Jim Collin’s research drills down into companies that are Good to Great and Built to Last.
And then there are companies that people love – companies that implement self-sustaining systems of performance that generate value equally across all stakeholder groups including customers, investors, employees, partners, communities and society.
These are the companies that create legacies. Legacies that outlast economic instability and sustain momentum in the face of turbulent times.
Raj Sisodia is the co-founder and Chairman of Conscious Capitalism and co-author of Firms of Endearment alongside Jag Sheath and David Wolfe. In their book, the authors describe Firms of Endearment (or just FoEs) as the ultimate humanistic companies – seeking to maximise value in ways that stakeholders respect, admire and even love. FoEs endear themselves to stakeholders by bringing the interests of all stakeholder groups into strategic alignment, without favouring one over the other.
The authors identified FoEs by searching out companies that exemplified high standards of humanistic performance. Put simply, they looked for companies that were loved – and importantly, were loved by all stakeholder groups. Then they conducted an investor analysis to understand the financial performance of these companies. This is how their research approach differed from Jim Collins’ work – who started first with an investor analysis and then an internal analysis of drivers of performance.
Among the list of FoE’s are well-known brands including New Balance, Patagonia, Ikea, 3M, Costco, Amazon, Disney, Timberland, BMW, and Unilever to name a few. The authors do not claim their list is exhaustive and invite regular punters like you and I to nominate the brands we love to be considered in their ongoing research through their website: www.firmsofendearment.com.
Being a purpose driven organisation pays off in ways the authors did not expect. Not only did FoE’s outperform the S&P500 by 14 times; they also outstripped Good to Great companies reported in Jim Collins’ research by 6 times over a period of 15 years.
So, what defines a Firm of Endearment? FoE’s are differentiated by a number of attributes. They typically demonstrate:
All of this adds up to a company where people are passionate. Passionate about the product, passionate about the customer experience, and passionate about the brand. The collective energy for these companies lifts engagement and minimises costs. People who work in these companies go to extraordinary lengths to innovate, adapt, and serve – because they feel valued, appreciated, and part of a worthy and meaningful purpose.
People stay because they are trusted, challenged, and experience professional growth, minimising turnover and recruitment costs and keeping the Intellectual Property (IP) in the business. People line up to join them – giving these companies the selection of the best talent and freeing up management to focus on strategy execution instead of replenishing the team. Customers talk about them – on social media, to their friends – which reduces the need for above the line marketing spend. Suppliers and partners work collaboratively with them – because the relationship fosters mutual growth and they will do what is necessary to maintain it. These companies create win-win situations and ultimately the passion for the business, if harnessed with clear strategy, translates into profit.
In these uncertain times – going back to basics and redefining how you add value to all stakeholder groups is a positive exercise in realising long-term win-win scenarios. If you equally value and prioritise all stakeholder groups – you generate strategic plans with minimal risk by designing balance into the system. What we all need right now are economic models share opportunities in ways that allows the whole system to grow. Only by realising we are part of an intricately interconnected chain of supplier / provider relationships do we move the dial on our economy together.
Sisodia, R., Wolfe, D. B., & Sheth, J. N. (2007). Firms of endearment: How world-class companies profit from passion and purpose.