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Every MBA student from time immemorial has been asked to memorize the following as soon as he starts school: “The purpose of a corporation is to maximize shareholder wealth.” On some levels it seems to be an indisputable axiom.
But on other levels, after the economic debacles of 2008-2009 people with political persuasions right, left and center have begun to ask the question: “Why?” Doesn’t a corporation also have a responsibility to its other stakeholders: employees [and franchisees] and customers and the communities within which it thrives? More importantly, can we take these other stakeholders into consideration without sacrificing corporate profits? Retailers as diverse as The Container Store, Zappos, Whole Foods Market, Starbucks and Costco have embraced a philosophy called “Conscious Capitalism” which presumes they indeed do have this responsibility. At the same time, they are thriving by most traditional economic metrics.
Since this topic was discussed at the NRF Big Show both in hallways and in sessions, it seems worthwhile to introduce it to the retail community at large. It resonated well with me.
There are four aspects to Conscious Capitalism: higher purpose, stakeholder orientation, conscious culture and conscious leadership. Seriously, kids…what’s not to like? We have a dearth of real leadership in our society, declining values (we can talk about what I mean by values some other time!), and a culture of “me, more, and mine.” As for higher purpose, doesn’t it make you squirm just a little when you hear that the sole purpose of a corporation is to make its stockholders rich?
While I may have a certain personal prejudice, I do think the times are exactly right for this notion to go main stream.
First there’s just the “good karma” part. Most of us want to feel like we’re helping those less fortunate than ourselves. RetailROI is an example of a grass roots initiative that has been embraced by retailers and technology vendors alike: At this year’s NRF Big Show, Build-a-Bear generously donated bears to those who would buy them, while a multitude of technology vendors like Oracle, NCR, Sprint and others sponsored RetailROI’s SuperSaturday event and show floor bear purchases (among other perks).
Then there’s the business challenge. It’s a real one. We know that stores are at a crossroads. Neither we, nor the communities around us want them to become showrooms or vacant space, but they must become more consumer-friendly and useful to return to relevancy. For that to happen, employees must be educated, empowered and welcoming. That’s a big shift for a lot of us. We view employees as an expense. Yet, workforce management vendor Red Prairie has introduced an interesting metric – Return on Invested Labor (ROIL). That metric essentially treats the employee as an asset. That’s a real shift. I can attest to the clear difference one experiences at a retailer like the Container Store. Employees are knowledgeable, helpful, and go the extra mile to make your shopping experience a pleasure, all so that we can “organize stuff.” I mean, what would be an easier online purchase than containers? But I truly enjoy my jaunts to the Container Store. The retailer has some of the most helpful associates anywhere.
Finally there’s the community. There are times when a big box retailer really adds value to the community. Other times, not so much. Adding value means more than just having localized assortments. It means acceding to a community’s aesthetic standards for a store, and maybe not putting them where they won’t fit in with those surroundings. That can cost more money. But it might be worth it.
A good friend of mine pointed out that there’s a lot to like about Conscious Capitalism as long as it doesn’t lead to a new array of government regulations. I can see his point. I’m not naïve enough to think that retailers and other corporate entities will altruistically embrace this notion, but I also believe that Consciousness is good business. Why? The consumerization of IT has led us in retail to a Rubicon: we have no choice but to embrace our other stakeholders, or they will quite simply desert us, and we will fail. The notion of conscious capitalism might be a part of saving the store and improving the in-store experience.