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How Conscious Capitalism creates businesses where everyone thrives

By Kip Tindell

I passionately believe that the best way to change the world is to change the world of business. To do this, we need to rethink the motivation behind businesses in the first place. Milton Friedman once famously said that the only reason for a corporation to exist is to maximize the return to its shareholders. I have a different view.

At The Container Store, and increasingly at many of today’s most successful and innovative companies, The Stakeholder Theory is replacing Friedman’s fundamental premise. The Stakeholder Theory holds that the ultimate responsibility of a corporation, including its management, employees, board and equity providers, is to maximize and harmonize the interests of all the stakeholders.

The Stakeholder Theory is an important part of the concept called Conscious Capitalism, which states that a corporation has a responsibility to not just the shareholder, but in fact to all the company’s stakeholders. Conscious Capitalism is different from corporate social responsibility (CSR) in that CSR focuses on what companies do for society with their money after they make it, while Conscious Capitalism focuses on how companies make their money. Studies have shown that Conscious Capitalism results in better outcomesacross the board: higher sales, inspired and loyal customers, devoted partners, and motivated and fulfilled employees — all while elevating humanity and improving our world. The kicker is that Conscious Capitalism results in higher returns for the shareholders because of the motivation and performance of the other stakeholders.

One of the most important tenets of this perspective is caring for employees. At The Container Store, we are above all else an employee-first company. We optimize and harmonize the needs of all our stakeholders, but we always put the employee first because we believe that is the best way to take care of everyone. If you really and truly — and I mean really and truly — take care of your employees, customers will invariably be better cared for when they walk into the store.

Caring for your workers also means they’ll stay with the company. I think if you’re lucky enough to be somebody’s employer, then you have a real moral obligation to ensure that person looks forward to getting out of bed and coming to work in the morning. If you go into The Container Store and talk to a salesperson, it’s likely that the person helping you has been working there for six, seven, or eight years. Historically, we’ve had an employee turnover rate of about 10 percent in an industry that averages over 100 percent. We’re so thrilled and fortunate that people join our company and never leave.

Business is not a zero-sum game; someone else doesn’t have to lose in order for you to win.

A second aspect of Conscious Capitalism is to build trust and respect among partnering businesses. If you synergistically create trusting long-term relationships with your vendors, those synergies will lead to higher and more sustainable profitability than if you practice traditional game theory with winners and losers. In short, business is not a zero-sum game; someone else doesn’t have to lose in order for you to win.

The companies and individuals that are gaining the most market share and creating the most profitability are increasingly those that practice Conscious Capitalism. Generally, those companies that still approach business as a zero-sum game, and opaquely employ a top-down military command structure form of leadership, are losing market share and being replaced by these better business models.

Thirty-five years ago, Southwest Airlines founder Herb Kelleher told me, “Kip, you can build a much better company on love than you can fear.” It’s a lot easier to win at business, and at life, if everyone associated with your business wants to see you win — rather than lying awake at night figuring out how to get revenge. This way of doing business not only enriches your life, and the lives of people you do business with, but also your business itself. I deeply believe that if you’re only interested in making as much money as humanly possible, this is the best way to do it.

This point about Conscious Capitalism is often lost: It’s not just the best way, it’s also the most profitable. Many of us involved with Conscious Capitalism spend a lot of time coaching and mentoring to try to scale up the movement. But we really do believe that a good capitalist is going to adopt that methodology which is most successful. Raj Sisodia, co-author of the book Conscious Capitalism, found that the returns of companies practicing Conscious Capitalism have outperformed the S&P 500 index by 14-to-1 over the past 15 years. Because Conscious Capitalism ultimately leads to higher profits, it’s likely that this way of doing business will soon become the dominant form of capitalism.

Conscious Capitalism is not just about higher profits, it’s about creating businesses built to last. If a group of us founded a farm, and we only really cared about the farm’s productivity for this quarter or this year, we wouldn’t have much of a farm in five years. The best farmers are ones that take care of their land, so that it will still be fertile decades down the line. The same principle is true for other businesses.

Conscious Capitalism will increase our country’s GDP. We’ll see not only higher wages, happier workers, and healthier families, we’ll see companies built to last that will add value to the economy and society on an unprecedented scale. And harmonizing a desire for high profits with the interests of employees, vendors, communities — all of the stakeholders — will ironically, and wonderfully, lead to superior returns for the company’s shareholders. We are all better off.

Kip Tindell is Co-Founder and Chairman of The Container Store, serves on the board of Conscious Capitalism, and is the author of UNCONTAINABLE: How Passion, Commitment and Conscious Capitalism Built a Business Where Everyone Thrives.