If the reason for a company’s existence is just profit, they won’t be very profitable. But if a company isn’t profitable, it won’t exist long enough to serve any other purpose. That’s what we call the purpose-profit paradox.
Firms of Endearment: How World Class Companies Profit from Passion and Purpose draws from an extensive research study looking for companies that focused on endearing themselves to their customers, employees, suppliers, communities, and shareholders. These FoEs are driven by “aligning the interests of all in such a way that no stakeholder group gains at the expense of other stakeholder groups; rather, they all prosper together.”
The authors and their research team narrowed their initial list of 60 companies to “28 companies we felt best manifested a high standard of humanistic performance” and did a financial analysis on these from an investor viewpoint. They found “these widely loved companies (those that are publicly traded) outperformed the S& P 500 by huge margins, over ten-, five-, and three-year time horizons.”
They also compared these FoEs to the 11 companies profiled in Jim Collins book, Good to Great. None of the Good to Great companies made their cut. The FoEs outperformed them by ratios as high as 3 to 1.
The book dives deep into understanding what sets FoEs apart from their peers. It’s brimming with insightful stories and examples from many of the firms. Here’s a partial list of their “distinctive set of core values, policies, and operating attributes:
- Subscribe to a purpose for being that is different from and goes beyond making money.
- Actively align the interests of all stakeholder groups, not just balance them.
- Devote considerably more time than their competitors to employee training.
- Their employee turnover is far lower than the industry average.
- Consciously humanize the company experience for customers and employees, as well as creating a nurturing work environment.
- Project a genuine passion for customers, and emotionally connect with them at a deep level.
- Consider their corporate culture to be their greatest asset and primary source of competitive advantage.”
Like Good Company: Business Success in the Worthiness Era, this is a very inspiring read based on a strong research foundation. The authors persuasively argue that we’re now into the “Age of Transcendence…the highest pinnacle that humanity has yet ascended to.” This research is further proof that the future belongs to strong, values-based, moral leaders who use their organizations to enrich everyone involved and make the world a better place.