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PHIL HARDWICK — Shareholders’ needs and keeing a balance

PHIL HARDWICK

PHIL HARDWICK

A lot of people are interested in your company or organization and its success. They want it to succeed because they have a stake in it. And that’s why they are called stakeholders.

There are six broad categories of stakeholders: Stockholders, managers, employees, customers, community and suppliers/distributors. Each has its own set of interests, needs and expectations.

Stockholders/Investors – In the case of public companies, the stockholders are the primary stakeholders, as are investors in privately-held companies. For nonprofit organizations there are usually various funders. In any case, these are the stakeholders that provide the funding and capital. Their main goal, or need, is a return on their investment. They keep their eyes on the management of the company or organization to make certain that the managers are behaving ethically and not taking unnecessary risks. The want information and results.

Managers – These are the stakeholders who decide which goals to pursue and how to achieve those goals. They are the ones who allocate resources, both financial and human, to accomplish the goals. Managers have to make decisions that affect all of the other stakeholders. They need motivation and incentive. Managers need constant oversight and supervision to make certain that their behavior is such that it remains ethical and proper in their quest to meet the needs of others, especially the stockholders/investors. There have been many cases of managers acting in their own self-interest to the detriment of others. Thus, top management in a large company needs rigorous oversight by the stockholders/investors. This can be an especially difficult challenge in cases where the top manager has too much influence and control in the selection of the board of directors. In the case of nonprofits, the board of directors must realize that its responsibilities include more than just attending meetings and lending their names to the organization. They also are liable for overseeing the proper operation of the nonprofit.

Employees – These stakeholders need a structure and compensation system that rewards employee contributions. Companies that focus on employees tend to have higher rates of return to the ownership of the company, as evidenced by research done Fortune magazine’s annual list of “100 Best Companies to Work For.” Employees want systems that are fair and do not discriminate.

Customers – This set of stakeholders is the most critical. If their needs are not met, then the company will not stay very long in business. Customers want a quality product or service at a fair price. Companies nowadays must do more than simply meet that need. They must work to create loyalty and continue to improve their product or service. Customers also want something more. They want to do business with a company that they identify with and is consistent with their values. Take a look at how companies are responding to the movement toward greener and more environmentally-friendly products. Those are examples of customer-driven needs being met.

Community – The physical location of a company also has needs. It needs good schools, good infrastructure and a good quality of life. It looks to companies and organizations to help provide those things. Good companies meet those needs by providing appropriate wages, leadership training to citizens and employees and ethical behavior. The community in turn provides the company with trainable employees, utilities, etc.

Supplier and distributors – Without suppliers and distributors very few companies could operate. These stakeholders need proper guidance on what to supply, an efficient system to deliver or distribute the product or service and quick payment. They also need to be aware of the company’s future plans. They also need to know about potential safety issues regarding the product or in the case of services they need to be aware of potential government regulations. The relationship between a company and its suppliers and distributors is so critical that it can bring a company to its knees, so to speak, if it is imperiled.

Your challenge as the owner and leader of your company or organization is to meet the needs of these various stakeholders while at the same time balancing the needs in the best interests of the company. That can get very complicated sometimes. For example, even though the company is performing well the stock may be getting pummeled because of a slowdown in the industry or the rapid climb of a competitor’s stock. Stockholders want to know why and they want to know now. This urgency can lead to so much focus on the needs of the stockholders that other stakeholders are ignored. Likewise, if employees are considering joining a union or taking some other job action it is easy to forget about the other stakeholders.

Identifying stakeholders and their needs is a continuing process because both change, and change often. For example, one supplier not meeting the needs of a company may be replaced by a new supplier. That new supplier may have different needs than the previous one. Constant conversations and communication with stakeholders is therefore the key.

In summary, a business or organization should identify its stakeholders and constantly strive to meet those needs while at the same time keeping those needs in balance.

» Phil Hardwick is a regular Mississippi Business Journal columnist and owner of Hardwick & Associates, LLC, which provides strategic planning facilitation and leadership training services. His email is phil@philhardwick. com and he’s on the web at www.philhardwick.com.

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