Principle 10: Value for All Stakeholders (Item 1)
Sustainability is determined by an organization's ability to create
and deliver value for all stakeholders.
It is not difficult to argue that Principle 10 is one of the most important
of the ten Principles. In Dr Hausner's research, Principle 10 has the
highest correlation with KPI improvement. It is one of the four Principles
that have high correlation with Business Excellence scores. It is also
done well by Business Excellence Award winners.
To some extent, that level of importance is expected. Principle 10
is a high order, summary Principle. Three of the ten Principles (3 `Customers',
7 `Enthusiastic People' and 9 `Value to the Community')
describe designing the company to provide value to different stakeholder
groups. When you combine those already important Principles, you get
a very powerful Principle. When you then add the other stakeholders
(eg, owners, the company itself and alliance partners), it is extremely
powerful indeed.
Principle 10 says `create and deliver value for all stakeholders'.
The emphasis is on `all stakeholders'. Principles 3, 7 and 9
each insist that the company must be designed to provide value to a
particular stakeholder group. If the stakeholder groups are not aligned
in what they want from the company, and there is no reason they should
be, then the company must have ways to resolve any conflicts.
If you choose not to provide value to all stakeholders,
this means that you have chosen to give less than an expected share
to one or more stakeholders. This usually results in a less than optimum
result for that company and can seriously harm its long-term sustainability.
Remember the discussion in Principle 2 (`Focus on Achieving Results')
about the Goal of the company and the necessary conditions to achieve
that Goal. In Its Not Luck and The Goal, Goldratt described
the Goal for most companies as to make money now and in the future.
There are three necessary conditions for success in reaching your Goal:
- Provide a secure and satisfying environment for employees now as
well as in the future.
- Provide satisfaction to the market now and in the future. (This
condition comes from the idea that the market punishes companies that
do not satisfy the market perception of value.)
- Provide value to the community now and in the future. (This is Principle
9 – the community punishes companies it considers are not good
corporate citizens and takes away there right to operate.)
- In Principle 10, we look at achieving a balance between these `necessary
conditions' and balancing the needs of all stakeholders in relation
to the company's Goal.
In most companies the important stakeholders are:
- Owners (shareholders)
- Customers
- The company itself
- Employees
- Community
- Alliance partners
Principles 3 (`Customers'), 7 (`Enthusiastic People')
and 9 (`Value to the Community') described in detail why it is
important to design the company around three of those stakeholder groups
– customers, employees and the community.
There is already an implied conflict between Principles 3, 7 and 9
in that each claims the company must be designed to provide value to
its particular stakeholder group. The implied conflict occurs
if each stakeholder group wants the design for them to exclude value
for the others. For example, employees may insist the company be designed
for them to the exclusion of customers or community needs.
When we add the remaining three stakeholders (owners, the company itself
and alliance partners), the potential for conflict is huge.
 It is clear that each
of these stakeholders has a major call on the company to design itself
so that each stakeholder receives sufficient value. How does the company
resolve this conflict?
Solving that conundrum while ensuring the company's sustainability
is the heart of Principle 10. The company must be designed to deliver
value to all its important stakeholder groups in proportions that those
stakeholders consider appropriate.
The company should know the needs, expectations and objectives of each
of its major stakeholder groups.
You should determine your company's short and long-term objectives
with respect to each stakeholder group (and in line with meeting your
own objectives and Goals). You should ensure that your actions and plans
explicitly address the different stakeholder needs. You should assess
and resolve any conflict between the different stakeholder's needs and
the company's needs and objectives.
You need to determine the balance you want to achieve between the interests
of the stakeholder groups and negotiate a position that is acceptable
to all stakeholders. You should find a balance that best meets most
stakeholder needs. You avoid adverse affects to any stakeholders.
The needs of the stakeholder groups are constantly changing. Although
the stakeholder groups will tend to remain fairly constant, the composition
of each group will constantly be changing. For example as owners and
shareholders change, as customers are added and lost, as managers join
are promoted and leave, as employees join and leave, as suppliers are
added and discontinued, as members of the community change.
Even if the composition of the groups did not change, the needs and
expectations of the group changes over time. For example, as ways of
doing business change, as products and service types change, as competition
offers different ways of delivery, service, terms of payment, workplace
conditions change, salary ranges and payment methods change.
You need to be constantly reviewing your objectives and strategies
for each group.
You should set targets for these objectives, develop strategies and
carry out activities aimed to meet your objectives with respect to each
stakeholder group.
The company should measure the success of those strategies in meeting
its stakeholders' and its own objectives, and in carrying out the activities.
The main difference between government-owned or not-for-profit companies
and other companies is the Goal.
For government-owned or not-for-profit companies, making money now
and in the future is usually not the Goal. It is more likely to be to
provide a valuable service to the community's infrastructure.
In government-owned organizations, the government provides money in
the form of taxpayer's funds. Taxpayers expect their money to be spent
well and value provided in exchange for the money they provide. For
example, government and its taxpayers expect:
- infrastructure built and services delivered to the community
- government agency customers to get value from the services provided
- the government agency to maintain itself
- government agency employees to be resourceful and enthusiastic
- the community's interest to be looked after and the community protected
from harm from the activities of the government agency
- the government agency to form alliances with partners in order to
achieve its objectives
Different Goal and consequently no dividend stream. However, if the
government does not provide enough funds, the government will not be
able to fill those expectations.
The same applies to not-for-profit companies. Once again, there is
no dividend stream.
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