A better way to win: Profiting from purpose

[phantom power]

Over the past several years, we have studied a group of companies that defy conventional wisdom and at first glance seem to perform financial alchemy. These companies pay their rank-and-file employees much better than their peers, have suppliers who are profitable, invest heavily in their communities, pay taxes at a higher rate, provide terrific customer service, invest in making their operations more environmentally sustainable, and do not externalize costs onto society. With all this spending, it would seem that there would be less left over for investors.

On the contrary, we have found that these companies dramatically outperformed the market over a 10-year period, by an astounding 9 to 1 ratio (see our book Firms of Endearment: How World Class Companies Profit from Passion & Purpose, Wharton School Publishing). We refer to this business philosophy as conscious capitalism.

We have been working to understand how conscious businesses are able to operate with superior financial results while creating many forms of wealth and wellbeing for all of their stakeholders, including society. It boils down to something quite simple: these companies knowingly operate with lower gross margins, but are still able to achieve higher net margins than their traditional competitors.

...

The next line item on the income statement is "GSA," and this is where conscious businesses really shine. Traditional businesses squander their hard-won but ill-gotten high gross margins by having to spend heavily on marketing, managerial overhead, legal fees, and high levels of executive compensation. They incur high recruiting and training costs due to high employee turnover. Their employees are disengaged and unproductive. Their product quality is suspect, leading to low customer loyalty and high levels of product returns.

http://opensource.com/business/11/2/better-way-win-profiting-purpose

[rucky]

1. An enthusiastic K&R

[drm604]

2. K&R

Interesting article.

[On the Road]

3. Sound Like Real-Life Examples of

Theory Y vs Theory X Companies.

[Kat45]

4. Sounds good. Why aren't more companies doing it? n/t

[SDuderstadt]

5. Just so you know...

I was excited when I read about "conscious capitalism" here. I was so excited that I started a thread about it in General Discussion here:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=749313&mesg_id=749313

I am sorry to report that it is getting dogpiled by what I call DU's "hardcore Marxist Brigade". Well, at least I tried.

[fasttense]

6. There is a good way to run a business and a bad way to run a business.

You can still make money (for awhile) by running a business into the ground. Especially in a giant corporation where profits are so huge a bad practice doesn't come to light until 10 to 20 years down the road.

There is a business or co-op here in our local town. It makes parts for cars. It is run by the workers. They actually vote on their managers, bosses, executives and who to hire. The employees or workers share in all the profits. They are still doing business while all the other factories around here have closed down. Unfortunately, they hardly ever hire because no one ever quits.