[Introduction] Tech Sounds: Tech Sounds presents The Conscious Capitalists. Hello and welcome to The Conscious Capitalists, hosted by two of the co-founders of the conscious capitalism movement and co-authors of the Conscious Capitalism Field Guide from Harvard Business Press, Raj Sisodia and Timothy Henry.
Timothy Henry: Hello everyone and welcome to our latest episode. This week we have someone who we all are sort of fanboys of. Fred Reichheld is the creator of the Net Promoter System of Management, the founder of Bain & Company’s loyalty practice, and the author of five best-selling books. The Economist refers to him as the “high priest of loyalty”. Fred, welcome to our podcast.
Fred Reichheld: Nice to be here, Timothy. Thank you.
[The Net Promoter System: Philosophy and Economics] Timothy Henry: Maybe just a quick intro to the Net Promoter Score (NPS) idea and why it’s not just a metric but a philosophy.
Fred Reichheld: My career began at Bain & Company studying companies I admired. We found that the loyalty of customers and employees was at the core driving a “shocking level of prosperity”. Accountants to this day can’t track it, but when you treat customers with loving care so they come back and bring their friends, you get a flywheel spinning. NPS is a moral philosophy—promoters minus detractors—that links to this economic reality.
Raj Sisodia: You talk about “Customer Capitalism” in your latest book. I’d love to hear you delve into that.
Fred Reichheld: The highest purpose of a business is to enrich the lives of its customers. Wise leaders understand they must inspire their teams to embrace that mission. Recommendation is an act of love; you only put your personal reputation on the line when you feel confident a brand will come through for someone you care about.
[The Flaw in Accounting and Earned Growth] Fred Reichheld: The “yardstick” we use in business—accounting—is deeply flawed because it doesn’t measure how well customers are coming back and referring friends. If leaders view loyalty as a tactic for profits, it won’t work. Profits are not the purpose; they are the result.
I advocate for customer-based accounting and the “Earned Growth Rate”. This measures growth coming from repeat customers and referrals versus “bought” growth from discounts or ads. The best companies have an earned growth rate of 90% or higher, yet most boards don’t even track it.
[Marketing as Gardening and Internal Culture] Raj Sisodia: I remember Phil Kotler’s metaphor that marketing is “gardening versus hunting”.
Fred Reichheld: Exactly. You cultivate and grow relationships rather than just capturing “targets”. But you can’t have high customer loyalty without employee loyalty. At Bain, we use a similar system for internal teams. We huddle weekly and ask questions about how proud we are of our work and if we would recommend joining the team. It is very hard to get promoted at Bain without being highly regarded by the people on your team; you don’t want bosses picking leaders without knowing if they live the values in the eyes of their teammates.
[Humility and Servant Leadership] Timothy Henry: You spend a lot of time in the book talking about humility as the core of servant leadership.
Fred Reichheld: The enemies of success are arrogance, complacency, and entitlement. It is so hard to learn and innovate when you think you’re the best. The “humble shall inherit the earth” is the right translation of the beatitude. Your job is to serve others; that is what servants do. That mentality is vital.
[Turnarounds and Counter-Examples] Raj Sisodia: What do you think of Microsoft’s turnaround under Satya Nadella?
Fred Reichheld: It’s a miracle. I wasn’t a fan of their “sharp elbows” approach before, but Nadella embraced empathy, humility, and a growth mindset. It proves that even a massive company can be transformed by leadership rooted in human values.
Timothy Henry: And a counter-example?
Fred Reichheld: Jack Welch and General Electric. They were almost an “anti-loyalty machine.” They didn’t want loyalty and didn’t expect it except based on money. It was a house of cards because they weren’t enriching the lives of customers and employees.
[Personal Purpose and Final Truths] Raj Sisodia: What is the purpose of your life?
Fred Reichheld: My hope from an early age was to help businesses measure success more effectively so they can track progress toward the right purpose: enriching customer lives. I saw my uncle run businesses brilliantly where they were better than families because they had the love of families but the accountability families often fail in.
Timothy Henry: Any final fundamental truths about business and life?
Fred Reichheld: We are susceptible to blotting out data that doesn’t support our beliefs. We need scientific measurement to understand how business actually works. I believe that the old guard rarely changes their minds—they just die off and are replaced by young people with better ideas.
[Conclusion] Timothy Henry: Fred, thank you for covering such a breadth of topics with us today with such humility.
Fred Reichheld: My pleasure.Timothy Henry: Thank you to our listeners. For more information, visit www.theconsciouscapitalists.com.