I am a fan of looking at something from all sides and understanding how each side thinks about it.
Consider a neighborhood school. There are students, parents, teachers, administrators, non-teaching staff, taxpayers, the community, homeowners (whose home value is impacted by the quality of the school), and possibly other stakeholders.
In theory every one of those stakeholders has a vested interest in the success of the school but in reality there is often conflict between them.
The teachers would certainly welcome a pay raise, for example. But the taxpayers may not. Or maybe they would because it would keep the quality high and thus the values of their homes.
What if the school wanted to start later and end later? The parents might oppose it because it would make it harder for them to get to work on time in the morning. But the teachers, administrators, and non teaching staff might welcome it because they would find it easier to get to work on time in the mornings.
All complex systems have many stakeholders and while they all want the system to succeed, because they have a stake in it, they rarely view success in the same terms.
Stakeholder analysis is extremely helpful in running a company and governing it (the work of the Board).
And the stakeholders of a company are not just the stockholders. Even when a Board and management is tasked with acting in the best interests of the stockholders, it is wise and prudent to act in the best interests of all of the stakeholders.
Doing so, however, is often impossible because of these conflicts between stakeholders.
Done properly, a stakeholder analysis attempts to determine what each and every stakeholder desires and the impact to them of an important decision. It is like a scorecard. It is often helpful to look at short term, medium term, and long term impacts.
I find that it is often the case that conflicts are the most extreme in the short term and that if you can frame a decision and the impact of it over a very long time horizon, it can be easier to get alignment.
But regardless of whether you can get alignment, a CEO must act and act decisively. And a Board must make sure that the CEO is acting wisely and in the best interests of the stockholders and stakeholders.
So doing a stakeholder analysis, understanding where the issues are and will be, and making a fully informed decision is the best course of action. And you will want a communication plan to mitigate the fallout of the decision as much as possible.
You never want to surprise or be surprised by your stakeholders. They may not like you, agree with you, or even support you. But they must be understood, respected, and considered in your decision making process.
Great stuff.It’s all about human dynamics, ownership and communications.Buddy of mine is a filmmaker and also the best enterprise salesperson I know. He literally writes a synopsis of the players when he goes after a complex sale. He often wins.
Storytelling wins every time
Certainly does with the mass public. We are still bound by evolutionary anchors …………… one day processing at speed via the cortex will happen
STORIES ARE OS FOR HUMANS.
That makes a lot of sense in business, because logic and common sense prevail, but it’s too bad this rational approach doesn’t seem to work well in politics and for resolving global or regional conflicts that have lingered for years.
it’s the asymmetry of geography.if data takes over from oil as the new apex commodity then there is the chance to change things.first the data silos have to go. the distribution of data has to be harmonised. it begins there. you’re exactly where you need to be to help bring about change.
you are missing the human element here.data as a medium of exchange will do nothing to address the most contentious borders in the world.go sit in jerusalem at a corner stall and have tea and listen. then tell me that you can unpack that situation through distribution of data.interesting approach but this is deeper than data, more complex than reason, and if there is a resolve, it is generational in its scope.
it is the human element i’m thinking of. if we each become self sovereign guardians of our own data we may then choose to share it with whomsoever we wish, and in doing so we certainly weaken the power of the technocrats pulling the levers of the nation state model of global governance.If the Middle East had only sand and camels the Jerusalem issue would have been solved at the time the idea of the state of Israel was being considered back in the 1940s. The right wing in Israel (certainly Netanyahu is an extremist) makes huge political capital out of the issue of Jerusalem just to stay in office. They behave to provoke, to perpetuate the idea that Israel is under threat. People throwing rocks against the most heavily armed military force the region has ever seen is no contest.I’ve sat in the comfy seats at the old League of Nations in Geneva. It’s a good place to go to consider how the world has been engineered to serve power and privilege. the issue of Jerusalem is part of that engineering, and it will be resolved, but only when the oil begins to dry up and data becomes sovereign.p.s. Where are the great data silos? Which country has recently moved its embassy to Jerusalem? In what currency is oil denominated? These are not coincidences.
not going to discuss this on fred’s blog.
and i have a summer to enjoy.we all three should agree that Jerusalem is a debating point that will never see the alignment of the stakeholders of this blog. that’s not a difficult analysis to make.all good.
Enjoy your summer, Jason. 🙂 https://uploads.disquscdn.c…
Thanks Lawrence :)Oh, a bit chilly down there 😉
You can’t reverse brainwashing with logic and rational.Think if someone tried to use logic and rational to tell you why they should be able (if you are married) to sleep with your wife. Or to even share a nice dinner with her from time to time. Your brain is simply not going to accept that. It’s baked into you that it’s not right and it makes you feel bad on an emotional level. It’s like that. Social proof can sometimes reverse brainwashing. But typically very hard if not impossible to do.
how to soothe the monster inside each of us? boards should think about appointing non-executive psychologists, to attend meetings and ‘map’ the human mindscape present.’stake’ holder – perhaps there needs to be a revised lexis, to better describe what is going on. it sounds very territorial, which as we know is a very powerful instinct in the human mind, and plays out badly much of the time, be it as neighbours, as tribes, as nations and states, et.c.
Keep in mind stakeholders include the geographic community impacted by the business, suppliers of the mundane, from office supplies to cleaning staff, political entities, and more. I’ve been using the stakeholder concept in my board advisory work for years. Directors need to understand and keep in mind the range of impacts of their decision making.
Reading “factfullness” is a good reminder re personal legacy education Work in progress for me…
I say ‘noooopppe’. In the real business world ‘suppliers of the mundane, from office supplies to cleaning staff’ are not and should not be considered at all. You can take that from what I learned actually operating in the real (non internet) business world for years. The only way that is ever taken into account is if there are personal relationships. That is one reason that it’s easier for new ownership (or management) to cut expenses. They don’t have those relationships and can do what they need to do. Remember when a new head of purchasing came onboard at a big customer. He told everyone ‘find a new vendor at a lower cost’ when they whined and gave reasons why they needed to keep using us. (We ended up keeping the contract in the end after his boss told him to cool off..) I’ve had a host of experience with this. Had a case where a company that was a big customer decided to stop using us after they bought equipment in house (laser printers which had just come out). That was after spending 80k to 100k in 80’s dollars to upgrade equipment (that customer being one reason). Buy equipment and then next month ‘we don’t need this we are happy but we just bought laser printers 300 dpi is fine for what we do’. Honestly nobody cares about these ‘other’ stakeholders that has been my experience. And you can’t either … ‘that’s business’ as the saying goes.Bottom line: They are not ‘stakeholders’. There is no expectation that when you provide those types of services that the company has any obligation (other than fulfilling a contract) that you get included in any discussions about the companies future or what it does.
.I never ran a company without consulting the cleaning supplies vendor on the strategic plan.JLMwww.themusingsofthebigredca…
This is typed in Sarcastic font, right?
Now you have me curious – what did that consulting consist of? And what difference did it make?
.Bit of a joke, Rob. I never consulted with anybody but my team and the Board. I was a CEO for 33 years of public and private companies. Toward the last two weeks of my career, I began to get a handle on that CEO-ing business.JLMwww.themusingsofthebigredca…
Ha, ok yes I laughed at it myself till i saw you telling James that it was written in bold font instead of sarcastic font. Then I started wondering, “what the hell is he talking about?”
.Bold sarcastic font.JLMwww.themusingsofthebigredca…
that old European framework of noblesse oblige didn’t make the crossing to the Americas 🙂 quite right too.
I agree that this is appropriate but not necessary.
Commodity suppliers are not stakeholders.
It is very hard to run the marathon when everyone else is running sprints.
True – Harder to run the marathon when everyone else is running sprints.Also True – Easier to win the marathon when everyone else is running sprints.Yesterday’s championship win in Paris reminded me of a conversation at work nearly a decade ago (at that time, Rafa had won 2005, 2006, 2007 and 2008).”How do you defeat Rafa in Paris ?Invite him to a game of cricket”.
It is very true unless………You get kicked out of the race after the first mile because everyone looks at the sprinters and think you have no chance because you are behind.
you might be in the wrong race, but the hare always loses, so fear not.
This is easier to do when things are going well. When things are not going well, then each stakeholder tends to view their stake as a stake in the ground.Let’s take an example. The company is not doing well and the investors want to change the CEO. Now you can see that from the investor point of view. What else can they do, and their investment is not working out. They will say it is their fiduciary responsibility to the shareholders.But then let’s take it from the CEO point of view. She might have a majority stake of shares in the business. She almost certainly has as many shares as each investor. She knows in her heart she is running the business as best that is possible, and bringing in a new CEO means she loses her job, loses control of the company. Well that is a pretty strong stake.
This is possibly the most useful post in recent memory. As a mid-career person, I would say I’ve been doing this to about 1/3 capacity. There is so much room for more — bringing in more perspectives and telling 67% more story!
There were great hopes for stakeholder analysis when it first emerged as a serious framework. I think it is fair to say that this results have been disappointing. For all the talk of other stakeholders all too often it constitutes little but lip service.
I think about this in the context of the industry I work in. Getting an understanding of the goals and concerns of all the folks in my supply chain makes it easy to see opportunities to improve things and build products for already apparent needs.
When you break down these company perspectives I’m always reminded of family dynamicsApplies here too
I think that the big tech firms should read this and think about their stakeholders. Twitter, Facebook, Google use the very far left wing Southern Poverty Law Center to measure if someone is out of line socially or not. They are increasingly out of touch, and not only open themselves up to competition, but regulation from populist regulators that do not understand the businesses. http://www.foxnews.com/tech…When it comes to public companies, shareholders and building shareholder value comes first. But, different people will frame and draw the boundaries on that differently (which is why it’s a good idea to have a board with diverse opinions).
I’m a little surprised that you think of yourself as somebody who look at things from all sides. I’m not passing judgement, but you definitely someone who comes off who uses his gut, ignores opposing facts and isn’t particularly troubled with that approach.
.Much of what is discovered as stakeholders has been defined by legal relationships forever.Shareholders elect board members. Board members hire leadership. Leadership hires the management. Management hires the workers.The company produces a product or offers a service to customers who use it for their benefit and that of others. Customers pay for the good or service which provides the life’s blood of the company.A company is co-located in some community on some bit of terra firma (or, these days, a bit of terra Internet) and conducts its business in a building built in conformance with municipal decrees and provided services by the same municipality.All of these relationships are informed and controlled by legal relationships which are either contractual or regulatory. Some of these relationships are extraordinary, being adjectivally anointed as “fiduciary.” Some have elaborate contracts.None of this is new. Stakeholders have existed forever. What is new is the re-weighting of the matrix which sometimes violates basic fiduciary duties.Companies belong to shareholders. Every act of a Board or a CEO has to be measured by whether it is in the interest of the shareholders.Your generation did not invent sex or business. They have been doing it the same way for a long time.JLMwww.themusingsofthebigredca…
“Companies belong to shareholders. Every act of a Board or a CEO has to be measured by whether it is in the interest of the shareholders.”That is, of course, correct (at least in the U.S.) However, it’s possible to take that viewpoint to the extreme. Especially if focused on short term outcomes. Maintaining a long-term perspective is the antidote – can help prevent needlessly destroying value for the other stakeholders.
I think you are wrong.If you are CEO and your shareholders want you to maximize short term results, regardless of other impacts, you either do it or resign.
If shareholders want me to maximize short term results at the expense of long term results, I wouldn’t take the job in the first place. I would make sure we have the same philosophy before ever taking the job.As JLM rightly responded, most of the time that is a red herring. In most cases there is “nothing to see here.” You have to manage both short term and long term interests. Do your job.But in rare, extreme instances, say if a shareholder wants me to behave unethically to appropriate value from other stakeholders, then they can find another CEO to do that job.
I was thinking new shareholders change the metrics.
Ah, yes – on that we agree.
.You suggest that taking a “long-term perspective is the antidote” — the antidote to what? There is no poison here. There are simple relationships which must be respected.A fiduciary relationship – using this as an example — such as the Board-shareholder relationship colors the Board-CEO relationship. It is a checkbox and binary.You get it right, you keep your job.You get it wrong, you get fired.There are consequences for getting it wrong. A Board should have specific objectives for the CEO to accomplish which serve the shareholders.The Board should appraise her attainment of assigned objectives. Comp should be tied to performance.There are many times in which long-term and short-term cannot be clearly discerned, so you cannot play favorites between them.It is very stylish to suggest that CEOs can ignore short term objectives and concentrate on the long term. It is particularly popular amongst unemployed CEOs.JLMwww.themusingsofthebigredca…
You’re describing one of the most complicated processes in ethical decision making in a universal setting, one we all experience as long as we pay taxes! The challenge is applying this in domains where we are compelled to move fast and break things. As I’ve noted before, my area is uses of privacy-sensitive data in credit and risk. Not only a complicated ecosystem but one with profound asymmetries in knowledge and power. I’m giving a talk on how my developers and I incorporated stakeholder-balancing as we crafted our system at the Strata 2018 conference in NYC. Kind of takes customer-engagement in product dev to a different level. And yes, it does take a lot of time. I’m sure (and hope) I’ll get lots of questions about that.
Done properly, a stakeholder analysis attempts to determine what each and every stakeholder desires and the impact to them of an important decision. It is like a scorecard. It is often helpful to look at short term, medium term, and long term impacts.Actually I just realized that there is a huge missing item that needs to be considered when ‘stakeholders’ are discussed. What is that? Social Media. A company can’t get away with anything today without considering what will be said online as a result of a decision. And this is way more powerful than in the past with just what had to be considered with traditional (and in theory more rational) media.Look what happened to Jack Dorsey in today’s ‘everyone gets a vote’ environment.”Jack Dorsey, Twitter’s CEO, blasted for patronizing Chick-fil-A”https://www.cbsnews.com/new…And what does Jack say in reply:https://twitter.com/jack/st…I don’t get why he has to bogu over this. What is going to happen? This is bordering absurd.
Fine except (1) what JLM said about laws, regulations, contracts, etc. defining and constraining the situation and (2)And a Board must make sure that the CEO is acting wisely and in the best interests of the stockholders and stakeholders.My understanding of a BoD is that it is there mostly (1) to provide continuity to the corporation when and if the CEO leaves or dies (i.e., a corporation is a “legal person” who can outlive any human, and the BoD is responsible for this legal person) and (2) to make sure the CEO does not seriously mess up the company.But for nearly all instances of a BoD, the part about “acting wisely” seems to be asking a bit too much of the situation.So, a BoD is some people who are devoting only part time to that BoD. Typically the CEO knows much more about the company than any Member of the BoD. The BoD Members may have a lot of wisdom about lots of things and business in general, but rarely will they be well informed on the details of the business.E.g., each of the two times I saved FedEx from going out of business, the work I did was, really, for the BoD — that the work pleased the BoD meant that the work enabled crucial funding. But, gotta say, really, no one on the BoD had much understanding of the work I did — they were looking at the work from 10,000 feet up. My work was good, but the Board had poor ways of knowing that. In time I got, developed, some wisdom about what I was doing, but I didn’t get it from the BoD.E.g., in my first year as a B-school prof, in just a few weeks I played a leadership role in computing in the B-school and the campus in total. IBM tried hard, e.g., sent in their nation wide super salesman. He was smooth and polished, but he lost, and I won. I was bitterly opposed by the longest sitting CIO in US higher education, a real uptight, a place for everything and everything in its place, kind of guy, but he lost, and I won.Really, the way I won was I convinced a school computing consulting group, lots of individual faculty members, the college computing committee, an associate Dean, and the Dean of the the school — so, I convinced some groups of people. Some of those people were something like a BoD. And soon I was appointed Chair of the college computing committee and asked to serve on the committee picking a new CIO for the campus. But in all of that, no one really knew many details but me. So, again, I wasn’t reporting to people with much “wisdom” about the details. I was correct, but really I could have been wrong, and I have to doubt that any of the people I was reporting to would have known enough to have known I was wrong.Point: BoD like groups have a tough time having much wisdom on the details of what they are looking at.
Great study from NYSE shows that the average stockholder holds on to the stock at 4 months versus 8 years in the 60s. There too many speculators looking to make a quick dime with billions at their disposal without a care about fundamentals. I’m true believer in stakeholder mentality as employees/suppliers are as valuable participants at making companies successful.
“I am a fan of looking at something from all sides and understanding how each side thinks about it.”on those rare occasions when you disable the comments function how can you know what one or more sides thinks about the subject of your post?
Ben Horowitz has a great talk on this idea in the context of management https://www.youtube.com/wat…
I like to collect as many stakeholder perspectives as I can upfront, I call it design criteria. 🙂
I agree with the jist of your comment 100% but I do have knowledge of ToysRUs. The employees (especially at their HQ in NJ) look that one up, were out for themselves as well.
the ‘if only’ approach – ‘if only we could somehow magically disappear that legal obligation cost anchor when we would be in the realm of supernormal profits and dividend payments’. children.
I read a long story on Bloomberg (link on HN) titled ‘Tears ‘R’ Us: The World’s Biggest Toy Store Didn’t Have to Die’. Was a long article that either completely missed (or buried didn’t fine comb read it) the real reason that it failed. No longer a situation of executing on the ‘low hanging fruit of opportunity’ as I like to say which is what business is all about in the end. In other words not enough business. Kids interest in toys has dropped dramatically as a result of both the internet and later smartphones, tablets, nintendo, video games (endless list). Sure everything else mentioned didn’t help or maybe accelerated the process but in the the end if demand and interest in your product goes down or doesn’t grow you are dead man walking in the end. No way around that. Sure online sales does not help obviously either but not the core reason.One other dynamic at work that anyone older can identify with with respect to toys. When I was growing up going to the toy store or getting a toy was a special event. I think that went out the window with the current generation of parents. They were spoiled more and hence did not inflict the same joy on their kids because they didn’t experience it themselves since they were spoiled in the ‘everyone gets a trophy’ world. Of course any articles on Toys R US are going to be written to highlight financial issues as the culprit and for sure they were. But the bottom line really is falling interest in toys by children and their parents and less need for them.https://www.toyassociation…. https://www.bloomberg.com/n… Also why kids aren’t interested in driving as much as we were. Parents are nicer and the kids have less of a reason to get away from them.
“…ToysRUs. The employees (especially at their HQ in NJ) look that one up, were out for themselves as well.”Thanks for sharing that tidbit. It’s not surprising. Many fingers were in that pot.
I would not disagree. But I would also say in addition to online they got competition that just out managed them like Costco and BJ’s.The classic example is Sears and KMart. Before that Sears owned Hechingers. Remember them??? They said when Home Depot or Lowes came in town Hechingers got sick, when they both did, they died.Target….busy. Home Depot and Lowes?? Eat Kenmore before lunch.This is what I call “harvesting the built in reputation of the business” As a finance person you don’t care about your employee and customers stakeholders, you just harvest the reputation until you leave a shell of a business, and then scrap that.With ToysRUs they played a serious game of chicken and were willing to burn it up rather than lose.No different than divorce, as I have discussed. I have watched people burn it up rather than walking away.As an aside I think that is what happened to Anthony Bourdain. There are some conspiracy theory’s which are interesting, but if I had to guess I would say his mind got to the point where it said: the way I can inflict maximum pain is to do that. Not justifying, just saying.
Well since you raised the issue of Bourdain I will say that I wish people would stop worshiping that guy. He was an entertainer and there are plenty of people who entertain us and more being born everyday. It was a good show I liked it. But he didn’t find a cure for diabetes. And in the end what killed him was also the fact that he fucked up his brain on drugs when he was younger. That was the contributing factor to his weakness later on (if not the early sign of it). And what do young kids see? Oh you can do drugs and the world will forgive you and accept you and give you many chances. (Note this is quite different than what happens to people accused of sexual abuse or child sexual abuse etc. or even using the wrong words What happens there? Total rejection and banishment. )
Only thing I will say is that sexual or child abuse means you are taking a piece of the soul of the person you are doing it to. While the other abuse is taking your soul and people might feel really bad about it, you are not taking their soul, they can leave.
Well do you think that when someone abuses drugs that only impacts them and nobody else? Obviously that is not the case (and you know this as well). My wife was tremendously impacted by what her parents did with drugs 100% no question about it. As were her siblings. Not that I need that example either since common sense says that a great deal of people suffer as a result of others abuse of drugs, alcohol or even cigarettes.And that’s without even getting into the impact on our health care system, costs and so on. That we all pay for.Now on the other hand (and you know I am not a gun owner when I say this) if you decide to keep your gun and use it at a range or clean it or whatever and use it responsibly it has close to zero impact on anyone in your family.
Everything has impact. Being upset when you come home after a hard day has impact, traveling has impact. And self abuse has impact. But it is a whole level higher on those two, especially children.