The top executives of big publicly-traded US companies, in my experience, tend to be rather drab fellows (nearly all are men) who choose their words carefully, hew carefully to the middle of the road in their thinking and rarely say (or do) anything outrageous.*
Not John Mackey, the founder and co-CEO of Whole Foods Market. For better and occasionally for worse, Mackey is an original, who doesn’t run his company by any conventional management book.
Instead, he has written his own book, called Conscious Capitalism: Liberating the Heroic Spirit of Business, with co-author Raj Sisodia, an academic affiliated with Bentley University. It’s a good read, especially because of the insights it delivers into the unusual culture and practices of Whole Foods, as well as into Mackey’s own evolution.
Some examples from the book:
Everyone at Whole Foods knows what everyone else is paid. Workers can give feedback if they think salaries are unfair, and top salaries are capped. That attracts the right kind of people. “It is a mark of emotional and spiritual maturity to be able to say, ‘I have enough.’”
All meetings end with appreciations. “By ending meetings with appreciations, we can shift people out of their space of judgment and back into one of love…Expressing appreciation is a form of kindness that has powerful effects on everyone involved.”
New employees are hired on a probationary basis, and kept on only if two-thirds of their “team” agrees to keep them on. “The logic is simple: anyone is capable of fooling a team leader for a while, but it is much more difficult to deceive the entire team.”
Workers who take care of their own health are rewarded with deeper store discounts than those who overeat or are slothful. Discounts are based on cholesterol levels, body-mass index, height-to-weight ratio, blood pressure and being nicotine free.
All of this — along with his knack for tapping into the willingness of health-conscious middle- and upper-class Americans to pay a premium for organic apples and goat cheese — helped Mackey build Whole Foods from a single natural foods store in Austin, Texas, (originally called SaferWay, a parody of Safeway) into a chain of 340 stores in North America and the UK that generates nearly $12 billion in annual sales and employs about 73,000 people. No company has done more than Whole Foods to propel organic food into mainstream America; placement on the shelves at Whole Foods can make or break organic and natural food brands, as the founders of companies like Honest Tea and Seventh Generation have told me over the years. It’s one of the great American retailing success stories of the last 25 years. The experience of shopping in a Whole Foods is superior in every way to buying groceries at a traditional supermarket.
So what’s not to like? Well, Mackey can be his own worst enemy. On his book tour, he attracted attention, not for his management innovations, but when he downplayed the problem of climate change and described the Obama health care overhaul as “fascism”–a word he later took back. He can be erratic and ideological. Erratic, as when he took to Yahoo message boards a few years ago to anonymous denounce his critics. Ideological is his view that markets can solve virtually every problem. He writes, for example, that “in the long arc of history, no human creation has has a greater positive impact on more people more rapidly than free-enterprise capitalism.” Maybe so–although democracy has done a lot for people, too–but Mackey’s faith markets and distrust of government is so absolute that he seems willfully blind to the notion of market failure.
It turns out Mackey has come a long way, baby, since his long-haired youth. A college dropout, he studied Eastern philosophy and religion, practiced yoga and meditation, adopted a vegetarian diet, lived in a co-op/commune and, by his own account, “embraced the ideology that business and corporations were essentially evil because they selfishly sought only profits.”
He still practices yoga and meditation and he became a vegan about a decade ago. (He was persuaded to give up animal products after a fascinating encounter with an animal rights activist that he describes in the book.) But his thinking about business has totally changed, as he explains:
Becoming an entrepreneur and starting a business completely changed my life. Almost everything I had believed about business was proven to be wrong….I discovered the business is based on cooperation and voluntary exchange….Investors, labor, management, suppliers–they all need to cooperate to create value for customers…In other words, business is not a zero-sum game with a winner and loser. It is a win, win, win, win game–and I really like that.
He’s right, in theory. Whole Foods and other admirable companies that get attention in Conscious Capitalism–among them Southwest Airlines, Google, Costco, UPS, Patagonia, REI–create value in their businesses by building a network of win-win relationships with workers, suppliers, customers, investors and communities. They are driven not by a short-term focus on profits but by a long-term sense of purpose and desire to serve all of their stakeholders.
But as Mackey acknowledges, many other companies–indeed, entire industries–have veered off course and lost their sense of purpose. Pharma has been plagued by ethical lapses. Wall Street before the financial crash was anything but a win-win proposition.
The financial sector has become increasingly profit-obsessed and short-term oriented. Compensation levels have soared to ridiculous heights as financial incentives have fueled the fire toward immediate, profit-only management, diminishing real value creation…No wonder the industry’s reputation is in tatters.
So what leads one group of companies to practice “conscious capitalism” and others to engage in business as usual? Mackey doesn’t really address this question in any detail, but he seems to believe that the market — meaning customers, workers and investors — will over time reward better companies. In the food industry, he notes, Whole Foods, Trader Joe’s, Wegman’s and other “more conscious food retailers are all growing and thriving, while food retailers still following the traditional business paradigm are struggling.”
Conscious capitalism will ultimately triumph because it is based on higher levels of innovation, collaboration and cooperation. Eventually, the marketplace will weed out businesses that aren’t sufficiently conscious.
I certainly hope he’s right. Eventually, he may turn out to be right. But so far, markets have done an imperfect job at best of rewarding the better companies and punishing bad actors. Sure, Lehman Brothers, Bear Stearns and Countrywide all collapsed during the financial crisis, but so did much of the global economy. Tobacco companies are doing fine. Factory farms — a favorite target of Mackey’s — are doing OK, too. Nor are markets solving the climate crisis, or protecting the human rights of factory workers in China or Bangladesh. Only governments can do that.