Increasing revenue and profits is a laudable business goal, but why stop there? CEOs across the board agree that blending corporate values with governance and shareholder outlooks contributes to the greater good as well as the bottom line. In advance of NAIOP’s Commercial Real Estate Conference 2015, NAIOP spoke with Kevin Maggiacomo, president and CEO of Sperry Van Ness International – one of the most recognized commercial real estate brands in the world.
NAIOP: How does aligning conscious culture, leadership and stakeholder orientation benefit the bottom line?
Maggiacomo: These are three of the core tenets of conscious capitalism and are absolute game changers when appropriately implemented. Few would disagree that leading, scaling and increasing the profits of a business, faster than you otherwise could, while simultaneously elevating humanity, is anything but a homerun. So-called “conscious capitalism” aligns purpose with profits by focusing on doing well by doing good – not to “give back,” but in figuring out how balancing the needs of all of a business’ stakeholders, including employees, customers, suppliers, community and shareholders – results in a more purposeful and profitable business. The result is empowered employees who are more loyal, work harder, are more creative, care more and are responsible for driving greater customer experiences. With that, an increased bottom line inevitably follows.
NAIOP: Share some examples of companies who have done this and the benefit to the greater good.
Maggiacomo: Southwest Airlines is a good example. Their mission is to democratize the skies and make air travel affordable for everyone. Only 25-30 years ago, a mere 15 percent of Americans had flown on an airplane. Through much of Southwest’s work, that number is now closer to 85 percent, in part by offering lower fares and bringing coverage to smaller markets. They also lead the industry in environmental consciousness and launched their Green Plane, a “flying laboratory” for environmentally-friendly products. At Southwest, team members love working there, customers consistently return and their profitability has consistently increased since they launched operations.
Consider also TOMS shoes, whose profitable business was built on a model of giving a pair of shoes to a child in need for each pair of shoes the company sells, and the Container Store, whose CEO, Kip Tindell, pays full-time sales employees a minimum of nearly $50,000 a year — approximately double the average for retail stores. This attracts the best and most motivated employees, whose productivity is three times better than the average worker, resulting in substantially increased profits for the company. In both of these examples, all stakeholders benefit.
The bottom line is that it’s not necessary for consciousness and capitalism, self-interest and the broader interest to be mutually exclusive. Rather, they are inextricably tied, and they all serve one another.
NAIOP: Why is diversity so important to the industry and individual companies?
Maggiacomo: First, business demographics are changing around the globe. Commercial real estate needs to better represent our changing client base in order to better represent those clients in the market. We need to recruit and develop leaders from 100 percent of the population, not just the 50 percent who are men. After all, more women are graduating with bachelor’s degrees as well as MBAs than men, so we have far more qualified candidates. And you may have noticed that an increasing number of tenants occupying commercial real estate are women.
Second, the business case for gender balance is rock solid. Our company’s category results aside; in the United States, women hold about 14 percent of executive officer positions and 17 percent of board seats. Yet, research by Catalyst found Fortune 500 companies with the highest percentage of female corporate officers reported, on average, a 35.1 percent higher return on equity and a 34 percent higher return to shareholders than companies with the lowest percentages of female corporate officers. Therefore, this is about generating better results as much as anything. That’s why Sperry Van Ness is committed to maintaining gender-balanced leadership with 50-50 male-female representation on both our executive team and board of directors. It works!
Third, striving for gender balance – and diversity for that matter – is the right thing to do. In 1970, American women were paid 59 cents for every dollar their male counterparts made. In 2010, compensation for women rose to a mere 77 cents for every dollar men made. If change continues at the same slow pace as it has for the past 40-plus years, it will take almost another 50 years for women to finally reach pay parity. It’s important that we work to change that. And the commercial real estate industry is uniquely positioned for women to be highly compensated based on performance, just the same as men are. Historically, at Sperry Van Ness, a disproportionately high percentage of our female advisors have been among our highest earning advisors. So naturally, we decided we wanted more of them. This is a great example of how doing what’s right for people, is also good for the bottom line. That’s what conscious capitalism is all about.
Hear more from Maggiacomo and fellow CEOs discussing Conscious Capitalism at the Commercial Real Estate Conference, October 13-15, in Toronto. See the conference website for details on who attends, hot sessions, and project tours.
Kathryn Hamilton, CAE, is Vice President for Marketing and Communications at NAIOP Corporate.