… for the so-called competing interest conundrum of shareholders, customers and other stakeholders
Most entrepreneurs, being experienced as they are, obviously won’t be oblivious of the constant and never-ending struggles almost every business face. Those who can adapt in today’s highly competitive business environment will in no doubt survive, thrive and yield near-boundless financial realisation through market innovation. The alternative is to go extinct by not seeing through the proverbial forest trees.
There is a common perception that if the needs of one stakeholder group are prioritised, then there must be a trade-off whereby other stakeholder interests are not fulfilled as a result. However, the idea that multiple stakeholder interests can be satisfied without the need for trade-offs between groups is core to philosopher and business expert R. Edward Freeman’s Stakeholder Theory. This expression can be found in his book ‘Managing for Stakeholders: Survival, Reputation and Success’. The central theme of his theory describes how a firm as a whole can create value for its internal and external stakeholders.
With many perspectives on priorities and various stakeholder interests at play in any cross-functional effort, it is critical that leaders of such efforts are equipped to effectively manage competing stakeholder priorities in order to deliver value on corporate initiatives.
The necessity for customer satisfaction may require committing a bit of profit. This fact however shouldn’t dissuade decision-makers from the credo of the customer being king or god, and seeking to delight them. In today’s ruthless business climate, it is those who do not relax in the pursuit of customer satisfaction, against the ultimate motif of profits even in the short-run, who will win the game.
Any business entity that is sincere in delivering value to its clients is all-but guaranteeing their own success. It does not pay to seal the business’s fate in a coffin of corporate greed and advancement at all costs, and covertly kill the goose that lays golden eggs. In an era when consumers are blessed with so many options with whom to do business, it is imperative to be set apart from the rest through a unique selling proposition.
Businesses, therefore ought to know and deliver value in order to transform the good to the great. Icons in the field of business are known to be created only by having the best interests of consumers at heart. It is indeed a good course to chart if the goal is to leave the legacy of a monumental business and expand an existing footprint.
The business of being in business is to make profit
Every well-meaning Ghanaian hearts bleeds at the performances of most state-owned enterprises and the persistently depressing Auditor-General’s annual reports on Ministries, Departments and Agencies. There is so much bleeding from the nation’s coffers, it’s no wonder we are in such a financial quagmire. I mean, nobody does business that way and expects to survive.
In the 1970s Milton Friedman, an economist, in an essay espoused the doctrine that shareholders form the entity’s backbone and should be treated with the utmost respect. Obviously, profit maximisation requires entities to find ways of generating additional revenues through value addition and creating more products and services while minimising costs.
This proposition is without doubt very plausible. After all, it is the investor who makes it possible for all other stakeholders to butter their bread. They can only be encouraged to continue investing in the business when what they have put in is yielding much-needed fruit.
The Economist in 2016 referred to Friedman’s insight – which is generally mentioned as shareholder theory – “the biggest idea in business”: stating that “shareholder value rules business”. Harvard Business School professors Joseph L. Bower and Lynn S. Paine, for instance, argue that maximising shareholder value “is now pervasive in the financial community and much of the business world”.
In 2019, the Business Roundtable – a group that represents CEOs of big corporations including Apple, JP Morgan, General Motors and more – declared that it had changed its mind about the ‘purpose of a corporation’. That purpose is no longer to maximise profits for shareholders, but to benefit other ‘stakeholders’ as well – including employees, customers, and citizens. They assert, “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country”.
Emerging drifts in business objectives
It is clear from recent developments that business is not concerned ‘merely’ with profit, but also with promoting desirable ‘social’ ends; that is to say, business has a ‘social conscience’ and must utterly take up its responsibilities for providing sustainable climate, employment, eliminating discrimination, upholding business ethics and whatever else may promote general well-being in contemporary times.
It then just makes sense to seek to ‘Grow the Pie’ so each stakeholder can have a fair share. “When you serve society and run the business with a purpose, you’re growing the pie; and therefore it’s not only stakeholders that benefi, but also shareholders,” says Alex Edmans.
Companies delivering value to stakeholders aren’t splitting the pie to make shareholders worse off; in the long-term, it does benefit investors. For example, if employees are empowered and treated better with a bit of investment made in training them, it may seem to be a cost in the short-term, but in the long-run they become more motivated and in good stead to be productive. It actually has a positive ripple-effect in delivering superior customer service, and therefore investors benefit.
Some have suggested an abandonment of customer-centralism because it’s untenable to agree with every customer’s caprice; and customers ought to understand that while they are valued and appreciated, the business and employees come first. This argument is born out of the conception that happy employees go the extra mile to provide the good services needed to make customers happy.
The New Norm for Business Growth is Employee Experience
Customer is King = Business Growth – implying that if customers are treated like kings, they will be loyal to aid business growth – is predominantly known. However, there is a new thinking: that it’s no longer about being ‘customer-first’; rather, it’s about being ‘people-first’, because it is employees who determine a brand’s customer experience.
Companies with a ‘people-first’ culture understand that their employees are critical to their success. This is reinforced through the employee experience. Gordon Bethune, who is best known for revamping Continental Airlines, has said: “You can’t treat your employees like serfs. You have to value them. If they think that you won’t support them when a customer is out of line, even the smallest problem can cause resentment”. In most cases, demoralised employees’ job performance is negatively affected – ultimately leading to poorer customer service.
People need to feel respected and appreciated for them to put their best foot forward. When employee-happiness is a priority, it makes them more energetic, motivated and more willing to interact with customers. Customers ultimately receive better service, thereby creating a pleasant environment for both employee and customer. Amazon is undoubtedly one of the largest retailers in the world, but according to Forbes it suffers many complaints from its workforce; and Jeff Bezos’s long-standing emphasis on customer satisfaction over everything is partly ascribed. It is a recipe for disaster in any business model to continually take the side of customers over employees without trusting their judgmental ability or hearing them fairly.
The Transition – Employee is King
Some brands and global corporates such as Google and Virgin Atlantic, though focusing on the notion of ‘Customer is King’ with their continued unparalleled service, also understood the term ‘customer’ has two segments. And this is changing the norm for business growth once again.
The internal customer is the employee and the external customer the end-user. The change in dynamics is reflected in the words of Richard Branson: “Companies Should Put Employees First”. Thus, ‘Employee is King’ is making waves in top businesses globally. The thinking is “if employees are treated as kings, they will treat customers as kings”.
It must be noted, however, that in the equation for business growth, the customer is still the key variable. The change in the new notion was for organisations to focus more on the employees for the employee to focus more on the customer.
Employee is king = Customer is King = Business Growth
In an event when an organisation focuses on customers to the neglect of employees, that’s a slow recipe for disaster.
Employee < Customer is King = Customer is not King = Business Decline
The bottom line: There has been a tremendous transformation in business in the few decades since, making quite a number of companies place emphasis on employee-happiness. There is research to show that it has proven to be an effective method to increase sales and improve customer loyalty. Happy employees = happy customers. This new mindset may seem difficult to adopt, however it is incredibly beneficial to businesses in both the short- and long-term.
Though the view toward customers has evolved over time, it does not matter where one finds him/herself in the world: being customer-centric means thinking about the customer experience. The customer, as a matter of fact, might not always be right; however, being thoughtful in the approach to delivering customer experience will always serve one’s company very well. Companies therefore need to embrace customer experience and trust every customer to build successful relationships.
It should be realised that the alternative isn’t about just putting employees first and watching them put the customers’ needs first in return. The goal is still the same: to deliver the best experience possible to total customers, because all the ends aren’t mutually exclusive and therefore need to be vigorously pursued.
Henry’s expertise, knowledge, skills, abilities, qualifications – and more importantly, demonstrable functionalities – transcend several disciplines. He has over two and half decades of corporate and several non-corporate leadership experiences. Henry, the writer, can be reached via [email protected]/0244651663 or 0208178791