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I want to show you three short clips from
CEOs talking about how they create value for stakeholders.
Because this is the cornerstone of thinking
about a new story about business in society.
Of thinking about our goal here, which is to
think differently about business and to make it better.
First, John Mackey, CEO, Co-CEO,
Co-founder of Whole Foods Markets.
Can you say some more about this culture creation
and how you do that at Whole Foods Markets?
>> Well, the way I think about it is
that it starts without purpose in the, in the
center and then the stakeholders radiate out like spokes
on a wheel and are connected to that purpose.
And then, the culture aspects are all the things that unite the stakeholders
to the fulfillment of the purpose.
So the purpose satisfying the stakeholders.
And the culture or, or mean structures processes, strategies to do that.
How do we create that at Whole Foods?
we co-create it.
the stakeholders are involved in that creation.
But once you internalize that purpose and what you have a stakeholder model.
Then you can examine the culture
that exists and say that's not really serving us in terms of
our mission or our purpose or in terms of creating value for stakeholders.
So we gotta evolve that or get rid of that.
In this type of strategy so, for example Whole
Foods is organized into, into teams, into self-managing work teams.
And, that helps the team members the employees, we called
team members at Whole Foods, that helps them to flourish.
And if they flourish, if they're happy in their work and, and
they are creative and that, that helps them to serve the customers better.
Of course, if they're serving the customers better, the business is going to
flourish and that'll serve the investors
because the business will be more profitable.
so the, by having that type team structure, that's a
cultural, organizational value at our company that helps serve the purpose and
the stakeholder groups.
There's, there's literally dozens and dozens, perhaps
even hundreds of cultural aspects of Whole
Foods that have evolved over time that
serve the mission and the stakeholder model.
>> Next, I'd like you to listen to Kip
Tindell, the Co-Founder and CEO of The Container Store.
We talked a lot about what we call Stakeholder Theory.
The idea that what companies really do is they create
value for customers, suppliers, employees communities and people with the money.
and a lot of people have said to me as,
as, as well as people who write about this a
lot, they've said you know, how, how does, that's a
great theory, but you know, can it work in practice?
And you've always
run The Container Store, it seems to me, along the stateholder
lines the same way John Mackey's run Whole Foods along those lines.
a lot of companies have done that, so how, how did you come to
understand, I think you said somewhere businesses
are comprised of in, interdependent sets of stakeholders.
How did, how did you come to realize that? Was that
just a intuitive thing as an entrepreneur or, or did, did the light
bulb go on one day or is that just the way you've always been?
Well, I think, no, I mean, we think about it.
We've talked about it.
Nobody knows more it's fun talking to you about this.
Nobody knows more about this topic than you, but let's
take the, the vendor as as one of the stakeholders.
You know, I mean, so, so primarily,
we have the, the, the employees and the customers and the vendors
and the shareholders, and the community, and and there's more, but the
it's how is the little Container Store going to compete with the mass merchants?
You know, we can't, we can't beat Walmart on volume.
But we can beat and we do beat Walmart on relationship building.
Creatively crafting
a mutual relationship with that vendor, you know and.
>> So the vendors want to make you better?
>> Yeah, yeah, I mean we're creatively, you know,
rather than laying awake at night trying to figure
out how to screw each other around, we're, we're
actually laying around at night thinking how we can synergistically.
you know improve that, that, that relationship and it's, it's thrilling.
It's, it's, it's more profitable than any other way.
We're, I would dare say that, that most of our
vendors will tell you that The Container
Store is their favorite customer, you know?
I mean we, we we do things for them.
We loan them money.
We, we, we buy a shrink warp machine for them.
We pay all of our bills on time because we can afford to do that and they can't.
A retailer gets paid immediately.
A vendor gets paid, you know, 60 days later.
And so, you you create synergy.
Somebody gets the the last pallet of whatever the hot item
is that Christmas.
Somebody gets the best price in the, in, in the country.
And through this very creatively extensive
hopefully, many years of creating a true partnership with that manufacturer,
you can enhance the profitability of, of, of
both sides far more than, than any other approach.
And it not only enriches You're lives and in life
of the people you do business with it actually,
actually works better to think of the methodology too.
If all you really want to do is make as much money as possible, as quickly
as possible, I would submit to you the best way, the best way to do it.
And the same goes for the employees.
The same goes.
As you know so well, balancing the needs of all those stakeholders allows
for a, a really enduring, long term,
and increasingly synergistic build of the business.
And when I look at companies that are really dominant in their niche or
doing what they're doing better than anybody
else, they all possess that same mind set.
That same approach to business.
In any human relationship, if one party's taking advantage of the other
it doesn't last very long or you hope it doesn't last very long.
So.
>> If you one of, one of, one of the ways of
thinking about this is that's fairly dominant in our world is that
its only shareholders that matter.
It's only the people who are investors that, that matter and I realize The
Container Store is a privately owned company,
but suppose for a minute that you.
>> We still have shareholders.
>> Yeah, you still have share, you still have share, shareholders.
>> Think for a moment if you, if you only had
to worry about shareholders, you only had to worry about the investors.
What, what would The Container Store be like?
>> Yeah, so I
[CROSSTALK].
>> So you didn't worry about employees the
way you did, you didn't worry about vendor, vendors.
>> Well, it wouldn't have The Container Store yummy
culture and it's the culture that drives the value.
so it wouldn't exist, I mean if you, if
you, if you myopically focus only on the shareholder.
As business schools have taught people to do for
decades, if you, if you myopically focus on the,
shareholder it loses the magic, magic, you don't have
a business or you don't have a very good one.
And I think that companies that continue to
companies that, that don't evolve into this approach,
this sort of stakeholder, Conscious Capitalism method of
doing business are, are, are going to lose out.
the the great thing about it,
what, what, what we, what we call Conscious Capitalism and our foundation
of principles that kind of a
purpose-driven and values-driven methodology of doing business.
if you look at the companies that, that do that, Whole Foods Southwest
Airlines Google Trader Joe's, they do better than anybody else.
I mean there's, there's been studies made that,
that, that suggests that it's perhaps six or
eight times the S&P and that's not two or three times.
So what's interesting about Conscious Capitalism I think is
that pretty soon, most people are going to do it.
Because most, I mean a good capitalist is eventually
going to adopt that methodology which is most successful, right?
I mean, we're out there, you know, speaking about how great it
is to do it, but I think most people will do it eventually.
>> Yeah.
>> The, the,
the, the myopic focus only on a shareholder alienates
the employee, it alienates the vendor, it alienates even
the customer ironically in the way that in the way that so
many technology companies.
I mean today, take care of the customer better than
the old, the old guard banks take care of the, you know, you don't really
trust that bank, you think they are trying to get into your pocket too much.
But this technology company will say, hey, don't
order this book you ordered it six months ago.
>> Yeah.
>> You forgot. >> oh, yeah, thank you.
You know, I mean, they're, they're looking out for you.
They're, they're, they're, they're on your side a bit.
>> Yeah.
>> And so, yeah, it's, it's you know, the way to do it.
You know, we, we pay 50 to 100% above
industry average. >> Right.
>> And so, it'd be easy for a shareholder to
demand that you not do that, but that's not their money.
That's the employees, you know, money.
We actually we don't constantly nickel-and-dimed
the vendors to, to the point that they we, we want them to be profitable to.
I think we're, I think we're intelligent
enough to creatively craft that mutually-beneficial relationship.
You know
Andrew Carnegie was lying on his deathbed
in the Adirondacks and a card reporter from
The New York Times came up and said,
hey, you know you're probably the most successful.
of all time is anything you attribute your incredible
business success to and he said, yeah, there is.
There's one beacon, one guiding light that I attribute all my business success to and
that is filling the guy's basket to the
brim, making money then becomes an easy proposition.
Fill the other guy's basket to the
brim, making money then becomes an easy proposition.
That sounds like something that
>> Good investor, a shareholder would sure hate to hear a CEO say,
but it actually, it actually does work.
>> I actually think that principle, fill the other guy's basket to the
brim, is the best articulation of what
stakeholder theory is that I've ever heard.
>> Mm-hm.
>> If you fill that stakeholder's basket to the brim Making money's going to take
care of itself. Finally, listen to Tom Gardner at the
Motley Fool. I think there's a large recognition that
the current business model, the current narrative, business
is about the money, it's only profits that matter.
People are competitive and self-interested,
and that's all that matters.
Businesspeople lie, cheat and steal more than the average
and then by some magic, the greatest good emerges.
That sort of caricature of the model
of business that's in our culture is changing.
changing in a whole bunch of directions toward people worrying about corporate
responsibility, towards sustainability, towards a more
stakeholder oriented idea like conscious capitalism etcetera.
What do we need to do as, as individuals
[INAUDIBLE]
to hasten that change. to if you like bring the principles of
conscious capitalism more to the center to encourage more of that thinking.
Because the old model is still, you know, has
a grip on much of the business world as well.
I think I'm a believer in appropriately place positive reinforcement.
And so I I'm a bigger fan of identifying the companies
that are doing what it appears to
be effective appears to serve many stakeholders simultaneously.
we were talking before about super alignment, what I call super alignment.
You're much more articulate on this than I am Ed,
but the things that actually cause all stakeholders to benefit simultaneously.
So its not a trade off if I lower prices
for customers then I'm going to have to lower salaries for employess.
If I if, if I'm not going to be creating
commercial value for the shareholders then I'm going to have to also take some
value away from the employees and said how do we set this organization up.
To get a multiplier effect for everyone, so that everyone's cheering each
other on and I think there are great organizations that are doing them.
A lot of those organization are newer companies that
are being created with that new, with the newer thinking.
with the, without the Milton Friedman, it is about the
shareholder, that's the only, that's the primary, if not exclusive
stake holder that matters for an organization.
You know really I think the great organizations kind of put the shareholder.
In fourth place, because that shareholder is
going to derive a tremendous amount of value if
the other folks involved in that business are happy over a long period of time.
So, I think it's about positively re-enforcing companies, and I
think that's one of the things I love about conscious capitalism.
The highlight companies that are apart of that movement,
Whole Foods, and The Container Store and so many
other great business that treat their stakeholders with respect.
Creating value for stakeholders is in part, or rather purpose is a very
important part of of each of what these CEOs do.
It's been there since they started these companies and its evolved in a way,
there's kind of fly-wheel, once you get
them going in the same direction Kip Tindle
often says the world, the universtions inspires to corpororate with you.
Once you see these interestes going in the same direction.
But this isn't enough for you. Listen to what some other executives say.
Who are not apart of the consous capitalism movement.
Some people you would think are very different from that.
First of all the iconic CEO of General Electric in the 80s and
90s Jack Welch.
Jack Welch says on the face of it
shareholder value is the dumbest idea in the world.
Shareholder value is a result not a strategy, your main constituencies
according to Welch are your employees, your customers and your products.
Well not quite the way I'd put it but still the idea that profits are
result and what we're focusing on is that underlying
model of how business fits in society or Henry Kravis.
A buyout expert, sometimes called a corporate raider, he says,
you have to focus on all of the stake holders.
It's a new thing for us and we're really hammering long term value
is only achieved if growth benefits all stake holders from owners to employees,
communities, even governments.
We're conscious, we're fiduciaries to millions of
hard-working men and women and university in Damas.
Trust must be earned over the long haul and maintain constantly.
We've not always adequately explained that to the man on the street.
[UNKNOWN]
is in a way articulating a summary of this new story.
One of my favorite quotes from Bill George, now a
professor at Harvard Business School, longtime chief executive of Medtronic.
He says serving all your stakeholders is the best way to produce longtime results.
Create a growing prosperous company. Let me be clear about this.
There's no conflict between serving your stakeholders and
providing excellent returns for shareholders.
Let me just read that again.
There's no conflict between serving all your
stakeholders and providing excellent returns for shareholders.
It's impossible to have one without the other.
However, serving all these stakeholder groups
requires discipline, vision and committed leadership.
And finally, for those of you who might be academics, Michael Jensen economist,
inventor of agency theory, theory and a kind of die hard shareholder value guy.
Said, we can learn from the stakeholder theorists how
to lead managers and participants in our organization to
think more generally and creatively about how the organization's
policies treat all the important constituencies of the firm.
This includes not just financial markets, but employees,
customers, suppliers, the community in which the organization exists, and so on.
There is a revolution afoot in business. We're creating new models.
We're creating new ideas and more importantly we're creating new businesses
that put business and society together. This is
not easy to do. Don't mistake my enthusiasm for
doing this with the idea that I think it's easy, I know it's not.
The question I'd like you to ask is what do you see as the main challenges
for companies that are trying to do this, because next week,
I'm going to ask you to think about
what you can do in terms of starting
a company or In
terms of your roll as
customer or employee.