The third installment in the TLS Continuum series is devoted to discovering who really matters in the global workplace. It is the basis of an ongoing debate, sometimes a volatile one at that. The debate is on one hand talking about shareholders and on the other talking about stakeholders.
Which one is more important to your organization?
I will get an earful from people who tell me that the only term I need to think about is the term shareholder. Organizational management has so ingrained in our psyche that we are talking about those that have monetarily invested in our businesses are all that counts.
We make our strategies based on what the shareholders want. We make business initiatives based on what the shareholders want. If we look at Dictionary.com and ask it for a definition of the term shareholder, the site indicates that a shareholder is one who holds or owns shares in a company or corporation. Their relationship with your organization is purely financial in nature.
These individuals have a vested interest in how well the organization performs. If the value of the shares goes up they are earning a return on their investment. If that same value goes down, then their investment is not that valuable. I would suggest that if that is your perspective, then you are in reality short-changing the organization and its future.
If we look at Dictionary.com and ask it for a definition of a stakeholder it tells us that a stakeholder is a person or group that has an investment, share, or interest in something, as a business or industry. If we really dissect the definition there is nothing in that definition that implies a financial interest in your organization. So the basis of the debate is that all shareholders are stakeholders but not all stakeholders are shareholders in the true sense of the term.
From over 40 years in the business world stakeholders to me are any entity or person who has an interest in how the organization performs. It is any entity or person who has an interest in the functionality of the organization. In each case their perspective might be different but the end result is the same. So lets consider who the stakeholders are in your organization. These should be the same no matter who you are nor how big your organization is.
Assuming that I am correct in this assessment as to the correct side of the debate who are they? It is necessary that we understand that the stakeholders of our organization may be either internal or external in nature. Lets look at each of the types of stakeholders and their individual roles:
Shareholders – We have already said they are the ones holding a financial interest in your organization. They are the ones who primarily make up your Board of Directors and are involved in agreeing to any initiatives, which might affect the value of the organization in the marketplace. I do not think we need to dwell on this, as it is pretty self-explanatory.
Hiring Managers – They have a financial interest in the organization but not the same as the shareholder. Their interest is dependent on how well the company performs and is centered on the compensation they are paid for performing their duties.
Candidates – The candidates are interested in your organization based on your brand and reputation in the marketplace. They are seeking out the employers of choice. They are seeking out those organizations who provide the best work environment. Their interest in your organization is contingent on receiving reasonable compensation for the time put in and the rewards back. It is contingent on their being accepted as real human beings rather than a number on the expense sheet.
Recruiters – Again like the hiring managers they have a financial interest in your organization based on the circumstances in which they are working with you. They receive compensation as the result of sourcing, identifying and recruiting new candidates for your organization to fulfill talent needs. They have not bought shares of stock in your company for the most part but they receive a financial benefit from working with your organization.
Management – Upper management is tasked with a dual responsibility. First they are expected to bring a return on investment to the shareholders. At the same time they are tasked with making the organization run as efficiently as is possible taking into consideration the economic climate both inside and outside the organization. It is entirely possible, considering today’s executive compensation packages that they may be that strange hybrid who truly is a stakeholder and a shareholder.
Human Capital Assets – Depending on to who you talk to, we are about to enter a major talent war. Some suggest that as much as 75% of our employees are ready to jump ship. The ones who will remain in your organization are those who believe that their opinions count, that the organization is truly listening to their complaints, concerns and praise. They are willing to stay with your organization when they feel that as vital stakeholders in the organization there is value to their contribution. They have a financial interest within the organization however it goes beyond the paycheck. It is based on being the very best organization possible so that they earn the reputation for being the best employees and the best organization in the marketplace.
Trade Associations – In this category we are including not only professional organizations but the unions as well. They have a vested interest in representing their members. Their interest in your organizations, involves being able to point to your organization in the discussion of best practices. They can point to your organization regarding your hiring practices.
Alumni – Your former employee’s are a stakeholder in your organization. They can either carry the mantle of the successes of the organization or spread its faults. Look at LinkedIn and see the number of alumni groups that exist. They are a location for the members to discuss the good times and the bad. It also is a place for the organization to identify sources of future talent.
Educational Institutions – The educational Institutions are stakeholder sin your organizations on several fronts. One you provide a ready source for students for their business programs. On the other hand you provide a source of employment for their graduates. Your organization also provides a living laboratory where they can send student son internships to learn the ways of business.
So whether you want to argue with me on the term, stakeholders are a critical part of your organization. It goes well beyond having a financial investment based on owning apiece of the organization. It goes to each of the parties to the processes having a vested interest in the ultimate outcome of the operations of the organization. It is vested in whether we operate as a total entity or our own little silos. Take a moment and consider where your orientation is – to exclusion or inclusion of all the parties to the process and to the strategic direction of the organization.
What is your direction? Are you including or excluding the stakeholders in your processes?