This is an addendum, representing profound new corporate performance results, from my earlier post on the trend, now approaching ‘buzzconcept’ model status, of enterprises representing positive human characteristics – higher purpose, social responsibility, trust and honesty, altruism, inclusiveness, being values-driven, etc. – for all stakeholders: http://www.customerthink.com/blog/building_valuable_customer_centric_and_trust_based_relationships_a_well_established_concept_tha
If I’m picking current and well-researched books on this general topic, my first selection would be Conscious Capitalism, a new volume by Raj Sisodia (co-author of Firms of Endearment, Wharton School Publishing, 2007) and John Mackey, co-CEO of Whole Foods Market. In addition to organizations like Whole Foods, the Conscious Capitalism ‘movement” (http://www.consciouscapitalism.org/) includes senior executives from companies like Southwest Airlines, Costco, Google, BazaarVoice, First United Bank, The Container Store, Patagonia, UPS, Trader Joe’s, and dozens of others.
As stated in their book, “Conscious Capitalism is a way of thinking about capitalism and business that better reflects where we are in the human journey, the state of our world today, and the innate potential of business to have a positive impact on the world. Conscious businesses are galvanized by higher purposes that serve, align, and integrate the interests of all their major stakeholders.” This sounds reasonable, even high-minded; but, does it monetize?
Mackey and Sisodia have directly addressed this issue, i.e. how well the conscious capitalism firms have fared financially, in their book (see pp. 277-278). Not surprisingly, conscious capitalism is also good business. They looked at the investment performances of the Firms of Endearment (FoE) companies versus the S&P 500 during the 1996 through 2011 period. Here’s what they found:
FoE – 1,646% cumulative, 21% annualized
S&P 500 – 157% cumulative, 6.5% annualized
FoE – 254% cumulative, 13.5% annualized
S&P 500 – 30.7% cumulative, 2.7% annualized
FoE – 56.4% cumulative, 9.4% annualized
S&P 500 – 15.6% cumulative, 2.9% annualized
For those who are skeptical about the superior performance of values-based, more customer-centric and ‘human’ approaches representing exceptional returns, and believe that taking a longer view is needed to provide more assurance, it should be recognized that the 2006 to 2011 period includes both the financial meltdown and the slow recovery. Unlike NPS, which was suspicious from the beginning because of the limited number of examples offered, the results of close to 30 selected companies were evaluated by Sheth, Sisodia and Wolfe in their book. These companies not only significantly outperformed Collins’ Good to Great companies (which he chose because they had delivered cumulative returns at least three times greater than the market over a 15 year period), over time they monetized extremely well on an individual, collective, and cumulative basis.
In Firms of Endearment, it was noted by the authors that none of the Good to Great companies were selected for their list. For instance, Altria (the parent company of Philip Morris and John Middleton) performed well and made Collins’ list, but didn’t make the Firms of Endearment cut because, viewed on a societal level, the company represented diminished value. I’m not a tree-hugger, but I understand the thesis they present.
Sisodia used the same FoE companies in the new results quoted in Conscious Capitalism, which, because it was published this year, represents the most current available financial results.
So, even in the challenging economic times represented by the last five years, enterprises living human approaches to stakeholder value delivery still perform at over 3x the S&P 500. I can’t speak for everybody’s definition of effective financial performance, but this is good enough for me.