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(More customer reviews)What is a Firm of Endearment? The authors argue that their example companies share a common set of core values, policies, and operating attributes which include:
1. aligning the interests of all stakeholder groups (customers, employees, partners, investors, and society) rather than seeking profit optimization
2. below-average executive compensation
3. open-door policies
4. employee compensation and benefits are above average for their industry
5. above-average employee training
6. empower employees to satisfy customers
7. hire employees who are passionate about the company's purpose
8. humanize customer and employee experiences
9. enjoy below-average marketing costs
10. honor the spirit as well as the letter of laws
11. focus on corporate culture as a competitive advantage
12. are often innovative in their industries
Companies identified include extensive examples drawn from Commerce Bank, Container Store, Costco, Harley-Davidson, Honda, IDEO, IKEA, jetBlue, Johnson & Johnson, Jordan's Furniture, New Balance, Patagonia, Southwest Airlines, Starbucks, Timberland, Toyota, Trader Joe's, UPS, Wegmans, and Whole Foods.
These companies are often contrasted with Wal-Mart and the Good to Great Companies identified by Jim Collins in 2001 in terms of stock price growth.
The authors argue that there is a new level of consciousness emerging that rewards those who do good while doing well. The implication is that all firms should shift to stakeholder optimization and the cultural values identified in the example companies.
While they don't make this argument, it's clear that the authors have identified many of the mindsets that lead a company to seek optimizing results for all stakeholders.
Before you assume total cause and effect, I would like to raise some issues not fully addressed in the book:
1. This is an after-the-fact evaluation. As such, (like Good to Great), we may mostly be seeing what the leaders are proud of . . . rather than what caused their success. For example, Southwest's success is focused on their corporate culture. But the company also has a better business model than almost any other airline (Ryanair's is better) and does a better job of fuel cost hedging than any other U.S. airline. Those factors aren't mentioned.
2. These companies are almost all in consumer products or services. A class of socially conscious consumers has sprung up who look hard for such firms. It's not clear that OEM and industrial buyers have evolved their preferences nearly to the same extent. So many of the lessons may only apply consumer goods and services (except for those validated by Gallup for having a motivated and effective group of people working for you).
3. Almost all of these firms are highly effective business model innovators who have gained enormous advantages over competitors who seldom innovate their business models. As a result, they can afford practices that may or may not pay off in profit without incurring any negative reaction. The next business model innovation will pay for the cost.
I was surprised that this book didn't look at the study I made from 1992-2001 that identified continuing business model innovation as the single best factor for explaining high levels of corporate performance (see The Ultimate Competitive Advantage). The books share some examples in common (including Jordan's Furniture and Timberland), but many of FoE's examples are also superior business model innovators (Amazon, BMW, CarMax, Caterpillar, Container Store, Costco, eBay, Google, Harley-Davidson, IDEO, IKEA, jetBlue, Patagonia, Starbucks, Trader Joe's, UPS, Wegmans, and Whole Food).
4. It often pays better to serve stakeholder interests than to ignore them. Why? Because ignoring stakeholders often burdens both the company and the stakeholder with costs and experiences that neither want. This economic case for stakeholder focus isn't fully developed outside of the customer arena.
5. The book emphasizes sustainability, but much of that argument is built around companies disappearing from the Fortune 500 (something that happens whenever a merger happens . . . which doesn't mean that the organization goes away, just the corporate headquarters in most cases). In the research of my students on environmental sustainability (see Hiroshi Fukushi's work,A Strategic Approach to the Environmentally Sustainable Business, for example), it's apparent that making the environment cleaner than when you touched it is economically advantaged in most situations. The idea of sustainability is based on the outmoded notion of not doing too much damage rather than finding profits in making the world better than you found it.
But it's a good book that creates more questions than it answers. This one will probably stimulate some more careful thinking in the area of where seeking to be more considerate of others is going to create better results as well as better sleep.
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Firms of Endearment: How World-Class Companies Profit from Passion and PurposeLove, Joy, Authenticity, and Soul:Building Winning Businesses in theNew Age of Transcendence • Why today's most humane companies are blowing away the S&P 500 averages• Increasing "share of heart": delivering the emotional, experiential, and social value your stakeholders are demanding• 30 powerful case studies, including CarMax®, Timberland™, Jordan's Furniture, Trader Joe's, Wegmans, and Toyota™Today's best companies get it. From Costco® to Commerce Bank, Wegmans to Whole Foods®: they're becoming the ultimate value creators. They're generating every form of value that matters: emotional, experiential, social, and financial. And they're doing it for all their stakeholders. Not because it's "politically correct": because it's the only path to long-term competitive advantage. These are the Firms of Endearment. Companies people love doing business with. Love partnering with. Love working for. Love investing in. Companies for whom "loyalty" isn't just real: it's palpable, and driving unbeatable advantages in everything from marketing to recruitment. You need to become one of those companies. This book will show you how. You'll find specific, practical guidance on transforming every relationship you have: with customers, associates, partners, investors, and society. If you want to be great–truly great–this is your blueprint. We're entering an Age of Transcendence, as people increasingly search for higher meaning in their lives, not just more possessions. This is transforming the marketplace, the workplace, the very soul of capitalism. Increasingly, today's most successful companies are bringing love, joy, authenticity, empathy, and soulfulness into their businesses: they are delivering emotional, experiential, and social value—not just profits. Firms of Endearment illuminates this, the most fundamental transformation in capitalism since Adam Smith. It's not about "corporate social responsibility": it's about building companies that can sustain success in a radically new era. It's about great companies like IDEO and IKEA®, Commerce Bank and Costco®, Wegmans and Whole Foods®: how they earn the powerful loyalty and affection that enables truly breathtaking performance. This book is about gaining "share of heart," not just share of wallet. It's about aligning stakeholders' interests, not just juggling them. It's about building companies that leave the world a better place. Most of all, it's about why you must do all this, or risk being left in the dust... and how to get there from wherever you are now. Foreword xvPrologue A Whole New World xxiChapter 1 It's Not Share of Wallet Anymore; It's Share of Heart 1Chapter 2 New Age, New Rules, New Capitalism 23Chapter 3 The Chaotic Interregnum 49Chapter 4 Employees—The Decline and Fall of Human Resources 65Chapter 5 Customers—The Power of Love 97Chapter 6 Investors—Reaping What FoEs Sow 125Chapter 7 Partners—Elegant Harmonies 145Chapter 8 Society—The Ultimate Stakeholder 171Chapter 9 Culture—The Secret Ingredient 197Chapter 10 Lessons Learned 235Chapter 11 Crossing Over to the Other Side 253Acknowledgments 273
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