The Stakeholder Value focused Business

During a recent ‘clean up’ of the files on my laptop, I came across a presentation I gave to a group of business leaders 10 years ago. It struck me that the message I was trying to get across to them then is probably just as relevant today. So I’ve produced some of the content from it below……

Have you ever addressed Charles Handy’s famous question “What’s a company for?” in terms of your company? Is the answer vague? Is it something to do with making money?

In the old order in Business:

  • the investors were the real ‘kings’;
  • customers, employees etc. were largely ‘there’ in order to serve the prime purpose of making money;
  • there was almost universal buy-in to the economist Milton Friedman’s assertion that “There is one and only one social responsibility of business – to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”.

This way of thinking dominated business thinking throughout the world until the 1990’s and many business leaders still think this way. Is it the way you think?

But major developments in technology, particularly IT, over last 25 years have resulted in seismic changes in the world:

  • the development of global markets;
  • political orders and landscapes are changing irretrievably;
  • the movement of goods & services is becoming much easier, cheaper & faster;
  • communications are becoming ‘instant’;
  • the effects of social media are growing exponentially;
  • travel is quicker and cheaper;
  • a global data and information rich society is emerging;
  • people of all nations, religions and cultures are becoming more and more informed about political, social and environmental issues;
  • significant advances are being made in addressing some of the big issues of education, poverty, health in the world;
  • etc…..

These changes generate consequences and challenges, both positive and negative. Some of the consequences for business that we experience include:

  • investors are becoming more informed, demanding, vocal, aware of risk, likely to readily reposition their investments as they see opportunity;
  • customers are becoming more informed, demanding, vocal, likely to move their custom elsewhere for varied and sometimes conflicting reasons;
  • employees are becoming more mobile, educated, informed, demanding, likely to move job and change career several times during their working life;
  • society is becoming more aware of issues, vocal, demanding, influential, powerful;

Information is power; expectations are growing exponentially; loyalty is diminishing.

How should businesses respond? Doing nothing is not an option….the old order is dying fast. But there is a solution: Shift from a Shareholder to a Stakeholder value generation focused approach to business. This requires a fundamental shift in mindset with the key decision makers.

There is proof that in recent years this is gradually happening, often forced upon companies by external events.  Examples include:

  • US owned motor companies brought to brink of collapse, global banks going bust – previously focused almost exclusively on making money
  • Tata, DHL, Unilever, Lego, Coca-Cola, Walmart …. all succeeding in challenging markets – focused on addressing stakeholders needs & wants.

So ask yourself and your peers these questions:

  • Do we really focus on consistently delivering high levels of value for all our stakeholder groups?
  • Is this reflected in our goals, objectives, strategies and detailed plans?
  • What can we do to improve both our stakeholder focus and the value we deliver to them?