At Marcellus, we believe in the role of business going beyond just the motive for profits and hence have featured articles on the subject in 3L&3S often. Most recently, we featured the iconic ice cream maker Ben and Jerry’s conscious capitalism. For those of us with a sweet tooth, we feature another company which measures up on the profit with a purpose scale – Mars. Many of us know Mars for those delicious chocolate bars but less known is the fact that Mars is now one of the world’s largest pet food companies (some of us with pets would be familiar with the dog food brand Royal Canin). Indeed, as the article says, pet foods now comprise majority of its sales (58%). When put in context of its overall sales of $45bn (larger than Coca Cola), you get a sense of the scale of its pet business. Mars remains a privately held business entirely owned by the founding family (currently in its fourth generation). So how has the family established this balance between profit and purpose:
“The firm gives credit for its success to the austere business practices Forrest Sr honed in Slough, now known internally as the Five Principles: quality, responsibility, mutuality, efficiency and freedom. They may sound like managerial guff. But they strike the right balance between making money and doing good. Many more showy corporations aim for that under the trendy slogan of “stakeholder capitalism”. Few carry it off as convincingly as Mars.
To understand why, first consider the relationship between the company and its only shareholders, the family—a dynasty worth about $96bn, according to Forbes magazine. The fourth generation, known as g4, runs the board. Like shareholders everywhere, they have varying priorities, ranging from sustainability to the welfare of “associates” (Martian for employees). Yet their mandate for steering the firm puts top-tier financial performance and long-term growth on a par with positive social impact and trust.
The shareholders reap less than a tenth of profits as dividends. That frees Mars to plough the rest back into its business, letting it keep a strong balance-sheet and a staunchly independent streak. They lead low-key lives. That fits with Mars’s egalitarian ethos and preference for privacy. They also retain some of Forrest Sr’s eccentricities. A former board member recalls factory visits with family members where everyone tried mouthfuls of canned dog food in order to check its quality. “It’s like pâté. You get used to it,” he says. The practice continues—though “we don’t come into work every day and chomp away,” a current executive insists.
Next there is the firm itself. It has been professionally run since 2001. People who know Mars say the clan does not meddle much, provided managers do not threaten to blow up the firm’s—and hence the family’s—reputation. Delegation of responsibility runs deep. Mars has a relatively flat management structure, in which bosses have no cushy perks such as personal parking spaces. Associates are given responsibility, even at a young age, to make big decisions. If they take a calculated business risk that goes wrong, so be it. If they behave unethically there is zero tolerance.
In business, the firm is competitive but not cut-throat, rivals say. It used to be notable mostly for a strong factory culture, operational efficiencies and returns measured in relation to its physical assets. But this is changing as the veterinary-services business has grown. Now it plays up the more intangible parts of the business. “If you meet a Mars guy, they will talk about brands and people all the time,” a rival executive says admiringly, noting its high pay and good employee-retention rates.
As for stakeholderism, or what Mars calls mutuality, it says it puts the interests of customers, workers, suppliers, communities and the environment alongside those of the family shareholders. That comes with some big investments, such as $1bn to support sustainable initiatives such as renewable energy, and a policy of paying its taxes in full. But when it talks about these publicly, it is mostly because they are germane to its business. It does not wade into political debates, nor does it pontificate on every social issue.”
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