One of the biggest challenges for any company is to balance the needs of all its stakeholders while simultaneously growing and strengthening its brand. Motives for those with a stake in a company can span a very broad range. Balancing the ideals of the owners, employees, suppliers, customers and the local community is a difficult undertaking.
In some very famous examples, “profitability at any cost” was the theme, often because executive compensation was tied directly to bottom line performance. In those cases, such as Enron and others, this mantra was detrimental to all stakeholders as it resulted in the organization's demise.
Besides profitability, albeit honestly achieved, other factors must be considered by management in developing the reputation and longevity of the business. How the company functions as a corporate citizen can be extremely critical to its future. Environmental abuses and a reputation of unfairness to employees can substantially damage a business and yield negative profitability.
Take a Holistic Approach
Balance is the key to managing the hopes and desires of all stakeholders. Even though spewing waste into the environment may be a less expensive method of production, it's likely illegal and will result in a strong negative reaction to the company when the practice is exposed.
To create the proper stability among all stakeholders, management needs to identify who the stakeholders are and which key issues are their likely drivers. This, all while keeping in mind that long-term profitability is essential to the survival and success of the company. Stakeholders similarly must embrace the fact that “profit at any cost” is a short-term business decision that usually results in short-term survival.
Avoid Conflicting Demands
Setting out clear company standards and operational intentions will help create balance. A company's standing depends on how they are perceived both today and in the future. Setting well thought out boundaries will help keep a positive reputation intact.
Every company has the potential to make a mistake. Honest communication and consistent behavior will bring loyalty that will likely mitigate the impact of any misstep. Everyone can think of a heroic save by a company when faced with a problem. What we remember is the save, not the problem, because the manner in which they handled the issue provided favorable expectations for their future conduct.
Setting clear expectations and goals for a business will eliminate daily conflict in the tug of war between stakeholder demands. It also provides a reference guide if a decision is made that may not fully meet one stakeholder group's anticipations. Constantly keeping the big picture in mind will help stakeholders understand the steps taken to achieve the overarching strategic plan. Knowing what is out of bounds for the company is as essential as knowing what the keys to success are. And having a clear vision to lead the company down that path will help them stay true to their stakeholders.