As his day job, Adam Melnick is the Senior Entrepreneurship Officer at nonprofit Colorado Lending Source and runs the Ice House 10-week entrepreneurship program there; he spent the last 3½ years learning everything he possibly could about entrepreneurship. About 2½ years ago, Adam was exposed, as he says, to the idea of Conscious Capitalism for the first time. The mission resonated so well with Adam’s passion, and his perception of the business culture of Colorado, that it inspired Adam to co-found the Colorado chapter of Conscious Capitalism.
On a warm Wednesday evening in March, Adam discussed how business can be a force for good in the world through the adoption of a Conscious Capitalist system.
How we got here
Today, the word “business” is associated with all sorts of terms, but the most common ones Adam hears often are money, greed, power, profit, exploiting workers, cheating consumers, inequality, environmental damage...it goes on and on.
A Gallup Poll found that only 18% of the US population trusts big business—and the only institution they trust less...is Congress. Another study from Gallup Poll found that about 50% of employees were unengaged and another 16% were disengaged with their business, meaning that ⅔ of employees either do not care about their employers or are actively trying to sabotage their company due to resentment. Scary stuff!
Business as we know it is also wrapped into many myths and misconceptions, and these spur animosity from all sorts of people. Potentially the largest misconception of the economy is the zero-sum myth: if one company is making money, the competitor is not, and vice-versa.
Adam believes that the truth is that by combining resources and working together, companies can actually grow the pie rather than just getting a bigger piece for themselves. The economy gets stronger, more value is assigned to it, and thus wealth expands.
Birth of Big Business
To really understand where and how these negative stereotypes and perceptions associated with business originated, Adam walked us through the origins of big business.
It all started with the Industrial Revolution, where those in power quickly and cunningly established that the purpose of business was to maximize profits for investors.
This concept gained enough ground that people truly believed this was their fiduciary responsibility to the company—it became the success metric of executives and board members. It also became corporate law, and this law became the backbone for business school—and from there, profit as the main goal became indoctrinated into the belief system of every business student.
Education Epidemic
The normalization of big business also meant that employees were needed to be a cog in a wheel, with no room for creative aspects in the job description. This, in turn, trickled into the public education system, where students were made to memorize, regurgitate, and repeat—a way to prime many youngsters for industrial, repetitive jobs in large companies.
George Land conducted a study where he gave elementary school students the same creativity test that NASA engineers must pass to become astronauts and found that 98% of the kids scored in the genius range.
Land administered the same test to the kids as they progressed, and the scores kept decreasing steadily, until, as adults, the results were in the low single digits. Big businesses needed cooperative, not creative or authority-questioning laborers, and so the education system delivered.
Big businesses needed cooperative, not creative or authority-questioning laborers, and so the education system delivered. #history #business
Military Model
When big business was emerging, the only other organization of a similar large scale was the military. Consequently, the military structure served as a model for company culture: this is where the top-down, command-and-control, structured organization of big business was drawn from.
Crony Capitalism
For roughly 100 years, the US had a quite pure form of free enterprise capitalism, creating the biggest middle class in history as a byproduct. This system had a pretty even distribution of income between capital and labor.
However, toward the end of the 1900’s, the outlook shifted from providing value for all stakeholders involved to using government as a crutch to become huge, successful, and entangled in matters previously out of their control, such as regulations and limiting competitors. In short, cronyism is the concept of using government to become successful as a business, which distorts free market capitalism.
If you ask Adam, he’ll tell you that the system in place today is not true free market capitalism—it’s fueled by incentives for businesses to get a break via government involvement. But it could be with a little work and a lot of ethical decision-making.
So...why is business good?
Although businesses can be corrupted by greed, there’s a solid argument for why business is inherently good. At its core element, it creates value for everyone involved.
It’s ethical because of being based on voluntary exchange from both parties for the sake of mutual gain.
The goods and services that businesses provide to the market exist for the sake of making consumers' lives easier, more comfortable, efficient, and overall better.
Business is noble in the sense of elevating our existence, but it also can be heroic by diminishing poverty. In fact, 200 years ago, about 85% of the world lived in extreme poverty, and now that number is down to only 16%. 53% of people in the world lives in countries with democratic governments and universal suffrage—up from 0% just 120 years ago.
What is Conscious Capitalism, anyway?
In Adam’s words, “business is not about making as much money as possible; it’s about creating value for all stakeholders.”
The 6 key stakeholders include customers, suppliers, the environment, community, investors, and employees.
This belief goes far beyond strategy and is the foundation on which a business is built on; every decision takes into account every stakeholder and the business’s overall place in its current environment.
Business is not about making as much money as possible; it’s about creating value for all stakeholders. #businessstrategy
Entrepreneurs who start successful businesses don’t do it for the profit; they do it to make a significant change to the world by solving problems. Sounds like a win-win for everyone, right?
Adam encouraged the audience to imagine a business that exists in a virtuous cycle of multifaceted value creation, generates all-around wealth and wellbeing for everyone involved, and still delivers superior financial results consistently. Would you be this kind of business’s customer? I sure would.
The core elements of Conscious Capitalism include having servant leadership - or as Adam put it, “we rather than me,” decentralization, and integrating the values of trust, integrity, and transparency.
Even better, there is an emphasis on developing people as a whole, not just for their role in the company: employees are encouraged to grow, become leaders, take risks, and, most importantly (and differently from the Industrial Revolution era), be creative without punishment.
Remember back to those scary statistics about current lack of employee engagement?
Well, management research has found that the people that are most engaged with their business are those who have autonomy and empowerment of making decisions. It only makes sense for a business to create the best people they can, as those people then help positively and authentically represent their business.
Businesses that implement the Conscious Capitalism system have outperformed the S&P 500 index by a factor of 10.5 in the last decade, but why?
The short answer: everyone wins.
The long answer: suppliers get a fair rate and are happy to do business; employees are more engaged, productive, and retention is higher; communities welcome the business more; and customers tend to be more loyal and satisfied.
The more these kinds of businesses give, the more they get, which brings us to the bottom line: it pays to truly care.
Q&A Session
Q: When developing company culture, groups tend to form that create division and have their own level of autonomy. How do you join them together?
A: It stems from the top leadership influencing groups to use the same style of leadership on every level. The key is to always make decisions through the lens of the organization’s values and purpose.
Most importantly, be consistent.
Q: How can this be adapted for companies that function remotely from satellite offices?
A: The key is interaction—bringing everyone together, if possible, in the same physical place at least twice a year to build connections is one way to achieve this.
Another, if the first is not possible, is to arrange weekly face-to-face meetings with employees and bosses to share experiences and become more tight-knit. It’s hard to do, however, and the biggest challenge of big companies with remote employees is unifying culture.
Q: Can you give an example of Conscious Capitalism in action?
A: One is Dave’s Killer Bread—Dave’s father started the company, his brother ran it, and Dave was in and out of legal trouble during the time. Then, when Dave cleaned up his act and joined the business, they created a program where ⅓ of employees were hired post-criminal offenses. Though Dave and company baked tasty bread, this other element was their bigger purpose: they successfully helped lower local recidivism rates through employment opportunities supplemented with training, support groups, and more.
A classic example is Whole Foods: when a blizzard hit one of their locations and wiped out all the cash registers, the store manager let customers leave with bags of supplies and suggested that they come back and pay when they can. Whole Foods could have simply turned everyone away so as not to lose money that day, but because of their sympathy, they likely gained lifelong trust with customers instead.
Toms proves their success of donating one pair of shoes for every purchased—they’re growing at a faster rate than Nike and opening retail locations soon.
Another example is Illegal Pete’s: the company has great employee retention due to the minimum pay being $18 an hour for employees and $60K per year for managers.
Q: Are consumers choosing brands because of Conscious Capitalism?
A: Yes, and it’s a great thing—companies can’t just fake it, because if a company spouts values that are not consistent with their true intentions, consumers can see right through the mirage.
For instance, when people first truly became aware of environmental issues, companies started greenwashing everything and anything, and it failed miserably.
Companies must talk the talk and walk the walk.
Companies must talk the talk and walk the walk. #ConsciousCapitalism #goodbusiness
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Check out Conscious Capitalism Colorado's website to learn more about the movement.
