Business is such a difficult endeavor. Why? For starters, try the complexity of the broad and diverse collection of stakeholders the business touches and the ways those stakeholders affect the business.
By definition, a stakeholder is someone who has a stake in the health and success of the business. Therefore, when thinking of stakeholders, the first that often come to mind are the investors. But that’s just the beginning.
In an indirect manner, the owner, employees, vendors, and landlord also have a financial interest. Beyond that, other stakeholders include spouses of employees, other customers served by the vendors, other businesses operating in the same geographic and market areas, the communities in which they operate, and the cities, states and countries in which each business generates revenue.
Even competitors are stakeholders.
Each stakeholder has his own self-interested connection to the business. The problem arises when those wants and needs are also in conflict with customers the business exists to serve. For example, parents who want the working spouse to ‘bring home the bacon’ while the other is creating a happy and healthy home.
When the definition of a happy and healthy home includes a two-parent family, the conflict becomes obvious. Does the working spouse spend his extra time at home with the family or at work helping to strengthen the business and his role in it? Stakeholder conflicts live in every decision a business owner makes, every action he takes, and have an impact whether leadership sees it or not.
The businesses that excel and succeed are those with the ability to identify all their stakeholders and work to find a proper balance between the needs of their stakeholders and the needs of the business.
Identifying the business’ stakeholders is the first step in resolving conflicts between varying wants and needs. Appreciating the different needs of the business and its stakeholders is the second.
Ram Thanapandian, senior program manager with technology-consulting firm Delegata, said, “Any time you’re impacted by a business, you’re a stakeholder. When people create a business plan, they don’t think about every possible impacted area, they just think about money and personal interest that is obvious. They should also look at all the unobvious stakeholders too.”
A few years ago when Citrus Heights incorporated as a city, there was disagreement over who was entitled to the sales tax revenue from Sunrise Mall. Sacramento County didn’t want to lose the revenue, and the city needed that revenue to fund its operation.
Every business in the Sunrise Mall and surrounding area played a role in this conflict because they all depend on public services like fire and police protection and regional transportation systems.
While many businesses fail to recognize who their stakeholders really are, according to Louis Zurlo, software systems specialist supervisor with CalPERS, “…we observed that many of the stakeholders weren’t aware of what it meant to be one. There was no ownership, collaboration or commitment. They weren’t aware that … they can actually affect the organization.”
Stakeholder conflict was on public display recently during the debate over raising the debt ceiling. Republicans were opposed to increasing revenues and Democrats were opposed to reducing spending without it.
Both parties were interested in serving a key subset of their direct stakeholders: the people who elect them. What neither party thoroughly addressed in the public forum was the impact of each other’s position on indirect stakeholders such as government agencies laying off staff, the impact on job growth, and the perceptions of local credit rating agencies and global markets.
If you are a leader in your business making plans for the coming year, part of your job is to identify all the direct and indirect stakeholders whose lives you impact, and who impact your business. While you can’t satisfy every need or desire, you can look for ways to maximize support from your stakeholders while minimizing the negative effects of your decisions.
If nothing else, simply recognizing your stakeholders will go a long way in ensuring they remain on your side when times are tough.