Reintegrating and Realigning All Stakeholders

Corporate Stakeholders

In part one of this entry I discussed the history behind the rise of shareholder value and challenged its viability as the primary value creator for businesses.  In Part II we are going to examine key considerations for reintegrating value across all key stakeholders for an organization and how each of them has a stake in improving the success, performance and impact for it.

This is not about throwing the baby out with the bathwater.  Shareholders are clearly still important.  They provide capital investment, keep management on track and are also emerging as stewards for corporate responsibility.  That being said the corporations other stakeholders can be aligned to support the corporation as follows:

Executive Leadership
The role of leadership in any corporation starts with being co-creators and stewards of the organization’s vision, mission and core values.  As I eluded to in Part I of this entry – organizations seem to have diluted the focus that a compelling vision and mission bring.  Ultimately, vision and mission have been way over talked about yet far underutilized as the primary lens of focus for organizations.   While I agree that profitability and growth are two key measures of success – they have been over-utilized as measures for corporate viability.

The over-emphasis on profits and growth are a kin to you and I being primarily focused on our breathing and growth as key measures for our personal success and fulfillment.  Yes, we need breath and grow in a healthy way to thrive.  Certainly, the healthier we are the more energy we have to improve our fulfillment and engagement with life.   In the same way, executive leadership must focus on growth and profitability to enhance the expression of their vision, mission and the value generated for their various stakeholders.  This includes taking into consideration a balanced view for what each stakeholder brings to the table as well as what they need in order to create maximum value.

Additionally, the development of core values is meant to create a powerful context for how we will behave as we conduct our business.  Ultimately core values must be in alignment with our vision and mission.  If we are serious about these values they will also be used to provide feedback and coaching to those who work and interaction with the organization.  Recently there have been far too many examples of good organizations gone bad because they swayed away from such fundamental values.

“The origins of corporations were that they were organizations with special charters (permits) from the state government to accomplish a specific public good for a limited time span.

For example, to build a railroad, roads, or mines where a lot of capital (money to invest) was required. Investors took a risk by contributing their money but were limited in the risk that they took. For example if the corporation went bankrupt the investors only lost the amount that they invested. Neither could the investors be sued in court for anything that the corporation did. Of course they hoped that the corporation would be successful and would pay them dividends (their share of the profits) or that other people would want to buy their stock so that the price of the stock would increase in value. ¹“   Jim Flory

The practical application of all of this comes during the strategic planning process as well as the day-to-day decision-making that occurs through out the organization.  Leadership as well as employees must consider how a priority or decision supports or does not support living the vision, mission and values.   The board and shareholders must see the value of this strategic navigational system created and hold management accountable to using it well.  Certainly, nothing is written in stone – markets change, new regulations can shatter a mission, and crises emerge.   During such times – it is the responsibility of executive leadership, the board and shareholders to consider if the mission, vision and core values must be recalibrated.  Ultimately, during this process the customer, employees and other key stakeholders must be counseled to ensure buy in.

The Customer
As noted in the quote above, the original purpose of the corporation was to serve the common good.  In today’s terms – the central element of service to the common good is the customer or client. During the current economic crisis a key call has been “stay close to your customer.”  Yet, we need to be staying close to them all the time – not just in crisis.  After all it is the customer that provides hints at emerging needs in the market.  Using an earlier metaphor – clients provide the rich air and nutrients that allow us to be more profitable and grow.

Employees
Again, during such a time of churn we begin to appreciate what we have.  While many have laid workers off – organizations have a strong desire to hold onto their best and brightest.   Why?  In today’s economy it is the knowledge worker who provides the foundation for innovation.  If our employees are staying close to our customers and have a vested interest in forwarding the vision and mission of the organization – we have the ingredients for expanding our impact.  Yet, to make this happen requires competitive salaries and benefits, a high degree of empowerment as well as rigorous standards for performance.  When these are all in place we should expect employees to be pushing the envelope in the service to the client.

In addition, we must also support our employees to keep an eye on costs.  I have heard more than one of my organizational clients say “This crisis has really had us look at how we are spending money and it is clear that we had lost control in many areas that were not delivering value back to us.”   During the current economic crisis we have seen many organizations ask their employees to suggest cost cutting options with great results! As things come back around and we begin to find greater success and profitability – we must continue to encourage the employee population to take ownership for continuous cost controls.   The key measurer of whether we should invest in some expenditure must be the well-being of the organization, its clients, the employees and other key stakeholders.

To hire and keep the bet we must provide benefits that attract them while making sure that the investments we are making are serving us well in accomplishing this.  Yet, we must also teeth into performance management.   I hear way too many complaints from executives that today’s works are “entitled.”   Such entitlement has been supported by the organization’s overemphasis on benefits.   The expectation has been that because we offer such lucrative benefits those receiving it will perform.  Without clear expectations around performance and clear ramification for under performance – we can expect more of the same.  In shore, such a performance management system involves:

• Helping our employees to take ownership of their careers.
• Having our employees consider the impact they most want to make over time in the organization.
• Setting performance goals that align the needs of the organization with the employees personal career vision and desired impact.
• Holding employees accountable to reaching certain performance goals that align with this desire for impact.
• Developing compensation systems that support the kind of performance we expect.

Ultimately, employees must take on greater responsibility for the organizations success while leadership is smartly investing in their fulfillment.

Suppliers
If you examine the emerging crisis in the auto industry – you can see how interrelated auto parts suppliers are with the big three automakers.    When the relationship between suppliers and those they serve are this tight – suppliers must be brought in to the mix of value creation.  While independence must be maintained – the power of a trust-based partnership cannot be underestimated.  This takes willingness from all sides to open up to authentic dialogue.  The goal is to negotiate a shared mission, vision for the relationship as well as guidelines for how we work with each other.   When this occurs all parties become better at what they do and provide enhanced value to the market place.

Community
Broadly defined the community stakeholder includes those who are impacted by the presence of the organization – locally, nationally and internationally.  The span of an organization’s community depends on those it indirectly impacts.  For example, Dominos at the corporate level may look towards supporting the community internationally while a local franchise owner can look for how he or she can impact their surrounding community.   Bottom line, organizations that take social responsibility seriously need to examine how their decisions will strengthen or weaken the community.  By focusing on strengthening community ties the organization only serves to strengthen its brand.

The larger the corporation – the greater the responsibility!  In part one, I referred to the automakers as missing the boat by overselling SUVs – even as we faced global economic and environmental crises as well as an increasing dependence on foreign oil.  Imagine if GM, Ford and Chrysler would have seriously committed to developing greener technologies starting 5 to 10 years ago.  Retooling may have brought to bare some pain in the transition to cleaner more fuel-efficient cars yet the pay back longer term would have been huge!   Again, we can point to the primacy of shareholder value, as one-reason auto executives may not have turned this corner sooner.

Conclusion
There is a silver lining in today’s crisis.  While it is an uncomfortable time for all of us – it is a time when we can begin to test and re-examine our assumptions about the purpose and impact of corporations.   A key element in recalibrating our view is to examine whether or not the primacy of shareholder value has served us.  In my view, it has not.  It is time that organizations regroup and reexamine their reason for being in business as well as to reintegrate other key stakeholders in the value creation process.

We would very much enjoy hearing your point of view so please comment.

Tags: corporate trends, shareholder value, value creation

This entry was posted on Monday, April 27th, 2009 at 2:28 pm and is filed under Leadership Development, Trends. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.