Whole Foods Market CEO John Mackey Believes In Business Model That Is Not Solely Profit-Driven

I do not believe maximizing profits for the investors is the only acceptable justification for all corporate actions. The investors are not the only people who matter. Corporations can exist for purposes other than simply maximizing profits”

– John Mackey, CEO of Whole Foods Market

Generally, CEOs of large multinational corporations have business models that focus primarily on generating profit, which is understandable, as in order to maintain a viable business, creating profit is important. However, by solely focusing on profit, oftentimes, large corporations somehow miss the mark when it comes to their responsibilities to customers, employees, the environment and other stakeholders involved.

John Mackey, the co-founder and CEO of Whole Foods Market is different from most CEO’s of successful businesses with large market capitalizations (Whole Foods’ market cap is $16.79 billion). Mackey strongly believes that his own success is largely due to building Whole Foods around a model that is not solely focused on driving profit. Mackey explains that many economists believe that business models must be focused on production leading to profit, in order to benefit investors. However, he does not believe this has to be the case.

After reading a report Mackey wrote on his business model, titled “Conscious Capitalism: Creating a New Paradigm For Business”, I think it is very interesting to think about the consequence of modeling a business in the way that Mackey describes, as while his template appears to be very charitable and ethical, it does seem rather difficult to implement.

In his report, Mackey discusses how currently, large businesses have a terrible image, mostly due to discreditable and unethical behavior on the part of corporations such as Enron, Tyco, WorldCom and AIG, to name a few. “Instead corporations are widely perceived as greedy, selfish, exploitative, uncaring – and interested only in maximizing profits,” said Mackey.

Mackey feels that it is the responsibility of entrepreneurs, who create the business, to ultimately decide the way it will be run, and to ensure that the business does not add to corporations’ notoriously bad reputation. “When we recruited our original investors at Whole Foods Market, they understood that Whole Foods Market had other purposes besides maximizing profits. Entrepreneurs discover and/or create the purpose of a business – not investors, or politicians, or lawyers, or economists,” said Mackey.

While Mackey does admit that profit is important, he believes that in order to generate long-term profit, executives need to not allow profit to be the paramount goal of the company, and focus on other goals, which will then lead the business to be the most successful.

Mackey’s business model for Whole Foods consists of a set of “core values” with all constituents (customers, employees, suppliers, investors, the community, the environment) directly affected by these values. Customers, to Mackey, are the most important constituents.

Credit: John Mackey’s “Conscious Capitalism: Creating a New Paradigm For Business”

“The core values are: selling the highest quality natural and organic products available, satisfying and delighting our customers, supporting team member happiness and excellence, creating wealth, profits, and growth, and caring about our communities and environment,” said Mackey.

Mackey employs many unique tactics in order to promote a transparent and trustworthy atmosphere within his company. For example, salary information is made available to everyone, which Mackey says greatly helps to contribute to an open and honest environment among staff.  Mackey also allows all employees to vote every three years on what benefits they would like to receive, and also institutes incentive-reward programs.

In general, it seems that the working environment in Whole Foods is one inspired by teamwork. “We also teach the importance of ‘shared fate’, and by shared fate I mean that the better the company does, the better the customers do, the better the team members do and the better the investors do,” said Mackey.

Mackey focuses a large portion of his business model on helping the environment and communities in which his business operates through philanthropy. He even calls the environment the “voiceless stakeholder”.

“I believe philanthropy is consistent with citizenship and should be managed prudently and efficiently just like every other aspect of a business. Philanthropy, executed properly, can also contribute to shareholder value through increased goodwill with customers, team members and communities,” said Mackey.

Mackey thinks that his business model needs to be applied to more companies in order to improve the image of global business around the world. “Corporations must rethink why they exist. If business owners/entrepreneurs begin to view their business as a complex and evolving interdependent system and manage their business more consciously for the well-being of all their major stakeholders, while fulfilling their highest business purpose, then I believe that we would begin to see the hostility towards capitalism and business disappear,” said Mackey.

While Mackey’s business model seems to be the perfect approach to pleasing all constituents and managing to generate enormous profit at the same time, it does seem difficult to execute. Can Mackey’s business model be applied to other businesses, or did Whole Foods just get lucky?

Read John Mackey’s full report: http://www.wholeplanetfoundation.org/files/uploaded/John_Mackey-Conscious_Capitalism.pdf

 

 

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About Jessica Summers

My name is Jessica Summers. I graduated as valedictorian from Marymount Manhattan College in 2012 with a B.A. in Communications and minors in Journalism and Political Science. During college, I spent a summer abroad studying at Oxford University and also held internships at CNN International, CNBC Business News, and WABC-TV, among other news organizations and media outlets. I am currently a graduate student at New York University’s Business and Economic Reporting program. I am an aspiring broadcast journalist, especially interested in covering the world of business and finance.
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