The word “stakeholders” seemed to come into vogue in Mission statements a decade or more ago; then it entered everyday business language with varying degrees of relevance. Most business people probably have a general understanding that this is a useful short description for people and organizations of some importance to our work. Should we be more aware of our stakeholders than this?
We emphatically should. Why?
First, from a marketing point of view. Business success stems from much more than sales to customers (who are in fact stakeholders). We build reputation and develop products through those who see or hear about us; who uses our products; that provide channels through which we communicate or distribute; that comment in the media. We are commercially viable thanks to suppliers, banks, shareholders and accountants. We depend on the broader community to provide us with staff and consumers. We make use of the infrastructure provided by political institutions and other companies. We are all part of the same environment.
In return, we may consider that we owe something to them, to help maintain their ability to do what we need. That is why self-interest requires stakeholder involvement. It is also the reason why the 2006 Companies Act obliges company directors to take into account the interests of all stakeholders in the operation of a company and not just those of shareholders. Some commentators have blamed the credit crunch on the top priority given to shareholder value by some banks. The failure of regulators and other authorities to enforce the Capital Companies Act with respect to stakeholder interests can be seen as another factor. Corporate Social Responsibility can be seen as a concern for large companies with Corporate Affairs departments, but, as a phrase, it describes the broader stakeholder agenda expected of directors.
Let’s explore a few different categories of interested business leaders that you might need to consider and why:
• Shareholders: As business owners, if they are unhappy with the way things are being run, they can ditch the management or the shares. They provide the capital, so they want to decide what constitutes satisfactory returns, even in terms of eccentric agendas.
• Customers: it is not necessary to say much, except that they are the highest priority as our soul. They provide income but also feedback to help us stay competitive.
• Suppliers: in manufacturing or supply businesses, they are the cornerstone and provide us with the means to add value. Unique relationships count as assets to be massaged and sustained. If you neglect them, innovation can run out; or they may prefer to deal with competitors.
• Supply chain: While it includes both suppliers and customers, it can also include the true drivers of the acceptance criteria. For example, if a major retailer demands a lower carbon footprint, the rest of the supply chain will have to respond to retain listings.
• Community: each employer is somewhere among other people, hiring, buying services, transporting goods on the roads. In other words, even if customers are elsewhere, neighbors are affected by the presence of a business. Teachers, merchants, family, and friends affect staff and their attitudes toward employers.
• Politics: those who decide to invest in infrastructure; those who campaign for the environment; lobbyists for rights: all of these can be considered as stakeholders in a company, with whom it is important to interact if only for fear of negative behavior.
However, to return to the everyday world of small (= most) companies, should we see this as something only for distant cousins of large companies or can we learn something for ourselves? As suggested above, it is not only a legal imperative to consider stakeholders in determining how a business is run, but also a business one. Understanding what shareholders want is important, but consideration of the company’s reputation is just as valid. So shouldn’t we, who run small businesses, act in a way that makes those we affect think highly of us? Surely if we do it right, our suppliers will want to treat us more fairly; our local communities will want to be employed by us; our clients will stay with us. Just look at the clamor for the Cadbury sale if you need an example.
None of this means that any category of stakeholders should be paramount; not always all interests can be catered for. Striking the right balance between different stakeholder interests can be challenging, but this does not excuse us from trying, if only because we need them to be on our side. So why not, when you are thinking about a customer or staff survey (both stakeholder groups), think about whether other influencers may need to be evaluated as well? Periodically, it may be helpful for managers to review with which stakeholders they should interact; and what is the best way to do it.
