Does someone have to lose in business for others to win? Should shareholders always come first? Kip Tindell, Chairman and CEO of The Container Store, says absolutely not.
Kip is a leader in a growing movement called Conscious Capitalism, which teaches that business leaders can create shared value by making their companies more successful and competitive while advancing the quality of life for the community and the world.
Executives apply the concept in different ways. For example, in addition to supporting sustainable agriculture, healthy supplier relationships and focusing on customer service, Whole Foods Market gives a minimum of 5% of its profits every year to community and non-profit organizations.
While at Whole Foods Market, the customer comes first, at The Container Store, CEO Kip Tindell says the employee is the most important stakeholder.
As a preview to the Conscious Capitalism Super Session at Retail’s BIG Show next week, we asked Tindell to explain the concept of Conscious Capitalism and its affect on The Container Store.
How do you describe Conscious Capitalism?
Since 1978, we’ve been running our business by putting purpose before profits. Back then, we just called it the way we do business. Kind of Golden Rule-ish – that’s the way we lived and worked. Today, we’re proud to be one of the pioneering companies in a movement called Conscious Capitalism along with Whole Foods Market and others.
We are a group of like-minded companies working together to change the face of business in America and around the world. Businesses that practice Conscious Capitalism stand for more than just making money and that force comes from the top with leaders who walk the talk through developing and nurturing a conscious culture. And we all have a firm belief that properly balancing the needs of all of a business’ stakeholders – its employees, customers, vendors, community and shareholders – is the right thing to do.
What’s the reaction when you describe Conscious Capitalism to other business leaders? Are they surprised you can be profitable with this approach? Are shareholders threatened?
The economist Milton Friedman famously said, “The only reason a corporation exists is to maximize the return of the shareholder.” With all due respect, Milton, at The Container Store we actually put the employee first, and if you take better care of the employees than anybody else, then they really will take better care of the customers than anybody else.
If those two people are ecstatic, wonderfully and ironically enough, the shareholder’s going to be ecstatic as well. But it extends beyond just those three stakeholders: the same is true for the suppliers.
People worldwide grow up believing that business is a zero-sum game: that you cannot gain without taking something from the person you’re doing business with. That’s patently false.
There is such a thing as synergy, which creates the most profitable endeavors and long-lasting relationships in business. The circle of stakeholders is being balanced by these management executives in such a way that they create synergy that is beneficial for all, because business really and truly is not a zero-sum game: you don’t have to screw around the other guy in order to get ahead; you can find ways for it to be truly a synergistic situation. I hate to say “win-win”, because so many people believe they don’t exist, but they do. I think it’s because people don’t believe that they exist that capitalism has a bad reputation.
We treat our suppliers the same way we treat our customers; we have wonderfully long-term relationships with them. One of the beauties of Conscious Capitalism is that your employees are so proud of the business, that they’re more productive. They’re so proud of the way the company does business and its philosophies and culture that they work harder, they’re more creative, and they care more.
While some businesses like Zappos and Google have embraced this philosophy, you also have your critics. In your experience, what part of the Conscious Capitalism model is the most difficult for business leaders to embrace? How do you win them over?
The interesting thing, in regards to Conscious Capitalism, is that people are jaded; they don’t believe this works—but if you study business, the best examples of conscious capitalist companies worldwide are much more financially successful than the ones that are using the old model. The hard part is convincing the skeptics of this, so luckily we have many examples to give them.
It’s no secret that Southwest Airlines is very successful in this country, where almost all airlines are unsuccessful. They are a great example of Conscious Capitalism: their employees love their company; they are motivated through love rather than fear. Herb Kelleher has always said that you can motivate a company through love much better than you can through fear. Back when he first started talking about that, nobody thought like that. It really does work in every industry.
Ultimately, the proof is in the long-term financial success of the companies who practice Conscious Capitalism. At The Container Store, we’ve experienced a compounded annual growth rate of 24% since our inception and are proud of a 10% turnover when the average retail employee doesn’t last a year, and have hundreds of employees who have been with us working in our stores, home office and distribution center for 10, 15, 20, 25 years.
In some ways, your business philosophy resembles a personal code of ethics. Does the way you do business reflect the way you approach your personal life?
It’s about operating under one code of ethics – personally and professionally. There is not nor should there be a “looser” set of ethics for business. Why would you act one way at work and another way at home? The old adage, “well, it’s just business” doesn’t pass muster and is by no means is an acceptable way of behaving.
You’ll be co-presenting a Super Session about Conscious Capitalism at the NRF 101st Annual Convention & EXPO. With nearly 22,000 people expected to attend the show, you can plan on a huge audience that includes a lot of retail leaders. What do you hope to accomplish with your session?
We want to express that this form of capitalism works more effectively than other methodologies and share even more about it, providing examples of how it has manifested itself and driven success within our own businesses.
Besides your session, what are you most looking forward to at Retail’s BIG Show this year?
At The Container Store, one of our Foundation Principles is Air of Excitement! Three steps in the door and you know if a retailer has it. Well, the BIG Show has it! It’s one of my favorite events of the year – being surrounded by the greatest retailers in the world, sharing ideas for the industry and our own companies, seeing friends and vendors. I get to connect with heroes of mine like Gordon Segal, Tony Hsieh, and Terry Lundgren and meet amazingly brilliant people with incredible ideas like Tadashi Yanai from UNIQLO, who is honestly determined to be the world’s largest Specialty-store/retailer of private-label apparel by 2020 and I’m pretty sure he’ll get there.
I encourage people to attend and boldly interact with their peers – there is no other assembly of great minds and illustrious retailers on the planet than at the BIG Show!
For those who can’t make it, the session will be live-streamed from the event and available to view after the show. Visit www.nrf.com/annual12 for details.