Principle 10: Value for All Stakeholders (Item 5)
Sustainability is determined by an organization's ability to create
and deliver value for all stakeholders.
You should be seeking to find innovative and inventive ways to create
and deliver value for all your major stakeholder groups.
This follows the process that we have described several times already.
- Find what your stakeholders want, need and value. Ask them. Don't
assume that you know.
- Work out what you will do (if anything) to meet those needs. Set
objectives and have plans to reach those objectives for each major
stakeholder group. Make certain that those objectives help you meet
your own objectives.
- Carry out the plan.
- Measure to see if the plan was carried out. Did you do what you
said you were going to do?
- Measure to see if what you did helped met the stakeholders objectives
and your objectives.
- Review what you did to see if you can do better or if you need to
do something differently.
We are up to the second point on that list. The point is important
because
- It is easy to assume that you know what your stakeholders
want, need and value. What you assume may have no relationship to
what they actually want, need and value.
- You need to work out if and how you will respond to those needs.
- You need your objectives for those stakeholders to contribute towards
your own objectives.
- You may need to be innovative and inventive to meet those needs.
In Principles 3, 7 and 9, ('Customers', 'Enthusiastic People', and
'Value to the Community'), we described the needs for value of three
major stakeholder groups (customers, employees and community) and made
suggestions of how to determine and meet those needs. What of the other
three major stakeholder groups.
Owners. The assumption is that they want money now and in the future.
Do they want anything else? Power, influence? How can you give it to
them?
The company itself. The assumption is that the company needs continual
investment in maintenance, protection and growth. Is there anything
else? What prevents you giving that now? What would it look like if
you could do it?
Alliance partners. What can you do to improve the partnership? What
is it that they do that annoys you? What would it be like if that were
not happening? What do they say you do that annoys them? What would
it be like if that were not happening?
Most companies are used to thinking about competitors for the customer
stakeholder group. Unfortunately, you have competitors for the other
stakeholders as well.
- Owners can choose to buy their shares from other companies
or allow their funds to be invested in other companies in an expectation
of better reward.
- Customers can choose to buy products and services from other
companies.
- The company itself can choose to concentrate on a different
set of core competencies or to diversify away completely or partially
from its existing business mix.
- Employees can choose to work for other companies (or for
themselves by withdrawing their volunteering).
- The community can choose to allow other companies to operate
and deny you permission to operate, or to operate only with very restrictive
regulations.
- Suppliers can choose to sell to different companies and exclude
you from being able to use their particular products and services.
Alliance partners can choose to form alliances with different companies
and exclude you from benefits that the partnership could bring to
your company.
The company is constantly competing for players from each group. You
need to determine what the players in each stakeholder group want and
set out to woo them.
All stakeholder groups usually want the company to be sustainable into
the future. Owners want the continued income stream; customers want
the continued supply of the useful products and services; the company
and employees want continued employment with its financial, social and
other rewards; the community wants the continued benefits the company
brings in terms of infrastructure, employment etc; suppliers want you
to continue to buy their products.
Of course there are exceptions. Such as a company formed to complete
one project and whose intention was to close when the project was completed.
For example, a company formed to stage the Olympic Games.
However, usually the intention is for the company to continue indefinitely.
It would be rare for a company to plan to fail.
The plan for the future may be to be taken over. Many small companies
have just such a plan. In which case, their main product is the company
itself and their main strategy is to maintain or grow the company until
it is attractive to a buyer. In this case the company still continues
— albeit as part of another company.
Unfortunately, few companies articulate their plans for the long term.
Is there a plan for the company's end game in three, five or twenty
years? Or, is there a 300 year plan?
Most companies with long to medium term objectives need to diversify.
Diversification spreads the risks into different markets or core competencies
and can be an extremely useful sustainability strategy. There are two
types of diversification.
Diversification of market. Develop a decisive competitive edge
in many unconnected markets. Then a drop in one market should not affect
your overall result. You cannot prevent the market from dropping, but
you can prevent the drop from eating your total market share to the
extent that there is not sufficient work for your company. Enter segments
for which there is small probability of many of them dropping at the
same time. When a lucrative segment is booming, shift focus from some
less lucrative segments. When a market segment is down, shift focus
to other segments. You must always be on the move just to stay still
in the current.
If you do not do this, you are exposed to risks from drops in
the market. There is no absolute competitive edge. It is just a window
of opportunity, which will one day be closed. Find ways to identify
windows that will take competitors a long time to close or that are
least exposed to drops in the market.
Diversification of workforce. You must also diversify your employees
by creating flexibility. Make certain every employee is serving many
segments of the market. Develop new products that require almost the
same resource as you already have. To accomplish flexibility of the
workforce, you have to segment your market and not your workforce.
Notice that most companies segment their workforce by having them specialize
or work on product lines that address only one segment. This does not
work because it makes that part of the workforce vulnerable. They can
be lopped off. As we have seen in Principle 7 (`Enthusiastic People'),
employees who see that their company has a policy of lopping them off,
do not volunteer.
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