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A home for the Conscious Business community in the UK


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CASS Report shows Employee Owned businesses more resilient

This is a great piece of research from CASS Business School. It shows that employee owned companies are at least as resilient as non-EOB’s in good times but have a huge advantage in hard times such as recession, outperforming non-EOB’s in growth, turnover, profits, productivity, etc.

UPDATE-Employee-Ownership-Report-January-14-2014

It’s short, to the point and there are graphs and picture to make it easier to digest. So why not have a read…

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Preaching, fear and hopelessness – the holy trinity of resistance

If conscious business makes sense, why is it not more universally adopted?

If good or conscious businesses can be empirically shown to be more profitable, as more and more studies appear to show is the case; and if it can be shown that a more human approach to business makes the people who work in them happier, committed and fulfilled; then what is it that stops more people and businesses from embracing and adopting the principles willingly and gleefully?

Well, the first thing is simply knowing that there are other ways of doing things. That bad behaviour doesn’t have to be accepted under the guise of ‘that’s business’. That’s an awareness exercise.

But often what stops people is a simple case of resistance.

Human nature, by instinct, is very often naturally resistant to change, because there is a certain comfort in doing things the way you and other people have always done them, even if you don’t like the process or the outcomes. This can be put simply under the label of habit, and explains why people continue to smoke when they know and feel it does nothing for them.

And beyond that I also wonder if there other forces at play that might turn people off.

The first is hopelessness. If the size of the task or the change seems overwhelming, such as changing the nature of business, then starting the change alone can seem just a bit futile. (See climate change).

The second is preaching. From toddler to pensioner, no-one likes being told what to think and do, particularly if you’re being made to feel bad about what you have been doing.

That’s why all good engagement should start with a question – why should you, or anyone else, be interested in this? Or a story. That’s why the most famous preachers haven’t been preachers at all in the fear and damnation mould. They have been the more inspirational types, storytellers, the ones who help create a positive vision of the future. “I have a dream…”

And what is most prevalent in any stopping any form of change? An underlying sense of fear.

If I do this, because it’s against perceived wisdom or practice, what will happen? Will the world stop, will my customers and staff leave, will we make any money?

Fear is a very powerful emotion. Indeed it has been used for years as a sales tool to gain action. Sell your client a story based around fear, uncertainty and doubt (FUD) and you will scare them into action. But honestly, who wants to build a life or a career based around something as destructive as fear?

The truth is, the trick to overcoming  this holy trinity of resistance – hopelessness, preaching, and fear – is to challenge them wherever you find them, and share and create new practice and stories that inspire and reassure.


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Book review: Conscious Capitalism: Liberating the Heroic Spirit of Business by John Mackey and Raj Sisodia

Here’s a review I wrote for Amazon. I think I could probably write several reviews of this book – there’s such a lot in it. But here is a snapshot:

This is a great book.

I must declare a bias: I am a real fan of the ideas presented here, and I have met one of the authors.

But trying to put that to one side, I still think it is a great book.

It is very thorough, very complete, and like my colleague Will McInnes’ book Culture Shock: A Handbook For 21st Century Business it is full of practical advice and suggestions on building a different type of business.

It is clearly written, full of good stories and quotes. It also seems to include a good measure of honesty – as when John Mackey describes the problems he had with the SEC.

It is ideological, yes, but I think that is what we need right now. There’s a lot of talk in business about disruption, and how business should respond, but this book sets out the beginnings of an intellectual and emotional framework for business in the 21st century.

Umair Haque’s Betterness: Economics for Humans (Kindle Single) also comes to mind.

After an introduction, which aims to reset the narrative of business, the book is broken into several sections on making practical changes to the way a business works:

– Higher Purpose
– Stakeholder Integration
– Conscious Leadership
– Conscious Culture and Management

The book pulls together a lot of thinking from a range of very diverse sources. That is the whole point I suppose: to bring topics such as economics, sustainability, business management, psychology and systems thinking together. Indeed, the authors aren’t afraid to mix words like love and care in with the kind of terminology (innovation, collaboration, decentralisation) you will read in many modern books on business management.

There are lots of practical examples and stories from Whole Foods Market. That company is obviously better known in the US than the UK, and there is a notable lack of any European examples (John Lewis, the Co-op, Cadburys etc). But as founder and CEO, John Mackey has been through most of the major decisions that need to be made in setting up and growing a large, listed company.

Once or twice I had a bit of a sharp intake of breath.

The term “free-enterprise capitalism” personally reminds me of “free market capitalism”, in the style of Reagan and Thatcher. Something to which I have an instinctive and somewhat negative reaction. But, after a moment, I reminded myself to suspend a little, remember that I am not an economic theorist or expert, and read on.

And their real point is that capitalism generally has given itself a very bad name with the people who should be supporting it – those of us who believe in freedom for individuals and also in sharing, giving etc.

The other slight intake of breath came when Margaret Thatcher is listed amongst a list of leaders with high integrity, including Gandhi and other personal heroes. Again personally, I found this hard to take.

But again the truth is this is probably more about my biases and prejudices than anything else. And a good book, I believe, should challenge one’s thinking, not just confirm one’s prejudices. I resolved to dig out a biography and do some deeper research.

The book ends with sections on starting a conscious business, and transforming to become one.

An appendix covers the business case for Conscious Capitalism – including reference to Raj Sisodia’s work on Firms of Endearment and a comparison with the “Good to Great” companies. This, in my view, is a very strong and compelling financial case.

Another appendix gives a very useful list of similar, related approaches (such as sustainable business, B-corporations etc), and explains why conscious capitalism is different.

In a final section, which contains a call to action, I was pleased to see a reference to Tom Paine, author of Common Sense and the Rights of Man. These, at the time, were seditionary works. They stirred people up.

This book is similar – some will hate it, but the mixture of emotion and intellect is powerful. Which is important, because, as the authors say, there’s no time to waste.

Overall, this is a manifesto for a new type of business. Or, if you simply want to find out what Conscious Capitalism and Conscious Business are all about, this is a great starting point.

It is a big book as well as a great book. It will take you a while to read. But in my view it is really worth the effort.


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Evidence for Conscious Business

Some people would argue that if you need evidence that being more conscious at work is a good thing, you’ll never be persuaded. But there’s also an argument that hard evidence helps – to give confidence and encouragement to those that need it.

So here’s a selection of facts and figures I have put together.

It covers the value of employee engagement, clear purpose, innovation and good leadership. It shows these are what investors look for, and that they are good for a business generally. There is a PDF version here if you prefer to print and read (or send to your ebook).

Investing in  leadership skills:

About 80% of professionals who analyse companies for investors – including investment bankers and executives at private equity companies and hedge funds – say they would place a valuation premium on a company with a particularly effective senior leadership team. And the same percentage said they would discount a valuation if they thought a company’s leadership was ineffective. Analysts and investment professionals placed an average premium of 15.7% on particularly effective leadership, and an average 19.8% discount on companies with leadership that was deemed ineffective.

[Deloitte 2012 How TMT Companies Win The Confidence of Investors]

Stock market performance and shareholder return in relation to conscious business:

Firms of Endearment study – over 10 year period companies that broadly  follow conscious aims outperformed the S&P 100 by ratio of 9:1

[Raj Sisodia, Bentley University]

Stock market performance and shareholder return:

Motivated employees are 52 to 127 percent more productive than those who have average motivation. Companies that have an employee recognition strategy double the return to shareholders compared with those that don’t. 40% of the variability in corporate financial performance comes down to employees sense of fulfillment in the workplace.”

[Richard Barrett, ‘Liberating the Corporate Soul’ – TBD original source]

Growing interest by investors in sustainability, climate change, social factors:

Investors increasingly believe that social and environmental conditions in society can have a direct impact on the business operations of a company and its long-term viability.

In 2011, average support for environmental and social shareholder resolutions topped 20% for the first time, according to research by Institutional Shareholder Services. That’s up from 18.1% in 2010 and 16.3% in 2009.

[Sabine Vollmer  – senior editor – CGMA Magazine March 2012]

 Including more stakeholders improves financial performance:

Despite the drop in performance seen in 2011, companies that are owned by their employees have outperformed FTSE All-Share companies by on average 12% each year.  Over successive three-year periods they have outperformed by 37% and over successive five-year periods by 71%.

[The Employee Ownership Index]

 Transparency:

280 CEOs were surveyed for the report spanning 21 countries. Three-quarters of the CEOs recognised the need for measuring non-financial value. Meanwhile, 76% think the current reporting system places excessive emphasis on financial data. 87% viewed transparency as an opportunity, and 13% viewed it as a threat. The question among many CEOs is how much transparency is too much.

[Research Commissioned by  AICPA and CIMA (the major UK Accounting Bodies) and carried out by Oxford Economics (2012)]

Employee disengagement is expensive and destructive:

In recent years, employee loyalty has plummeted. Here are just a few sobering statistics that may surprise you:

  • Only 30% of today’s employees reported that they were engaged (loyal and productive)
  • 54% reported they were passively disengaged (going through the motions)
  • 16% reported they were actively disengaged (badmouthing the employer, sniping from the sidelines

[Getting Engaged: The New Workplace Loyalty, Mattanie Press, October 2005, By Tim Rutledge]

Congruence and authenticity at work:

In a field experiment carried out in a large business process outsourcing company, it was found that when socialization/induction focused on personal identity (i.e. emphasizing newcomers’ unique perspectives and strengths and authentic expression) it led to significantly greater customer satisfaction and greater employee retention after six months, compared to (a)when socialization focused on organizational identity (i.e. emphasizing pride from organizational affiliation) and (b)when it focussed on the organization’s traditional approach which focused primarily on skills training.

[Breaking Them In or Revealing Their Best? Reframing Socialization around Newcomer Self-Expression By Francesca Gina (Associate Professor in the Negotiations, Organizations, and Markets Unit at Harvard Business School)]
Encouraging newcomers to be themselves rather than adapt to the company culture]

Purpose impacts profit:

A  strong, strategically coherent and well communicated corporate purpose is associated with upto 17% better financial performance

[IMD/Burson Marsteller Corporate Purpose Impact Study 2010. The study is based on research into 213 European companies from 10 industries.]

Employee engagement:

88% of highly engaged employees believe that they can positively impact the quality of their organization’s products;  only 38% of disengaged employees think so

[Towers Perrin 2008]

Only 4% of UK workers exhibit the highest level of engagement with their work.

[Corporate Leadership Council]

Purpose and brand:

40% of a company’s reputation is determined by its purpose and 60% by its performance.

[Burson Marsteller/Penn, Schoer and Berland 2008.]

Lack of employee engagement costs companies re staff turnover, accidents and theft:

Gallup in 2006 examined 23,910 business units and compared top quartile and bottom quartile financial performance with engagement scores.  They found that: Those with engagement scores in the bottom quartile averaged 31–51 per cent more employee turnover, 51 per cent more inventory shrinkage and 62 per cent more accidents. Those with engagement scores in the top quartile averaged 12 per cent higher customer advocacy, 18 per cent higher productivity and 12 per cent higher profitability.

[Gallup in 2006]

Employee engagement and earnings per share:

A second Gallup study of the same year of earnings per share (EPS) growth of 89 organisations found that the EPS growth rate of organisations with engagement scores in the top quartile was 2.6 times that of organisations with below-average engagement scores

[Gallup in 2006]

Employee engagement and innovation:

Gallup indicate that higher levels of engagement are strongly related to higher levels of innovation.

Fifty-nine per cent of engaged employees say that their job brings out their most creative ideas against only three per cent of disengaged employees. This finding was echoed in research for the Chartered Management Institute in 2007 which found a significant association and influence between employee engagement and innovation.  Based on survey findings from approximately 1,500 managers throughout the UK, where respondents identified the prevailing management style of their organisation as innovative, 92 per cent of managers felt proud to work there

[Gallup/Chartered Management Institute in 2007]

Employee engagement and illness:

Engaged employees in the UK take an average of 2.69 sick days per year; the disengaged take 6.19.

[The Macleod Report commissioned by BIS 2009]

The CBI reports that absence due to sickness costs the UK economy £13.4 bn a year.

[CBI]

Employee engagement and interfacing with clients/customers:

70 per cent of engaged employees indicate they have a good understanding of how to meet customer needs; only 17 per cent of non-engaged employees say the same.

[The Macleod Report commissioned by BIS 2009]

Employee engagement and retention:

Engaged employees are 87 per cent less likely to leave the organisation than the disengaged.

[The Macleod Report commissioned by BIS 2009]

The cost of poor employee retention:

The cost of high turnover among disengaged employees is significant; some estimates put the cost of replacing each employee at equal to annual salary.

[The Macleod Report commissioned by BIS 2009]

Employees as ambassadors and relation to NPS (Net Promoter Score):

Engaged employees advocate their company ororganisation – 67 per cent against only three per cent of the disengaged. Seventy-eight per cent would recommend their company’s products or services, against 13 percent of the disengaged.

[Gallup 2003]

Employee engagement and change/flexibility:

Engagement  and involvement are critical in managing change at work; according to Price waterhouse Coopers (PwC), nine out of ten of the key barriers to the success of change programmes are people related; only 24 per cent of private sector employees believe change is well managed in their organisations (15 per cent in the public sector) according to Ipsos MORI.

[Price waterhouse Coopers (PwC) and Ipsos MORI]

The need for employee engagement and conscious business more widely in UK:

Gallup suggest that in 2008 the cost of disengagement to the economy was between £59.4 billion and £64.7 billion.

[Gallup (2008)]

The importance investing in everyone, not just leadership:

The IES/Work Foundation report ‘People and the Bottom Line’ found that if organisations increased investment in a range of good workplace practices which relate to engagement by just ten per cent, they would increase profits by £1,500 per employee per year

[The IES/Work Foundation report ‘People and the Bottom Line’]

Towers Perrin in their 2008 Global Workforce Study of employee views found that the top driver of engagement was senior management demonstrating a sincere interest in employee well-being.

[Towers Perrin in their 2008 Global Workforce Study]

Evidence is not the problem, there is so much of it:

The case for employee engagement – there are so many more research findings in the Macleod Report

[commissioned by the Department for Business (BIS) 2009.]

Consciousness is a rare commodity:

Only 10% of Managers take “Purposeful Action” (a powerful combination of focus and energy).  Meanwhile 30% of managers procrastinate, 20% show detached behaviour and 40% exhibit distracted behaviour.

[Sumantra Ghoshal and Heike Bruch]

Pretending to engage employees doesn’t work:

If employees conclude that a manager is just trying to win points by paying lip service to consulting them — and has no intention of acting on their advice — they are likely to stop offering input and, worse, act out their frustration by clashing with their colleagues.

[When Employees Stop Talking and Start Fighting: The Detrimental Effects of Pseudo Voice in OrganizationsGerdien de VriesKaren A. Jehn and Bart W. TerwelJournal of Business Ethics, 2012, Volume 105, Number 2,  Pages 221-230]


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Institutional corruption?

Remember institutional racism?  This term was coined in the 1960s in the US and widely adopted in the UK in the 1970s to describe a situation where an entire organisation, rather than just one or two individuals within it, collectively fail a particular group of people because of their colour, culture or ethnic origin. In the UK the term was used to describe the police after a number of high-profile events such those at the Brixton riots, Broadwater Farm and so on.

The idea is that, at least to some extent, the inappropriate behaviours and attitudes of individuals are so widely adopted within the group that they become social norms. Because they are so prevalent, no one questions them. Of if they do question them, their questions fall on deaf ears.

I guess it’s another example of group conformity in action.

Sometimes I wonder whether some organisations today suffer a form of institutional corruption. We all know the extreme examples: Enron, BCCI, Satyam, and so on. Companies where, ultimately, criminal behavior crashed the companies to the ground.

But isn’t corruption sometimes more subtle, and more pervasive?

A while ago, and this is going to begin to sound like an episode from Money Box, my insurance company sent me a renewal notice for my household insurance. Something made me check – and I discovered that they had increased the premium by 30% compared to last year.

When I called them, as soon as they heard the problem was “price”, they put me on to their “loyalty team”. When the salesman (sorry “loyalty consultant”) heard the price he quickly recomputed it and said they could offer the same service for a 0% increase instead.

Now my guess is that probably quite a few customers can’t be bothered to check what last year’s premium was and just renew automatically. Personally, I think that is pretty dubious behaviour for a business. Imagine how I might feel if I went into a shop and they tried to short-change me by 30%?

Wouldn’t I right to be aggrieved? Might it even be fraudulent or criminal?

When I enter into a relationship with a company I expect to be dealt with honestly – I want to trust that company and have them reward my trust. Would the shopkeeper who short-changed me by 30% retain my trust?

So going back to the idea of institutionalised behaviour, is it possible, then, that an entire company can be institutionally corrupt?

Is it possible that the salesman thinks of his role as an upstanding member of the “loyalty” team – when actually he’s in the “covering up our corruption” team?

That his managers and others in the company think that this kind of behaviour is so normal that it’s “commercial best practice”?

Is it possible that even the senior management and the CEO are so institutionally blind that they believe it right and proper to accept favourable compensation packages even while their employees are behaving in ways that are dubious or verge on the criminal?

Could this institutional corruption extend beyond the company to the whole industry? To other companies? To its regulators? To the media? Sometimes there’s not a critical voice to be heard, anywhere, of what some might think are corrupt practices – “this is just the way it is in this industry, it is just the norm”.

When the UK police were accused of institutional racism I can still remember the confused, questioning voices from their representatives: “You can’t be talking about us? We’re not racist”. It took a long, long time to really sink in.

The irony, is, of course, that as with the police force, or any other organisation, the public recognise this institutional racism, or corruption, or whatever it is, much sooner than those inside the organisation.

It feels wrong. But often the fact that everyone else is telling you its right makes it harder to put a name to it. It requires bravery to stand up and make that kind of statement.

Consciousness, even?

But businesses that are institutionally corrupt will lose customer loyalty in the long-run. My insurance company has already lost mine.


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Systems Thinking and Conscious Business

Today one of my sons told me he had been trying out the text-to-speech option on the Kindle. He thought it funny it couldn’t speak properly – all it does is read the words with no intonation or sense of meaning.

This led to a discussion of the difference between a series of words and a sentence. The computer can read each word individually but has no sense of the bigger thing – the sentence. Nor of the next bigger thing, the paragraph. Nor the next – the chapter, or indeed of the whole book.

It is very clear that a book is much more than all the words in it added together.

Take a piece of paper and draw 5 boxes. Arrange them in the rough shape of a circle. You can see the boxes. You can also see the circle. But where exactly is the circle? It doesn’t really exist in one sense – there are no lines on the paper which make up a circle. The circle only exists as an emergent property of the individual boxes arranged in a particular way.

2 + 2 = 5. Or in this case, 1 + 1 + 1+ 1 + 1 = 6.

These examples illustrate something that is central to thinking about business in a “systems” way.

This has little to do with IT systems, by the way; nor systems in the sense of processes that are used to deal with issues methodically or “systematically”. We’re using a different meaning of the word – this is systemic not systematic thinking.

These examples illustrate that businesses are complex systems. They are made up of “just” the individuals that work in them, but they are also much more than that. They are all the relationships between the people as well. And the relationships externally too.

And they are even more than that. They are wholes, and also part of a bigger whole. They’re integrated and connected into that bigger whole in ways that may even be difficult for us to comprehend.

This may all sound rather ethereal.

But it has some very practical implications.

For example, when trying to improve profitability in a company managers are often tempted to play around with metrics or KPIs. Adjust a few simple things like how hard people work, and surely profitability will increase?

I’m afraid it just isn’t so. A business is a complex system, and playing with one low level metric is just as likely to make things worse as it is to make things better.

Much better to think systemically. I have blogged before about Donella Meadows and her (fairly) famous list of the best points to intervene in a complex system. Be it a business or any other system.

According to Meadows, the least powerful are the ones we most often think of, presumably because they are easy to grasp and grapple with: constants, parameters, and numbers. Often we rearrange these “deck chairs” while the ship is sinking.

Transparency – who sees which information – comes in at number six from the top.  Transparency is a core part of developing a conscious business. It does work to radically change behaviour – and is certainly much more powerful than changing low level metrics themselves.

But the really powerful levers (in Meadows’ view, and mine) are:

  • The goal(s) of the system.
  • The mindset or paradigm out of which the system arises.
  • The power to transcend paradigms.

Consider that a business that chases short-term profitability has a different goal from one that is interested in profitability over the long-term.

Asking questions like “what is a business for?”, or “what does competition actually mean?” is the kind of activity that can lead to a shift of paradigm or mindset.

And realising that how we see things changes everything is the ultimate lever. That, of course, is what consciousness is all about.

PS To get started in systems thinking I’d really recommend the late Dana Meadows book Thinking in Systems: A Primer. Or try the Systems Thinking wiki. Or more recently I really enjoyed The Gardens of Democracy if you want to explore how (eco) systems thinking relates to areas beyond business.


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Conscious Business – A Strategy

I have lost count now of the number of times I have been asked what Conscious Business is.

And I have also lost count of the numerous ways I have explained it.

I suppose it is a bit like trying to describe a mountain. It all depends which face you climb. Or whether you are interested in geology and what’s underneath it.

But here’s one more go. An attempt to boil it down to something people can take away and use.

Conscious business is a strategy – for personal, business, and ‘planet-wide’ use.

As with all strategies we tend to be interested in the outcomes it produces. Are they good, bad or indifferent?

I think it’s a good strategy for personal use because it produces good outcomes:

  • it is more enjoyable – being based on authenticity and congruence;
  • it is more fulfilling – leading to better, more stimulating, and richer relationships;
  • it feels better – moment by moment, it leads away from disquiet towards more energy and peace.

It’s a good strategy for business because it produces good outcomes:

  • better short-term profits – through differentiation, reduced costs, more creativity and innovation;
  • better medium-term profits – through increased customer loyalty and lower staff turnover;
  • better long-term profits – through more resilience and flexibility in the face of market upheaval and change.

And it is a good strategy for the planet because it produces good outcomes:

  • it naturally leads to the creation of products and services that are less harmful and more beneficial;
  • it is more aligned with our deeper collective needs as humans – to collaborate, to support each other, and evolve in a positive direction;
  • it builds value for everybody, including future generations.

That’s it.