A Deeper Dive into Conscious Capitalism

Earlier this month I wrote a blog recommending Whole Foods founder John Mackey’s new book, Conscious Capitalism, as the most important book of the year, perhaps the decade. That's why I wrote its Foreword.

As the book is hitting the business best-seller lists, some people have pushed back because they think John Mackey is anti-union. Let’s take an honest look at what he actually believes:

 

  • “While we believe that the best approach is to avoid the need for unions in the first place, businesses that already have labor unions should strive to engage with them constructively rather than viewing them as adversaries.” He cites Southwest Airlines as “a great example of a company that has had a predominantly positive and win-win relationship with its labor unions.” As Herb Kelleher, former CEO of Southwest Airlines, said, “I just treated them like human beings.” This is what I have always tried to practice in dealing with unionized and non-union employees.
  • Whole Foods is a role model for treating its employees well. They are highly motivated, fairly paid with incentives, and have excellent health care and benefits. Walk into any Whole Foods store and talk to the first-line employees, as I have, and you immediately perceive they take great pride in their work and the Whole Foods mission to help people eat healthy foods.
  • Not convinced? Then buy John’s book and read Chapter 11, page 157. There he says, “There has been a long history of adversarial relationships between companies and unions. These conflicts usually have been very harmful over the long term to all the stakeholders of the company, including unions and the team members (that is, employees) they represent. To fully flourish, companies must evolve to form win-win partnerships that create value for all stakeholders. This requires the leadership of the company and the union to both become more conscious and adopt a spirit of cooperation and partnership.”
  • He goes on to note that unions grew 100 years ago in response to poor working conditions, saying, “There is no question that labor unions primarily came about because of the failure of businesses to care about their workers as human beings.” In my experience, management often gets the union it deserves. If it doesn’t treat its people well and pay them fairly, then employees will unionize and often engage in “win-lose” tactics to force better treatment. On the other hand, if employees are well treated and paid fairly, they do not feel the need for a third-party to represent them.
  • Mackey observes, “private-sector union membership peaked at 36% in 1945 but has since declined to 6.9%.” My observation about this decline is not that employees have dropped out of unions or that companies have broken up the unions. Rather, the “win-lose” approach to collective bargaining has caused both companies and entire industries to go out of business. This pattern started with the steel industry, spread through shoes and textiles and then to airlines and automobile companies and their unionized suppliers, as well as some major retailers. Meanwhile, emerging industries, such as computers, semiconductors, IT, pharmaceuticals and medical technology, treat their employees so well that they do not feel a need for a union.
  • Contrast this situation with Germany, where employees have “co-determination” with management and the two have pursued “win-win” solutions that benefit both sides and have enabled German companies in the chemical, automobile, auto parts, machine tools and high tech products to become world leaders in spite of the high cost of hourly labor.
  • Mackey concludes his rationale about employees by arguing, “A conscious business knows that treating its people well is the right thing to do; it does not need to be coerced into doing so. Unions simply aren’t necessary if a business operates with a stakeholder philosophy and if team members are seen as important stakeholders who should be well compensated, happy, and flourishing in the workplace.”

 

I find these statements compelling and inspiring. Collectively, they describe a philosophy that is identical to the one we followed at Medtronic. The company's bedrock philosophy is to have employees whose loyalty is to the company and the patients Medtronic serves, and who have a sense of well-being because they are well paid, fairly treated, and have “a means to share in the company’s success.”