By Geoff Campbell of Round Table Companies
A Note from the Editor: We hear a lot of talk about a winning stakeholder model, while we are also aware that in practice, executing this tenet of Conscious Capitalism requires intention and action. After you’ve read the article, let us know your recent insights into exploring your own stakeholder map.
Do you want your piece of the pie or do you want to grow the pie?
All businesspeople should know themselves well enough to answer this fundamental question about what is more important to them. Growing the pie is a familiar concept to anyone who has studied economics and capitalism. Through stakeholder mapping, Conscious Capitalism, Inc. and its partners, like the Stagen Leadership Academy, are teaching business owners around the world how to expand the pie—because a larger pie simply feeds more people.
Many experienced CEOs who run huge organizations still don’t “get” the idea. What is a stakeholder exactly? Most people are familiar with shareholders, those who own stock in a company. But stakeholders are a wider array of anyone vested in the long-term success of a business. “Growing the pie” only happens when businesses value all stakeholders, not just shareholders.
For example, there was a tech CEO going through the Stagen Leadership Academy’s module on stakeholder mapping. His company served the healthcare industry and employed over 10,000 people. One of the first steps in stakeholder mapping is a leader being able to put themselves in the shoes of all their stakeholders to deeply understand their needs. But what does a leader have to do before putting themselves in someone else’s shoes? They first have to remember to take off their own.
As the tech CEO contemplated his client’s perspective, he realized he didn’t fundamentally understand their core needs; he had often been thinking only from his perspective about what he knew he could deliver. “He was so disturbed that he couldn’t answer the question from his customer’s perspective, he couldn’t fill out the map,” explains Rand Stagen, founder of the Stagen Leadership Academy. “He was a brilliant, successful leader, but he couldn’t answer what his customer’s deepest needs were in relation to his offering,” and when that realization hit him, he saw an opportunity to learn and close a significant strategic gap.
The tech CEO knew that to get to the heart of the matter, he would have to engage differently and directly, and that is exactly what he did.
“I need to talk to them,” he said, the light of stakeholder mapping dawning on him. “If I do, we could identify new needs and deliver more value.”
Stakeholder orientation is a pillar of the Conscious Capitalism movement, but it is also a growing and evolving concept.
The basics are straightforward: a stakeholder is anyone with a long-term interest in the flourishing of a business.
Those within the Conscious Capitalism movement understand that by that rubric, employees, customers, suppliers and vendors, investors and shareholders, the larger community, and governments are stakeholders. There are even some who recognize the environment as an important stakeholder.
But being able to reel off the general categories is not enough. Once stakeholders have been identified, companies need to understand the needs of each in relation to the products or services that the company provides.
In the traditional business mindset, relations with stakeholders were informed by a zero-sum, win-lose mindset. Within that framework, a company’s leader will be looking to negotiate the best possible vendor deal for his company, regardless of the long-term impact on the supplier.
Conscious Leaders enter negotiations with a conscious, win-win mindset, understanding that if they have a great supplier who helps meet their needs, they have to negotiate a deal that works for both parties. And this mentality helps all the businesses make more money in the long term.
While this may seem a common-sense shift—because squeezing suppliers can put them out of business, leaving the company expending resources to replace them—the win-win model is a relatively recent phenomenon. The prevailing stakeholder in the Industrial Age, for example, was the shareholder, often leading to poor working conditions for employees, bad deals for suppliers, and higher costs for customers—not to mention a legacy of environmental degradation.
Some who are new to the Conscious Capitalism movement often express confusion as they attempt to create an accurate stakeholder map. They note, for example, that their internet service provider touches their business in a significant way. Does that make it a stakeholder?
Most likely not. The key is to understand whether the provider has a concern for the long-term success of one’s organization. While an internet service provider wants any business it can attract, it isn’t likely to have a vested interest in a company’s long-term success. On the flipside, those internet-based companies are certainly stakeholders in the ISP’s world.
The heart of understanding a stakeholder relationship is recognizing that you care about a company. It could be a small, local caterer that has become a community hub in your neighborhood. When you grow to appreciate and care for this business, you enter their stakeholder chain as a customer and community member who invested in their particular success, as someone who doesn’t see them as a commodity.
Critics sometimes claim that the Conscious Capitalism win-win model is an exercise in chasing rainbows; they express doubt that a business can thrive if it is concerned about anything other than its own bottom line.
This caricature ignores the fact that conscious leaders of conscious businesses earn higher returns in the long run than non-conscious businesses. What conscious leaders are doing is expanding the pie, and that is one of the greatest humanitarian efforts any business leader can do. To expand the pie, you have to understand that while you are the chef, all the stakeholders you touch are the ingredients in what you’re cooking.
Squeezing vendors may bolster short-term quarterly earnings but hobble future profits by destabilizing a supply chain. Such relationships still require fierce negotiation. But instead of grappling for the best possible short-term deal, conscious leaders will negotiate from a position of dynamic creative tension instead of destructive tension. This is the heart of a Conscious Culture.
And everyone is interested in culture, because, as management guru Peter Drucker famously stated, culture eats strategy for breakfast. Traditionally, when people talk about the culture of a company, they usually mean the company culture towards employees. But in stakeholder theory, the company culture is the culture of all the stakeholder’s experience. Whether your accounting department pays your bills on time or not, is your culture. The experience of your vendors is the experience of your customers—and don’t fool yourself into thinking otherwise. Stakeholder theory is about recognizing these fundamental truths, and decompartmentalizing the way business leaders view culture.
Rand Stagen, member of the Conscious Capitalism Inc. board, often tells CEOs: “Tell me what you care about, and I will tell you how big you are. You can learn to be bigger by caring about broader stakeholder needs.”