Values-Centered Entrepreneurs and Their Companies

Values-Centered

Entrepreneurs and

Their Companies

A new brand of entrepreneurs has arrived on the business scene. These entrepreneurs

carry with them a whole new set of values. Their mission is to be socially responsible,

protect the planet, and do the right thing for all of their stakeholders. They aim to

achieve a balance between profits and one or more causes of their choosing, and view

for-profit entrepreneurship as a vehicle for social change. Their approach to man￾agement questions our basic assumptions about how businesses should be run and

what their role should be in society. The authors call these pioneers “values-centered”

entrepreneurs.

This book explores how these highly unorthodox leaders have built their profitable

and socially responsible business enterprises. The authors examine a group of over

40 entrepreneurial companies and how each balanced the profit objective with social

responsibility in key aspects of their business operation—from their initial company

formation, through growth, to exit—to build successful triple bottom-line companies.

The book presents ten of the most dominant and interesting commonalities with a

focus on those policies and decisions that departed from conventional business

practice.

David Y. Choi, Ph.D., is Associate Professor of Management and Entrepreneurship

and an Associate Director of the Fred Kiesner Center for Entrepreneurship at

Loyola Marymount University.

Edmund R. Gray, Ph.D., is Professor of Management at Loyola Marymount

University.

Values-Centered

Entrepreneurs

and Their

Companies

David Y. Choi and Edmund R. Gray

First published 2011

by Routledge

270 Madison Avenue, New York, NY 10016

Simultaneously published in the UK

by Routledge

2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN

Routledge is an imprint of the Taylor & Francis Group, an informa business

© 2011 David Y. Choi and Edmund R. Gray

All rights reserved. No part of this book may be reprinted or reproduced

or utilised in any form or by any electronic, mechanical, or other means,

now known or hereafter invented, including photocopying and recording,

or in any information storage or retrieval system, without permission in

writing from the publishers.

Trademark Notice: Product or corporate names may be trademarks or

registered trademarks, and are used only for identification and

explanation without intent to infringe.

Library of Congress Cataloging-in-Publication Data

Choi, David Y.

Values-centered entrepreneurs and their companies / David Y. Choi, Edmund R. Gray.

p. cm.

Includes bibliographical references and index.

1. Social responsibility of business. 2. Social entrepreneurship. 3. Entrepreneurship—

Moral and ethical aspects. I. Gray, Edmund R. II. Title.

HD60.C48 2010

658.4′08—dc22 2010000654

ISBN13: 978–0–415–99760–7 (hbk)

ISBN13: 978–0–415–99761–4 (pbk)

ISBN13: 978–0–203–88350–1 (ebk)

This edition published in the Taylor & Francis e-Library, 2010.

To purchase your own copy of this or any of Taylor & Francis or Routledge’s

collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.

ISBN 0-203-88350-0 Master e-book ISBN

(DYC) To my parents

and

(ERG) To my grandson, Alexander

Contents

List of Figures and Tables ix

Preface and Acknowledgements xi

Part 1: Toward a New Breed of Entrepreneurs 1

1. Introduction 3

2. The Values-Centered Entrepreneur 9

Part 2: The Lessons/Guidelines 21

3. Commit to a (Meaningful) Purpose 23

4. Raise Capital with Mission in Mind: Be Strategic, Resilient,

and Cautious 35

5. Hire Talented Employees with Shared Values 48

6. Promote Your Company’s Values 58

7. Build a Cohesive, Dedicated Organization 67

8. Maximize Profits . . . With Some Exceptions 78

9. Minimize Your Environmental and Social Footprint 94

10. Stay With It for the Long Haul 107

11. Make Giving a Priority 117

12. Be a Role Model for Others 128

13. Concluding Thoughts 137

Part 3: Case Studies 143

Case Study 1: Gottlieb Duttweiler and Migros 145

Case Study 2: Stonyfield Farm 149

Case Study 3: King Cycle Group 159

Case Study 4: T.S. Designs, Inc. 168

Notes 176

Index 188

viii Contents

Figures and Tables

Figures

2.1 Three-Phase Model of Corporate Social Responsibility 13

2.2 Continuum of Enterprise Models 15

5.1 Careers Page of the Website of Salesforce.com 55

9.1 The Next Industrial Revolution: Model for the Prototypical

Company of the Twenty-First Century 96

9.2 Ecover’s Comprehensive Environmental Policy 97

9.3 Solid Waste Generation per Unit of Product, LaGrange and West

Point, Georgia 103

11.1 Typical Relationship between Company and Foundation 119

A.1 T.S. Designs’ Vision, Values, and Mission Statement 169

A.2 T.S. Designs’ Sustainable Print Options 175

Tables

2.1 The Role of Business 11

2.2 The Pioneers 18

2.3 New Role Models 19

2.4 The Up & Comers 20

3.1 Robert Milk’s “Questions to Ask Yourself before Jumping In” 27

3.2 Unconventional Backgrounds 29

3.3 Ben & Jerry’s Mission Statement 31

3.4 Ecover’s Mission/Vision/Values/Strategy Statement 32

3.5 The Body Shop International’s Mission Statement 32

3.6 Timothy Haahs & Associates’ Mission Statement 33

4.1 Common Types and Sources of Financing for Entrepreneurial

Firms 36

4.2 Samples of Socially Focused Investment Entities 41

4.3 Dealing with Wary Investors 45

6.1 Contrasts in Marketing Approach 59

6.2 Terms Associated with Brands 62

6.3 Building a Brand Without an Advertising Budget: Sweet Riot’s

Approach 64

7.1 Common Excuses Why Conventional Entrepreneurs Do Not Make

the Effort to Become Excellent Employers 68

7.2 Fundamentally Different Approach Toward Employees 69

7.3 Inexpensive Ways to Form a Tight Community 73

7.4 Benefits of Appreciated and Inspired Employees 75

8.1 Financial Strategies for Values-Centered Entrepreneurs 79

8.2 Exchange between Craigslist CEO Jim Buckmaster and UBS

Analyst Ben Schachter 87

9.1 New Belgium’s Process Innovations 100

10.1 Year of Company Founding: Sample List 108

10.2 Acquisitions of Values-Centered Companies 112

11.1 Sample Institutionalized Giving Programs 120

12.1 Common Methods of Being a Role Model 129

x Figures and Tables

Preface and Acknowledgements

“Greed . . . is good,” Michael Douglas’s character, Gordon Gekko, famously pro￾claimed in the 1987 movie, Wall Street. Certainly, profit is a critical element in our free

enterprise system but the most prominent business headlines of the new millennium

suggest that unbounded greed has become the paramount motivator in business

(Karl Marx must be wryly smiling from his grave). Of course, business has never been

perceived as the most idealistic of professions but its public image, we would venture

to say, has shrunk to a new all-time low.

And, no wonder business has such a poor image. We have seen bankers willing

to put the entire financial system at risk to maximize their bonuses, observed

pharmaceutical companies making drugs unaffordable to millions of people, and

learned about oil companies paying lobbyists to create artificial doubts about solid

science, just to name a few reasons for business’s poor standing. And these actions are

deemed justified and understandable in the name of capitalism! (It is equally amazing

to see nice, honest people going to work every morning at these corporations.) But

besides the problem of public image, the prevailing self-serving view of business does

not really serve anyone, not people, planet or even business itself, at least not in the

long term.

As teachers as well as practitioners, we have a rather different view of business’s

potential; one that involves individuals starting companies to pursue their dreams for

a better world, not just for themselves and their families but also for their customers,

partners, and communities. One that employs and empowers people and treats them

with dignity. One that shares good fortune with the less fortunate and endeavors to

leave behind a better world for the next generation.

Too idealistic? Too impractical? We don’t think so! As we dug into our research, we

found more and more entrepreneurial companies whose philosophy and admirable

business policies fit our view of business and in many cases exceeded our expectations.

Their leaders refused to blindly follow the conventional role of business in society and

operated their companies according to an alternative set of values. Their cause￾orientation combined with entrepreneurial passion inspired innovative and often

unorthodox management practices worthy of public attention. Our article, “Socially

Responsible Entrepreneurs: What Do They Do (To Create and Build Their Com￾panies)?” published in 2008 in Business Horizons focused on these practices and

became a springboard to this book.

Our “values-centered” entrepreneurs (as we came to call them) clearly demonstrate

that businesses can be an integral part of society, not just as employers and revenue

generators (certainly very important functions), but through the use of a wide range

of interesting business strategies and management practices. These include offering

more sustainable products, building a totally different supply chain, inventing a new

brand of promotional strategy, and fostering an extraordinary relationship with

employees. This book brings to light the major commonalities as well as best-in-class

practices—thereby providing some insight into how these entrepreneurs juggle their

multi-faceted objectives successfully. Our hope is that these findings will serve as a

framework that a new generation of entrepreneurs can build upon.

The book starts with a brief discussion of our research objectives and method￾ology—and then presents an overview of the theoretical underpinning of the study.

The central core of the book is a comprehensive discussion of ten commonalities

in management practice that we distilled from our research. We devote a chapter to

each commonality. The book concludes with in-depth case studies of four companies,

highlighting their unique business philosophies, policies and practices.

Many people have contributed to this book. John M.T. Balmer, of Brunel University,

was an early collaborator. He worked with one of the authors in developing pragmatic

lessons from a study of four “sustainable” entrepreneurial companies. Several of our

students including Nancy Marcello, Mathew Carroll, Jonathan Mentzer, Mauricio

Rivera, and Jose Limon helped with company research and proofreading. Further, we

particularly want to acknowledge Catherine M. Dalton of Indiana University, editor of

Business Horizons, who helped us frame the study and provided valuable suggestions

in developing the aforementioned article. Other academics including Jeff Robinson of

Rutgers University and Fred Kiesner of Loyola Marymount University have supported

our project and offered suggestions. We should also note that our current Dean,

Dennis Draper and our former Dean, John Wholihan provided us with the supportive

academic environment needed for completing the research and writing the book.

Over the years, the following work-study students helped type our evolving

manuscript: Hugo Lopez, Jessica Lopez, Ankita Patel, Aimee Afad, Stephen Ma, and

Carolina Sanchez. We thank them for their efforts. We specially want to single

out Cissy Easter who oversaw the typing of multiple drafts of the manuscript and

managed much of the administrative work necessary for putting the book together.

We are grateful to all of our values-centered entrepreneurs who have provided

the inspiration for this book. Many of them have offered their time and wisdom.

A special thank you goes out to, among others, Gary Erickson (Clif Bar), Timothy

Haahs (Tim Haahs & Associates), Eric Henry (T.S. Designs), Chris King (King

Cycle Group), Robert Milk (Novica), Laura Scher (Working Assets), Kristin Groos

Richmond and Kirsten Saenz Tobey (Revolution Foods), Sarah Endline (Sweet Riot),

and Jeff Pink (EV Rental) who have helped with key insights that we have incorpor￾ated in our book. We especially appreciate Seth Goldman (Honest Tea) and Marc

Benioff (Salesforce.com) for their strong endorsement of our book. Executives in

many of the other companies, such as AgraQuest, King Cycle Group, Novica, Pacific

Community Ventures, Rhythm & Hues, and Tom’s Shoes, have also provided valuable

information.

xii Preface and Acknowledgements

Finally, we are privileged to have worked with a great team at Taylor and Francis.

The team includes John Szilagyi, Nancy Hale, and Sara Werden. A special thanks goes

to our copy-editor Jane Olorenshaw whose superb work exceeded our expectations.

The team has helped make our book better.

Preface and Acknowledgements xiii