26/05/2024

The CTO

The Best Chief Technology Officer

Stakeholders – Should We Care?

Stakeholders – Should We Care?

The word “stakeholder” seemed to become fashionable in Mission statements a decade or more ago; then entered everyday business parlance with varying degrees of relevance. Most business people probably have a general understanding that this is a useful shorthand description for people and organisations of some importance to our work. Should we be any more conscious of our stakeholders than this?

Emphatically we should. Why?

First, from a marketing point of view. Commercial success derives from much more than just sales to customers (who are indeed stakeholders). We build reputation and develop products through those who see or hear about us; who use our products; who provide channels through which we communicate or distribute; who comment in the media. We are commercially viable thanks to suppliers, banks, shareholders and accountants. We rely on the community at large providing 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 back to these, to help sustain their ability to do what we need. This is why self-interest calls for stakeholder engagement. It is also why the Companies Act 2006 makes it obligatory for directors of companies to take all stakeholders’ interests into account in the running of an enterprise and not just those of the shareholders. Absolute priority given to shareholder value by some banks has been blamed by some commentators for the credit crunch. The failure of regulators and other authorities to demand compliance with the Companies Act in respect of stakeholder interests may be seen as another factor. Corporate Social Responsibility may be seen as a concern for big companies with Corporate Affairs departments but, as a phrase, describes the wider stakeholder agenda expected of directors.

Let us explore some different categories of stakeholder business leaders might need to take into account and why:

• Shareholders: as owners of the business, if they are not happy with the way things are run, they can dispose of either management – or shares. They provide the capital so want to decide what constitutes satisfactory returns – even in terms of eccentric agendas.

• Customers: no need to say much except that they are top priority as our life-blood. They provide revenues but also feedback to help us stay competitive.

• Suppliers: in manufacturing or supply businesses, these are the foundation-stone, providing us with the means to add value. Unique relationships count as assets to be massaged and sustained. Neglect them and innovation may dry up; or they may prefer to deal with competitors.

• Supply chain: whilst both suppliers and customers are included in this, it may also include the real drivers of criteria for acceptance. For example, if a major retailer demands lower carbon footprint, the rest of the supply chain will have to respond in order to retain listings.

• Community: every employer is located somewhere among other people, recruiting, buying services, transporting goods along the roads. In other words, even if customers are somewhere else, neighbours are affected by the presence of a business. Teachers, shop-keepers, families and friends affect the staff and their attitudes to employers.

• Politics: those who decide on infrastructure investment; those who campaign on the environment; lobbyists for rights – these may all be regarded as stakeholders in a business, whom it is important to engage with if only for fear of negative behaviours.

However, to return to the everyday world of small (=most) businesses, should we see this as something only for distant cousins of big business or can we learn anything for ourselves? As suggested above, there is not only a legal imperative to consider ones stakeholders in determining how a business is run but a commercial one. Understanding what shareholders want is important but consideration for the reputation of the business is equally valid. So should we who run small businesses not act in ways which will make those we affect think well of us? Surely if we get this right, our suppliers will want to deal more fairly with us; our local communities will want to be employed by us; our customers will stay with us. Just look at the outcry over the sale of Cadbury if you need an example.

None of this means that any one stakeholder category has to be paramount; nor can all interests always be catered for. Getting 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 if other influencers may also need to be assessed? Periodically it can be fruitful for directors to review what stakeholders they need to engage with; and how best to go about this.