Sisodia, 57, did not plan a career as a seeker of justice. Actually, it happened rather accidentally. He was born in the city of Indore in India, and when he finished high school, he started to study electrical engineering. “Not because I wanted to,” he remembers. “At that time, the possibilities were limited. If you were good in mathematics, you studied engineering. If you were good in both mathematics and biology, you studied medicine. Otherwise God help you.”
In order to improve his conditions as an engineer a bit, he did an MBA, and went on, also by chance, to the next stage a prestigious doctorate in marketing at Columbia University in New York with a full scholarship. He heard at the time that his friends were trying to get accepted there, and followed them. “It was everyone’s dream at that time to go to the US, because India was still a socialist country then. Everything was nationalized, even the banks. The economy was in a terrible state.”
Sisodia began studying marketing at Boston University, but he always felt uncomfortable when he encountered more and more marketing failures. “You could say that businesses mainly become more efficient. The quality of the product rises with time, and the cost of production falls, but the cost of marketing only goes sky-high. At the same time, the public trust in marketing is constantly on the wane. Everyone does more with less, while marketing does less with more.”
In 2005, Sisodia decided to write a book about negligence in marketing. He though about calling it “The Shame in Marketing,” but his mentor at the time told him, “You know, in America, people want to hear about the solution.” This comment made him change direction. Sisodia went on a quest for “excellence in marketing,” with a clear criterion: “Let’s find companies that don’t spend money on marketing, but have excellent results.”
That is how he arrived at Starbucks, Google, and the Whole Foods chain of organic supermarkets, whose share is currently traded at a $15 billion market cap, and which employs 90,000 employees at its more than 400 branches. “At that stage, Whole Foods didn’t employ an advertising firm and had no VP marketing. Their marketing budget was 10% of the industry average, and that was spent mostly on local community work.”
The picture that revealed itself to Sisodia when he delved into the details was surprising: these companies, which saved on marketing and nevertheless were successful, demonstrated generosity and managerial generosity not only to their customers, but also to their employees and suppliers. Something in their organizational culture was profoundly different from what we customarily associate with the business sector. “These companies treat their employees and suppliers like they are supposed to treat their customers,” he clarifies. “They try to provide for their needs.”
Calvin Coolidge, Republican president of the US president in 1923-1929, once said, “The chief business of the American people is business,” but Sisodia prefers the saying, “The chief business of business is people,” a paraphrase used by Founder and former CEO of Southwest Airlines Herb Kelleher. “He was hinting that it’s not just money and numbers,” says Sisodia. “These businesses see people, and that’s how they operate.”
“Better than average profits”
Sisodia found that these companies shared several common features. The first is that “They have a higher purpose” beyond the bottom line at the bank. The second criterion involves management, or as Sisodia insists on calling it, leadership. He cites the example of James Sinegal, cofounder and former CEO of Costco, the second largest supermarket chain in the US, “whose salary before retiring in 2012 was $300,000 a year. He visited one of the chain’s stories every day. That was leadership that does not behave in the imperial style of many CEOs who are completely isolated from their business and from people CEOs who use a carrot and a stick to motivate people. What animal exactly is between the carrot and the stick? Not a human being maybe a donkey. The leaders I’m talking about are people with consciences who are thoroughly focused on the goal. They have no interest in accumulating power for the sake of power.
“Everybody is talking now about the wage differentials in the economy. The average differential within public companies is 1:350. At Whole Foods, the differential is 1:19. The wage differential is the ratio of the median wage in a company to the highest wage. The median wage at Whole Foods is $45,0000 a year, and the highest salary is $900,000 a year. In another company of comparable size to Whole Foods, the CEO is usually paid $15 million or more. Here you have a manager who earns less than $1 million.”
Another brick used in the building of conscious capitalism is “an organizational culture with trust, transparency, and openness, and concern for the people around you a culture built on love and concern, not fear. At Southwest Airlines, the company symbol on the stock exchange is a colored heart. They’re saying, ‘We love our customers and love our employees’.”
It sounds a little like hippies.
“You’re right, but there’s enormous power in it. Companies built on love and concern are stronger, because then people are really committed to the company, and that enables them to do exceptional things. Costco, for example, pays double what Walmart pays. At Walmart, the pay is close to the minimum wage about $9 an hour. At Costco, they pay $18-19 an hour, plus health insurance and benefits. They’re also better about paying their suppliers. They invest in the community in which they operate. Their taxes are high. Other companies just look for ways to avoid paying taxes. The companies we checked pay what they should.
“You might say, ‘Sure, the investors in these companies get good returns, but not really excellent ones, because they spend money on all the things you mentioned.’ If you compare them to other companies in the market, however, they make better than average profits.”
How can you explain the success of these companies when they pay a lot of money for things that others don’t pay?
“They spend more money on people, but they also save, because their employee churn is much lower than usual. At Costco, the churn is 7% a year. At Walmart, it’s 70%, so their workers are inexperienced. At Costco, workers stay at the company an average of 10 years. So they may pay their workers more, but sales per employee at Costco are double. Experienced employees are more efficient, and are committed to their work.
“These companies also save on marketing, because they have an advantage: word of mouth. Satisfied people return, and tell other people, certainly in the era of social networks. They also save on personnel and staff. They don’t have so many intermediate levels. They don’t rely on supervisors, because their people manage themselves as a community. The employees don’t need anyone standing constantly next to their shoulder. Another area in which these companies save is legal expenses, because there are fewer lawsuits against them. All that adds up.”
“When work is infused with meaning”
Sisodia does not confine himself to research and theory. In recent years, he has also advised companies seeking to become more conscious. His clients include IBM, Volvo, and even McDonalds. “I worked with them a few years ago,” he says, taking note of my raised eyebrows. “Today, we know that there are fast food chains doing good work. It’s possible to succeed in business, and to offer a good product.”
Do companies ask you for advice, or do you ask them?
“Some of them. If they come to us from the personnel department, or marketing people, we tell them that without the CEO, no real change will take place, and even further without the board of directors, there won’t be a change. I had an experience with the CEO of a huge food company who wanted to make a real change. He had been CEO for a year, when his kids came home for Christmas, and told him that they weren’t buying the company’s products anymore, because it was very processed food. A $20 billion company. That woke him up, and he decided to make a thorough reform.
“They started the process: they admitted that they were producing unhealthy food, and sought to improve the product. At the same time, however, the board of directors wasn’t part of it. The board wanted the company to merge with an even more industrialized food giant. The CEO told them, ‘Over my dead body.’ A few months later, I heard that they fired him. They merged with that company, and fired a thousand workers.”
What manager do you look for?
“I don't look for a manager; I look for a leader - a leader with a vision, for whom it’s important to take people to a better place.”
How do you raise a generation of such leaders?
“They exist you just have to find them.”
But they are exceptions. The question is what should be done in MBA programs, for example, to raise such leaders.
“I think we’re doing very bad work in business schools, because the focus is only on the shareholders and how to make more money. You have to change the basic narrative of the study program. You have to attract people who came to the business world for the right reasons.”
“There will always be angry reactions”
The book Sisodia wrote with Whole Foods CEO John Mackey about conscious capitalism was published 18 months ago. The book describes Whole Food’s organizational culture, which among other things requires employees to lose weight and become physically fit.
Many people regarded this as invasive and offensive.
“In my opinion, this is a win-win idea. Spending on health is constantly rising, the cost of health insurance never stops going up, and the cost is borne by both the employee and the employer. The way Whole Foods chose to deal with this problem is to create a voluntary program to give the employees an incentive to make healthier choices for themselves. They check a number of parameters, such as cholesterol, weight, etc., and the better these values are, the bigger the discount they get on products in the store. All the employees get a 20% discount, but if the health indicators are good, they can get as much as a 30% discount. People with a chronic condition who are already taking medication are sent at company expense to a weekly program for instilling healthy habits, such as correct nutrition and exercise. Some people have lost tens of kilograms after undergoing the program.”
What did you think about the angry reactions to this initiative?
“There will always be angry reactions. People love to criticize. There will always be a labor union looking for a way to make problems, because they want Whole Foods employees to be unionized. Whole Foods employees chose not to be unionized, however, because they feel protected, are treated well, and received good working conditions.
“There was one store in Madison, Wisconsin whose employees asked to be unionized. Mackey’s response was very supportive, because when something like this happens at Walmart, they simply close down the errant store. Mackey, on the other hand, did a tour of all the stores for several months, and asked employees, ‘How can we improve the work conditions? Where are we going wrong?’ He took the fact that one store wanted to be unionized as an indication that there was a problem.”
What is so bad about unionized workers?
“Unions bring an antagonistic tone into an organization that makes it ‘we’ and ‘they.’ They create separation and radicalization, while in essence everyone is part of the same body. So if it’s possible to do things in a way in which everyone sits on the same side of the table, that’s preferable.”
Labor union people will undoubtedly roll their eyes when they read this.
“It’s not easy to make changes. It takes time and commitment. These companies are growing out of difficulty and distress. Do you know Victor Frankl’s book, “Man’s Search for Meaning?”
It was a very important book in my life.
“For me, also. I discovered it only at age 50.”
Jews get to it earlier.
“So it would seem. He says there that you can’t chase after happiness. Happiness is the result of a life with meaning and purpose, and that can be achieved by doing things with a higher purpose, by unconditional love, and by finding meaning in suffering. This is also true for business. You can’t chase after profits. Profits are a result of building a business with a higher purpose, leading a business with love and concern, not fear and terror, and by learning from mistakes and difficulties.”
What should be done with Amazon.com?
Economic crises are undoubtedly the time when conscious capitalism meets its toughest test. This challenge is described in the middle of the new book that Sisodia wrote with Bob Chapman, “Everybody Matters.” Chapman heads Barry-Wehmiller, a family company dealing in technology for industry founded in 1885 in St. Louis. He inherited the company after years of stagnation, and turned it into a prosperous company worth $2 billion. Chapman was committed to leading the company in the spirit of conscious capitalism, but then the 2008 crisis came, and things became difficult.
“The orders dwindled, until they stopped almost completely,” Sisodia says, “and they faced a difficult dilemma: how to survive it. The board of directors recommended layoffs. That is the simple way to save on expenses. Bob, however, was worried about the fate of the workers. There were no alternative sources of employment in the area, and there are towns that are completely dependent on the company. Bob asked himself how a family would cope with such a situation. Would a family with five children say, ‘In the current situation, I can afford only three children?’ No, the idea is to share the difficulty, so that it doesn’t fall on just a few people.”
So what do you do?
“The solution that he proposed was unpaid vacations. He put people on unpaid vacations in turn. That relieved people of the fear of being laid off, and that was what motivated them. They discovered that Bob’s words were backed by substance and deeds. Later, when the crisis eased, the business got back on its feet more quickly than others, because it didn’t have to train new workers. They were all there already. In the year after the crisis, the business grew 30-40%. Bob asked his wife, ‘How do we thank the workers for sharing the burden with us?’ She suggested simply sending a letter with a check, but he said that they would simply waste the money immediately. Instead, he simply put the money into their pension account.”
Big companies have maneuvering capabilities that small ones do not. How can a startup or small business fighting for its life become conscious?
“The transition to being a conscious business is gradual. The business has to be built on a solid basis, with a correct business model and a good product. You have to start from this, but at the same time, you have to make sure that the intention is right and the purpose worthwhile. It can be there from the first day, even before the company can afford other things. If you start a business with an exit strategy in advance, that’s a questionable business model. That’s not how you embark on building something with meaning.”
Two months ago, “The New York Times” published an expose on the terrible organizational culture at Amazon.com: insults, stool pigeons, crazy overtime. Have you stopped using them for your purchases?
“That’s a tough question, because it is one of the best companies around. My decision to continue buying through them is related to the response of the CEO, Jeff Bezos. He sent a memo to all the employees in the company asking them to read the “The New York Times” article, and added that he found it hard to believe what he had read, because he had given no such instructions. Bezos encouraged everyone to send him an e-mail directly if they had experienced what was described in the story. He declared that this was not the company he had aspired to lead.”
How do you know that this was not merely a public relations cover-up?
“You have to be skeptical. I know that for years, there was a wave of complaints that Amazon.com’s warehouses weren’t air-conditioned, and people were fainting from the heat, and then they installed air-conditioners. You have to check whether a company is insensitive to criticism and denies it, or whether it’s trying to change. I feel that they’re trying to change.”
Published by Globes [online], Israel business news - www.globes-online.com - on November 10, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015