The word stakeholders is used a lot by businesses but to most people it sounds like something you’d use to hold a steak on the grill. But does it mean anything to business managers?
The stakeholder concept was first used in a 1963 internal memorandum at the Stanford Research Institute. It defined stakeholders as “those groups without whose support the organization would cease to exist. “Since then it has gained wide acceptance in business practice and in theorizing about strategic management, corporate governance, business purpose and corporate social responsibility.
In a connected world the support of stakeholders has become even more important to survival because everything you do and say is transparent and it better matter or your organization won’t matter.
Measuring What Matters
Ask most businesses how they measure success and they’ll likely respond by saying they focus mostly on such performance measures as profits, sales growth, market penetration, ROI, ROE etc. But that’s like driving a car by looking in the rear view mirror to figure out where you’re going. In the old days when change was slow managing by what happened after the fact didn’t really matter because you had the time and luxury to adjust before the market changed. But that is no longer the case. The game has changed.
Once the game is over it is easy to understand how you scored. Understanding the things that influence the game most are indicators that explains or predicts the result. Most organizations spend too much time and energy analyzing the result instead of observing and understanding the influences that leads to the result. It is kind of like weighing yourself everyday hoping you would lose weight without changing your diet or engaging in any exercise routine. The results are not likely to get any better.
Identifying What Matters
Most of the things that really matter to your stakeholders never appear on a financial statement or sales report, but they influence all the financial results. By managing and measuring the influences that matter most you will be able to better influence and thus predict the results in an ever-changing environment.
Every business wants to improve results and every employee knows that is what matters to upper management. But does upper management know what matters to employees? After all who interact with the customer most? Upper management or frontline employees? Be honest. If your company doesn’t know and offer what matters most to employees then how do you expect them to give what matters most to your customers? It is like saying “We need to improve sales so we are going to change our compensation system to better reflect your contribution to sales“. OK, but employees, sales people, marketing people, service people etc. do not control your business model, pricing schemes, suppliers, product designs, so forth and so forth. Knock , knock, who is there?
So What Really Matters?
One has to wonder what happened to common sense and business. Every business is runs on the fuel of human capital and without it the creation of relationship capital is diminished if not impossible. Strategic capital is created from the ideas, insights and creativity of leaders who see better ways to create value for a marketplace fueled by changes being ushered in by the abundance of collaboration.
Change is everywhere in today’s marketplace where structural capital is available for anyone and everyone to use at will to share intangible capital that matters most to stakeholders wishing to find and create more value than ever before in the history of business as we’ve known it.
If you enable stakeholders to get what matters to them then you will get back what matters to your business. But first you need to understand what really matters most.