Stakeholders See More Than Stockholders

by Jay Deragon on 09/24/2013

Stakeholder_(en)Stockholders have traditionally watched the results of the stock markets as a measure of their financial investment.  Stakeholders typically watch the behavior of those corporations they support as a measure of their interest and emotional support.  The level of support a business gets from people has a direct correlation to financial returns. Yet stockholders don’t typically see the things that influence the stakeholders support for a business.

A corporate stakeholder are those groups of people who can affect or be affected by the actions of the business as a whole.  Stakeholders are defined as “those groups without whose support the organization would cease to exist.  Stakeholders include stockholders but stockholders are influenced more by financial returns while the remaining stakeholders are influenced more by their experience with the organization.

Social technology has raised stakeholder interest and made the behaviors of business transparent. Businesses cannot longer afford to chase results at the cost of their stakeholder’s interest without losing their results at the click of a mouse.

You Can No Longer Hide Behind Your Behavior

Companies are recognizing that stakeholders are getting smarter, more influential and their digital footprints can be seen and heard long after the advertisement has run.  Now companies are trying to put on a human face and voice to appeal to stakeholder interest. The problem with that approach is that the new look and feel doesn’t mean the behavior has changed at all.

An AdAge article titled “The Newest Marketing Buzzword? Human” states:  Jetblue this week announced the launch of a new campaign called “Air on the Side of Humanity” which focuses on the qualities that make them a carrier that cares about people. TD Bank and Liberty Mutual too, are trying to distance themselves from being seen as institutions, and have devoted more airtime to campaigns that tout being “human” as part of their brand platforms. To drive home the message, insurer Liberty Mutual goes so far as to use a cover of the song “Human” by the band Human League in the ads.

It all comes as part of a movement on behalf of many brands to be seen not big corporate behemoths, but as companies that value their customers as individuals rather than cogs. While buzzwords like “engagement” and “social” have been popular, now the latest trend for brands is to be simply be human.

The difference between being human and a brand, a corporation or an institution is one has a soul and the other doesn’t. A soul is an active, essential and intangible part of the human network. All the tangible results of business come from the ability to attract the intangible nature of the human network.  Stockholders cannot be satisfied without stakeholders support. Stakeholder interest must come first but to see their interest you have to be able to measure the intangibles.

Results come from exceeding stakeholder expectation which then produces stockholder results.

{ 2 comments }

Matt Alston September 26, 2013 at 8:23 am

Jay,

Your insight into the interests of stakeholders and stockholders touches the very essence of the Achilles heal of public corporate management.

The officers of a public corporation are measured first and foremost by share prices. If the value of stock goes down 1 or 2 quarters they can be out of a job.

As a senior executive in a large international manufacturing company this issue was stated as:
“Never disappoint the Street”. That meant if the people holding shares are unhappy you have a major problem. By the way to be completely accurate it was the small block of institutional shareholders that actually influenced the final outcome.

The pressure to perform every 90 days makes the voice of the SHAREHOLDER much louder in the ears of executives than the voice of the Stakeholders.

Sadly you can not chase Happy Shareholders and succeed. Share price comes from doing things right, providing a value to the customer and being concerned about the customers view point. Get that wrong and you have no core success. Shareholders may leave for a 1% increase in return, stakeholders want to see the business succeed for personal reasons.

There is no program, initiative, marketing campaign or buzz word that causes long term change for stakeholders that is just a quick fix and it never gets to the root of the problem. However to create a permanent internal culture of value and trust instead of compliance requires an overhaul of the mindset of the entire organization.

If the executive team feels threatened by the shareholder issues they will react to defend themselves and the real issue of stakeholder value will be missed even though it is the path to the solution. That mindset will be visible to the organization and define its approach to what it does.

There are very innovative management strategies that have surfaced around the world. These have pointed to the truth that culture changes can be powerful and profitable. They demonstrate that decentralized authority expands the companies ability to innovate and prosper without compromising basic stability.

The ability to see this trend correctly and incorporate it into the organization may very well be the key to survival in the new knowledge age. The path has been shown and demonstrated but the fixed beliefs about management and competition are holding the old thinking in place.

Imagine what would happen if executives and organizations woke up the the realization that:

“I/we just need to learn how to get out of our own way”

Matt Alston

Jay Deragon September 26, 2013 at 10:52 am

Well said Matt but…..instead of touching the Achilles heal we need to pierce the heart and open the minds so they can see the folly of their ways gone by 🙂 Thanks for these comments !

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