Stakeholder Value

Readers of this blog will know that I define Organisational Excellence as “delivering sustained superior performance that meets and where possible exceeds the expectations of stakeholders”.  To achieve this organisations need to focus on the value that they are delivering to their stakeholders – their customers, shareholders, employees, partners and so on.

I have been surprised over the years to discover how few managers understand the concept of stakeholder value, let alone how to manage and measure it. Many models that supposedly focus on “excellence” fail them by hardly mentioning it at all.  Yet the value that we deliver to our stakeholders determines their expectations, their perceptions and ultimately their loyalty.

So what is “stakeholder value”?  There are many excellent articles generally available these days that help answer this question far better and more comprehensively than I could do in a short(ish) blog, but possibly the simplest definition is to represent it in the form of an equation:

Stakeholder Value  =  Benefits – Sacrifices / Costs.

Clearly it is often difficult to quantify each of the elements in this ‘equation’, and this is where the challenges associated with stakeholder value measurement and management often arise.  However a simple example might at any rate illustrate the concept. The computer on which I am typing this blog is an Apple MacBook Pro.  This product, for me as a computer customer, generates more value than a corresponding Windows based laptop, simply because the benefits of a fast, reliable, virus free, error message free, update message free computer outweigh the sacrifice of not having access to such a vast range of software, and the higher capital (but lower software) costs. But that value will reduce if, for example, Apple computers become more prone to virus attacks and Apple do not address this in a way that causes no or very little inconvenience to its customers.

Of course this examples illustrates another important concept, that of perceived stakeholder value, and the change that takes place in expectations over time.  At the end of the day, perception is all there is and these change as expectations change.  But despite this moving picture, one thing remains constant – stakeholder expectations, and their perceptions based on these expectations, are always based on the value generated for them by the organisation concerned. Of course it needs to be said that expectations are influenced by other factors as well, for example the perceived value generated by other organisations, such as competitors etc.

So…..when your organisation is considering the drivers of your stakeholders perceptions and behaviour, check whether the value delivered to those stakeholders is ever considered or even understood.