A reporter interviewing me about Conscious Business recently asked an important question:
It seems it would be easier to build a conscious business when economic times are good. In times of economic struggle isn’t it more challenging to be a conscious business?
A valid question. Let’s break it down. What we know is this: Conscious companies have a Higher Purpose and an unwavering commitment to their values that provides clarity in tough times; the long term orientation inherent in Conscious companies pays off in downturns; Conscious companies have deep stakeholder relationships that will keep the company afloat; and critically, Conscious companies are more profitable. These attributes crisis proof Conscious companies in ways not possible in businesses that exist to maximize profit.
Higher Purpose is the most important insurance
Conscious businesses have a deep sense of purpose and meaning and values that guide them, regardless of the circumstances. Making tough decisions happens in every company. When you have a Higher Purpose for your business, a worthy problem that you are focused above all to solve, you have a compass to guide your decisions. It’s so much easier to find your direction with a compass! When faced with a difficult decision, the key question a conscious business leader asks is, “How does this decision fulfill our Purpose and reflect our values?”. The discipline to ask this question is incredibly important when running a holistically successful business and is critical during an economic downturn. Employees passionate about the Purpose are even more driven to pull the company through hard times because they are working towards something more than making money for a select few. Employees can do amazing things when they want to – they can make or break a company! This story by Mike Rowe, Dirty Jobs blogger, reminds me of the ethos created with Higher Purpose. Not only will employees be more driven with a Higher Purpose, they will partner to figure out business problems and be incredibly loyal to companies that show genuine care, as demonstrated in this CNBC article about the value of Higher Purpose to employees.
A big part of Conscious business decision making is a long term orientation. Many of us have worked for a quarter to quarter company and know the perils of that short term thinking. A company practicing long term orientation has created more insulation against economic challenges because they think about scenarios over years, rather than quarters. This long term orientation causes diversity in investments, services and product lines because they are in tune with the insights of their employees and the needs of their customers. Employees truly know the customers, leadership is emotionally intelligent, deeply listens and collaborates, and the culture is based on trust, not fear of failure. The freedom to fail is one of the number one ingredients in innovative cultures. Innovation is crucial in hard times when lack of funding requires extra creativity.
Who cares if you go under?
When a profit maximizing company has no profit, who does the company turn to for support and partnership in a time of crisis? Who cares if they stay afloat? No one because they have burned through their relationships with employees, the community and customers in the pursuit of making more money. To save a company requires people to care about the company’s existence. There must be an emotional connection to want to keep that company around. Companies that focus on profit growth do not facilitate these types of relationships with their stakeholders. The first stakeholder they most often alienate in tough times is their employees. The employees could help the most through a tough time, yet they are often cut out of the equation first. The typical layoff scenario has a wave approach, where one set of employees is laid off first, with the remaining employees constantly wondering who is next. This approach is guaranteed to cut off the employee’s motivation to help, superseded by layoff survivor syndrome and fear of what’s going to happen to them. An HBR article cites a study where after a layoff “the survivors experienced a 41% decline in job satisfaction, a 36% decline in organizational commitment and a 20% decline in job performance.” From what I’ve seen in my HR work across many companies, those percentages are generous. Layoffs are a recipe for long term disaster.
Your stakeholders will help you
Conscious businesses have deep and reciprocal relationships with all of their stakeholders and lean on those partnerships to thrive in an economic downturn. Meaningful relationships with stakeholders yields different solutions than traditional business, applying an abundance mindset, not scarcity or trade-off thinking. There are different solutions that emerge when people come together with the goal of helping each other instead of competing with one another. With strong stakeholder relationships employees will take a pay cut or unpaid leave in order to keep the business afloat. Customers will accept price increases or buy more. Suppliers will defer payments or allow different pricing structures to avoid their strong partner going out of business. The community will keep the business alive if they love the business, like the story about Whole Foods getting flooded in the early days. The community, vendors, investors, creditors, etc. loved the store so much that they helped rebuild the store.
One the first page of my website you will find some compelling data about Conscious companies being more profitable. Bottom line, Conscious companies are more profitable and there’s lots of research to prove that. Higher profit combined with a long term orientation makes weathering a recession far more likely than a profit maximizing company.
The reckoning is here
We know Conscious companies survive and thrive through hard times much better than other companies. The challenge is to convince traditional capitalists, focused on profit, to put in the work to consciously create the culture, leadership, higher purpose and stakeholder orientation during the good times, when short term thinking deludes traditional leaders into thinking that this foundational work is not a priority. Money is flowing so why invest time when there’s so much money to be made!? Instead they spend their time on traditional business activities – finance, marketing, selling – without a sustainable business foundation.
In the Conscious Business Movement we often talk about a reckoning for profit maximizing businesses where they will have to change how they operate or go out of business. We might see that reckoning play out during this economic downturn. The companies that typically operate in a profit maximizing mode won’t survive or are severely impacted in the recovery and “survival of the fittest” points to Conscious companies as the new definition of “fittest”.