Do Companies With Heart Make Money? Part 1

Do Companies With Heart Make Money? Part 1

The answer is unequivocally yes. In the book, Firms of Endearment, Raj Sisodia, David Wolfe & Jag Sheth, did a study of companies that had heart. Each company meeting a certain criteria gets put on the list as a Firm of Endearment (FoE). The authors found that companies with heart most definitely made money and were very profitable over time.

18 Firms of Endearment

Further Financial Performance Comparison

The authors also looked at the FoE list in contrast to the organizations that made the list in Good to Great by Collins and Porras. The eleven companies that Collins and Porras identified as moving from “good to great” provided superior returns to investors over an extended time (at least three times greater than the market over a 15-year period). Here are the comparison highlights:

Investor Returns

  • None of the “good to great” businesses made the cut as an FoE, although Gillette came close.
  • FoEs outperformed the Good to Great companies by:
  • * 3.6 to 1 over 10 years
    * 1.7 to 1 over 5 years

  • FoEs performed on par with Good to Great companies over 3 years.

Recognizing Changes in Mainstream Business Culture

FoE organizations operate as an economic ecosystem with many interdependent, equally valued participants. Here are excerpts from Firms of Endearment that explain FoEs and the origin of the terminology.

“We argue that for the best prospects of success in the future, companies will need to combine an emotive dimension with operational efficacy …

What Is a Firm of Endearment?
The title of this book testifies to deep-seated changes in how people see things in mainstream business culture. Consider the words affection, love, joy, authenticity, empathy, compassion, soulfulness, and other terms of endearment. Until recently, such words had no place in business. However, that is changing. Today, a growing number of companies—including every FoE cited in this book—comfortably embrace such terms. That is why we coined the phrase firms of endearment. Quite simply, an FoE is a company that endears itself to stakeholders by bringing the interests of all stakeholders groups into strategic alignment. No stakeholder group benefits at the expense of any other stakeholder group, and each prospers as the others do. These companies meet the tangible and intangible needs of their stakeholders in ways that delight them and engender affection for and loyalty to the company.

FoEs connect with their stakeholders at a deeply emotional level. We know from recent brain research that loyalty is rooted in emotions, not reason …

Sisodia, Wolfe & Sheth give details about each top FoE to help us understand what sets them apart and why such a strong correlation between an organization’s humanistic and economic performance exists. Notably, while it provides plenty of specifics for meaningful application, Firms of Endearment is also very engaging and inspiring.

In our next blog post, we’ll look into what the book claims is “the secret ingredient to a FoE – their culture.”

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