By Curt Fowler
Conscious businesses should underperform their peers because they spend money on so many things their competitors do not. If you look at business as a “zero-sum” game, then this extra spending must cost someone, probably investors, but this is not the case. Conscious businesses have been shown to provide a 10x greater return for their investors.
Let’s explore the many reasons conscious businesses should underperform for investors.
Investors are Not Their Primary Focus
We all know that we tend to go in the direction of where we are focused. If you want to test this theory, go snow skiing and try to avoid a tree while staring at it. It doesn’t work well.
But conscious businesses do not focus on “maximizing shareholder returns” as so many of their competitors do. It would make sense that conscious businesses would provide a lower return to investors simply because they are not focused on it, but the opposite happens.
Higher Pay
Most conscious companies pay their team members well and provide generous benefits. In 2006, when “Firms of Endearment” was originally written, Costco was paying its employees double what Walmart did and Costco paid 98% of its team members’ health-care costs. Walmart’s pay has improved but is still not in the ballpark of what Costco pays.
Less Price Pressure on Suppliers
Rather than squeezing their supplies for the lowest possible prices, conscious companies partner with suppliers. In response, their suppliers thrive, are more innovative and profitable, providing better services and products.
Community Investment
Conscious companies tend to invest heavily in their communities. They do this through charitable, economic and environmental investments.
Customer Value and Service
Rather than providing minimal value and service at the lowest price, conscious companies invest heavily in maximizing the value provided to their customers through product innovation and customer service. These investments should result in much higher operational costs, lower profits and lower investor return, but the evidence shows the opposite is true. Why?
Conscious companies invest their money where it makes the biggest difference – on team member happiness, a great customer experience and a high-quality product. They minimize their spending in areas that provide little value – frequent sales promotions, the cost of high team turnover and the overhead associated with operating large bureaucracies.
Next week we’ll dig deeper to understand how conscious companies outperform for their investors despite these higher costs.
Curt Fowler is the President of Fowler & Company, a business advisory firm dedicated to helping leaders accelerate the growth, profit and impact of their firms by creating exceptional clarity and engagement throughout the organization. He has an MBA in Strategy and Entrepreneurship, is a CPA, and a pretty good guy as defined by his wife and four children.
Have a business growth topic you’d like me to cover? Send suggestions to cfowler@valuesdrivenresults.com.
