Firms of Endearment

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Firms of Endearment Rajendra Sisodia, David Wolfe, Jagdish Sheth 2007 0131873725 Alistair Schofield, Managing Director, Extensor Limited

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There is a cadre of books at the moment that are based on the premise that Western economies have entered a new era.  In Daniel Pink’s A Whole New Mind he refers to it as “The Conceptual Age”, in Firms of Endearment it is referred to as “The Age of Transcendence”.  The argument is that with an aging population, greater levels of wealth and an abundance of products and services, people are seeking a higher meaning in their lives.

The concept is not new; Maslow’s Hierarchy of Needs illustrates how people will only seek to satisfy their more ethereal needs once the basic requirements of food, warmth and shelter are provided for – a situation that we have obviously long-since arrived at in Western economies.

The basic premise of the book is therefore that with consumers and employees seeking more in life than simply money, companies need to adopt more meaningful goals than the simple pursuit of profit. 

Where most studies of corporate excellence begin with the financial performance of successful companies and work backwards (as in Jim Collin’s book Good to Great), in this book the authors began by defining the criteria for a “Firm of Endearment (FoE)” and only looked at the financial performance once the companies had been identified.  The results were startling, with FoE’s outperforming both then market and Jim Collin’s Good to Great companies by a significant margin.
In total, the authors identifies 30 FoE’s including Amazon, BMW, Caterpillar, Costco, Google, Harley-Davidson, Honda, New Balance, Southwest, Timberland and Whole Foods.  What distinguishes these companies from many of their competitors is that their mission and purpose incorporates all of their stakeholders, not simply their shareholders.  For example, Harley-Davidson treats its distributors as business partners rather than as customers; New Balance, the world’s third largest sports footwear manufacturer, produces all of its products in the United States paying an average of $15 an hour to workers whereas its competitors are producing similar shoes in China for an average wage of $0.30 per hour; Southwest airlines famously refused to lay off any staff in the aftermath of 9/11 believing that its relationship with its staff was more important than the short-term loss of profits.

The authors use these 30 companies as examples throughout the book as to consider how and why such companies are successful.  Their conclusion is that where in the past companies succeeded as a result of “forcing” results through top-down hierarchical management, today’s most successful companies achieve their success through  harmonious relationship between customers, employees, shareholders and the communities they work within.  While some would refer to this as “corporate social responsibility”, the authors refer to it as “concinnity”.  This is little-used known meaning “a skilful blending of the parts achieving an elegant harmony”.

The book does not suggest that such companies are anything new.  Organisations with a social conscience have existed for many years; for example, the Quaker companies of Rowntree and Quaker in the UK and in Japan, Matushita, the forerunner to the Panasonic Corporation whose leader described its purpose as “the irradiation of poverty”.  In my opinion, a failing of the book is that it does not adequately explain why organisations that seek to achieve concinnity will be any more successful today than they have been in the past.  I suspect that the authors’ response to this would be that the “Age of Transcendence” is increasing the demand from products and services from such companies, but that, of itself, does not result in the conclusion that companies that treat their staff badly and pay derisory wages will fail.

Whether you feel that the advice provided in the book is appropriate or not for your organisation is therefore a matter of judgement.  What I do not think is in question is that the book is well researched and provides some fascinating insights into the workings of some organisations that are great employers, great corporate citizens and highly successful.

Firms of Endearment is a book I would recommend as required reading for any manager or business leader.

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