In a world driven by human and intellectual capital, traditional Org Charts, Employee Handbooks and most traditional tools that used to help enterprises to run their business have become increasingly unreliable and ineffective. High performance and value creation doesn’t originate from to traditional enterprise tools or new technologies, it originates from focusing on the human side of business.
Jack Welch had it right when he said: “The essence of competitiveness is liberated when we make people believe that what they think and do is important – and then get out of their way while they do it.”
Enterprises face the biggest challenges to humanize their business since their organizations are driven by spreadsheets and shareholder value. As we’ve learned throughout the Great Recession, many companies leveraged their future away by focusing on short-term gains, destroying long-term value over time.
While shareholder value will remain a dominant metric, businesses have to focus their attention more and more on their relationships with customers, employees, partners, and all other stakeholder groups. By investing in these relationships, businesses will be able to create long-term value and, ultimately, shareholder value.
We believe that those organization aspiring to succeed in the current socio-economic environment have to understand holistically who their key stakeholders are and what they want. They have clearly defined strategies to ensure that constant value is delivered to these stakeholders. They have implemented processes to support this strategy and understand the necessary capabilities to execute processes. And they have thought through and communicated what the organization needs from its stakeholders – Loyalty, profitability, investment, etc.
Too often, metrics are derived from strategy. It seems so obvious. But it’s a trap. You can go from A to B directly, pass by C or go from A to D to C and end at B. Strategy is not a destination, it’s a choice of one path you’re going to take. Metrics help you track whether you’re moving in the right direction. Most corporate initiatives are focused on incremental improvements – expand your business to a new market, grow your product line, find new consumers. All these initiatives are developed with the belief that they will enable the business to deliver better value to all its stakeholders. That’s why focusing on the stakeholder perspective is imperative to deliver replicable value, choose the right strategy and exact metrics. When formulating strategies, businesses need to consider the wants and needs of all their stakeholders. This is not limited to primary stakeholders, the view needs to be expanded to the general public, special interest groups, legal and regulatory community. If this broad view of stakeholders is not adopted, businesses run the risk failing to satisfy the needs of their stakeholders, opening themselves up for revenge on multiple Social Media channels.
So, what is the best path for businesses to increase stakeholder value?
1) Stakeholder Satisfaction: Who are the most influential stakeholders and what do they desire?
2) Performance Strategies: What strategies should the organization adopt to ensure the desires of stakeholders are satisfied?
3) Measurement: Metrics are required to track if the chosen strategies are actually implemented. Metrics help to communicate strategies throughout the organization. Metrics combined with incentives help to speed up implementation. And, ultimately, metrics help you determine if the chosen strategy was the right one and if not, why. When the measures are consistent with the organization’s strategies, they encourage behaviors that are consistent with the mission and vision of the business.
4) Align processes with strategies: What processes do we need to put in place to allow the strategies to be executed?
5) Capabilities: What capabilities do we require to operate these processes? Today, tomorrow and in the future?
6) Stakeholder Contribution and Collaboration: What contribution does the business require from its stakeholders to succeed? How can we maintain and enhance these capabilities?
This complex exercise will help your business to face the challenging socio-economic environment and adapt efficiently. Or as Jack Welch said:
“An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.”