Capitalism’s higher purpose: An old idea gains new currency

A new leadership movement is gathering momentum in Australia. It is based on a simple principle: companies that operate to a higher purpose than making money, and making more money.

It’s not a new idea – in fact is an idea that was more prevalent among businesses 100 years ago, according to its main proponent, a professor of marketing and Bentley University in Masschusetts, Raj Sisodia.

Sisodia spoke to LeadingCompany today, in his first interview with Australian media.

Sisodia’s research over the past 15 years reveals a group of companies that are outperforming others by a factor of 10.5 to one in terms of cumulative shareholder value, when compared against benchmark indices.

Who are these remarkable performers? Companies such as Google, Ikea, Johnson & Johnson, Starbucks, Caterpillar and Whole Foods are among those that Sisodia studied in detail.

Sisodia found leaders of these companies had a different way of doing things. “They are less command and control, they are more modestly paid, they are committed to the purpose of the company, and grew up in the company,” he says. “They are into mentoring and motivation, not into the carrot and stick. We call them conscious leaders; it is also called servant leadership.”

These companies care about their shareholders, but they care as much about their suppliers, customers, employees, society and the environment. “Companies create and destroy many kinds of value, including social, cultural, emotional, spiritual and intellectual values,” Sisodia says.

Geoff Manchester, the managing director and co-founder of tour operator Intrepid Travel, is preparing to welcome Sisodia to Australia for the launch of a local chapter of Sisodia’s non-profit organisation, Conscious Capitalism.

Manchester, who stumbled onto Sisodia’s research a couple of year ago, will be the Australian ambassador for Sisodia’s ideas. “Conscious capitalism reflects a lot of our philosophy as a company anyway: the idea is that businesses do good in the community and are not just there to make money.”

Manchester says his company has been quite rigorous internally about sticking to its principles, and soliciting feedback from its 120 staff. “We have been a bit lax about telling the world,” he says. “That is changing. We are moving involved in telling our customers what we are doing.” Manchester’s involvement in the local group is part of that change.

Law firms are particularly vulnerable to becoming dominated by the profit motive, says lawyer Michael Bradley, the managing partner of Marque Lawyers, which he co-founded in 2008. “We [the founders] all came out of big law firms, which are money driven,” he says.

The founding partners of Marque put personal happiness as their motivating goal. He says: “We wanted to practice law and be happy, and relegated maximising our personal incomes to a consequence, rather than a direct goal. That drives everything we do in terms of how we structure our business and growth.”

Timesheets – the most hated element of traditional practices – have been banished, and so are time-based charge out rates. “Time-based charging doesn’t work for client. It is insanely stupid and bears no relationship to value and it is antithetical to building good relationships with clients.” Instead, the company charges a retainer or a fixed fee.