May 25, 2022


Article 2.6



For lack of wisdom and because of daily pressures, most of us think too much about our own needs and not enough about the needs of the communities that feed us-such as, family, company, domestic economy, etc. We can not outperform our communities with which we are interdependent.


Leaders of all types have, therefore, been preaching since the beginning - "united we stand, divided we fall." The four main stakeholders in a business - the employees, the customers, the suppliers, and the shareholders - have the same challenge in these most competitive times. It is difficult for stakeholders to pull together, however, if they do not understand the stakeholder success cycle and how they must be responsible to it first and themselves second.




A stakeholder is any person or institution that has a vested interest in the future well-being of a company. Business stakeholders can always take their bodies and skills; their purchases; their services; or their invested dollars to better alternatives if current payoff slides and future prospects dim. These collective expectations put much pressure on management to grow and reinvest profits for a better company future to attract and keep quality stakeholders' support.




In growth times or in growth industries managers can focus aggressively on growing sales and margin contribution dollars hopefully follow enough to afford raises and profits to reinvest, and most stakeholders are happy. But today, 80% of all firms are in mature industries with excess supply selling to a flat, post-consumer society demand. Growing profitably is difficult.


Looking at the diagram below, consider this method for growing. First, the employees win by getting market-plus wages and a motivating environment which includes understanding the strategic big picture and how they fit in and can make a difference. They work hard to produce perfect quality goods and/or services so that the customer can win second. If the customer is getting exactly what they need, they - will be more successful in doing their value-added activity; will return to buy more; and will tell their friends about you.



The firm wins third by retaining customers at a greater rate than the less effective competitors which will grow sales faster than the industry. And with superior quality, the firm can charge more to improve profits. By growing profitably the firm can: buy more from suppliers and discount the bills; hire new employees; promote or keep secure the existing ones; occasionally achieve premium levels of profits which can be shared among employees, investors, and special investments for better future care of customers. Premium profits reinvested can prime the cycle for another round of pie-expansion.




It takes clever leaders to be able to attract, motivate, and keep good people. Leaders must be willing to forward invest in wages and education to have skilled players. Then they must articulate a strategic direction and guiding values which will sustainably motivate and align everyone's energies.


Innovation is required to leapfrog the competition, adapt to environmental change, and turn unforeseen negatives into learning positives. When a leader offers or endorses a new program it means change and risk above the norm for employees. If it is a large-scale program, then suppliers, investors, lenders, and even guinea-pig customers may have to contribute extra resources or share risk. Why should they? What is in it for them? What if the plan doesn't work?


If stakeholders trust management's plan, implementation competence, and intentions to share fairly in any gains, then they may sign-up for the effort. Management can build trust in the plan by involving everyone who must buy in during the formulation stage. They can build trust in their implementation ability with a successful track record of doing similar programs of increasing size.


Trust in personal fairness must be earned by historically being trustworthy. If we keep all of our promises and even the ones that others thought we made; if we carry water for the troops, and serve ourselves last; if we do more for others than they thought necessary to have excess goodwill for offsetting occasional failings; and if we negotiate the sharing of any premium gains in a balanced way using measurable, objective market standards - then it is possible for us to have the trust and the commitment of the stakeholders.




Growing profits has become so difficult that we need greater amounts of stakeholder commitment and coordinated effort to achieve new levels of quality, productivity, and strategic fit with targeted customer needs. We won't get motivated stakeholders unless we can explain the big picture and how we are all inter-dependent. Then good leadership must earn the trust necessary to get everyone to sacrifice today so tomorrow's pie will be bigger and better for all. If not, the best stakeholders will start to withdraw their contributions if not leave for better situations. The best companies will prosper while the rest will deteriorate faster in these faster changing, more competitive times.





Merrifield Consulting Group, Inc. Article # 2.6