has to be based on a lot of stress and a lot of fear and a lot of anxiety and so forth. Positive sentiments like love, care, compassion and nurture don’t play a part in the role of business. If you operate like that, you are seen as weak and not able to compete. But what we are finding is that the opposite is true. Companies that are built on love, where people love what they do, where they love each other as colleagues, and where they have love for their customers and their suppliers, are much stronger.
Look at the downside of not operating with love. The opposite of love is fear. And if human beings operate in an environment of fear, people will not be creative and innovative. In America we have an expression ‘Thank God it’s Friday’.
It articulates the feeling that work is something you have to get through, and after work you can enjoy your life. And the overall level of engagement is very low. The percentage of engaged employees never exceeded 30% in the last decade. That is a tremendous waste of human potential. If you look at the difference in performance between this type of company and a normal company, a lot of it is explained by human energy. Ultimately it is all driven by energy. Not in the first place by the quantity of the energy, but by the quality of the energy. There is a lot more energy and a lot less friction within the organisation. And that allows the organisation to operate far more effectively. We have kept this out of the business world for too long. When John Mackey started Whole Foods, he said: “I want to build a company based on love and not fear”. And what has been the effect of this? When Whole Foods was in trouble due to a major flood in 1983, they didn’t know what to do. They had no insurance and it seemed that this would be the end of their company. But then several dozen customers came along and said: “Let’s clean it all up”. Customers took a day off in order to help their Whole Foods store survive. The power of love kept that company alive. Think about that! So we are talking about the power of love. We are talking about ‘firms of endearment’.
What characterises a firm of endearment?
Firms of Endearment have a purpose. Purpose about fundamental questions such as ‘Why are we here?’, ‘What are we trying to accomplish in the world?’, ‘What is the contribution that we are trying to make?’, ‘Why would the world be better because we are there?’, ‘Why do we exist?’. A purpose like this is the glue that holds the organisation together and it is also the magnet that attracts the right people. It reduces friction within the organisation because everybody is pointing in the same direction. Leadership embodies and articulates the purpose. Leaders constantly talk about the purpose of the business. Purpose is a dynamic concept and all stakeholders are involved in evolving it over time. Whole Foods, for example, conducts a study on its future every three years. They bring together all their stakeholders and spend three days dreaming about the future. That leads to an enhanced sense of purpose. All the stakeholders own it thereafter.
Secondly, we found that these companies have different kinds of leaders. They are driven by service; they are service-oriented leaders. They are very passionate about what they are doing and why they are doing it. They are not ‘command-and control’ and ‘carrot-and-stick’ types of leaders, and are not driven by money and stock options. These leaders are very different.
The third element we found is the way they treat their stakeholders. Firms of Endearment want to create value for all stakeholders, such as customers, suppliers, society and employees. You think about everybody’s needs at the same time. It is a question of intentionality. You want to approach the whole business by thinking about what value it creates for each stakeholder. And that each decision you take, you will look at its consequences for all stakeholders and ensure that somebody is not paying for somebody else, that no-one is being exploited. This does not imply that everyone benefits all the time, but it does mean that it benefits everyone and that everyone ends up advancing in the long term. So that is really the mindset that lies behind it.
The fourth element is their culture. The passion, dedication, generous spirit and expansive creativity found in every Firm of Endearment are products of their culture. The primary elements for organisational culture are, firstly, their dedication to maximizing the creation of value for all stakeholders. Secondly, the organisational values are embedded within the culture. This is the aligning force that keeps an organisation centered and balanced. The final aspect in their culture is their organisational energy. This is the force that propels the organisation forward at a steady speed. All Firms of Endearment are high-energy organisations.
This article is an abstract of an article published in &samhoud review #7.