A win-win game
Stakeholders must be assured of a successful future for them to stay invested in the company, says Kanti Gopal Kovvali, Institution Builders.
Business is not a sport where some stakeholder has to lose or fare badly for others to do well. Building an atmosphere of trust and transparency between all stakeholders will help companies retain them even during adverse times.
It is an undisputable fact that your stakeholders have an interest in your success. They have a stake, and that is why you consider them as your stakeholder. Your success would translate into healthy returns for investors, quality products and services at affordable rates for customers, increase in business for suppliers, and growth with better pay for employees. However when fortunes tumble and you face a ‘Nokia moment’, customers desert you, investors give you a thumbs down, and smart employees jump ship before it is too late. Managing stakeholders when the going is good is easy. You know it better than anyone else. However, when the going
gets tough, when your industry disrupts, do you know how to ensure they stay loyal or help you disrupt the market and become the leader again?
The interesting aspect of our times is that every industry and every company is in the midst of disruption. During the transition phase, when an industry is either fading away or passing the baton to a new one, no organization can be sure about how to interpret what is happening in the market right now, or what it might lead to. However, each stakeholder may have a few cues to solve the puzzle. If all the stakeholders engage with the organization, share market cues, hunches and unusual data points, connect the dots, gain insights, and together decide to change—the incumbent organization can rise like a phoenix from the old industry’s ash dumps. But why should the stakeholders take all the trouble when it is easier for them to just walk away and align with the new stars of a brand new industry?
They will, if you know how to nurture invested stakeholders’ who care for your future as much as you do. Luckily it is not all that difficult. You just need to bust a few assumptions about stakeholder management and initiate simple new ways of working.
assumptions to bust
assumption 01: winner takes all
A well-known FMCG company has the policy of cash and carry for dealers and payments after 180 days to its suppliers. Any stock unsold by dealers is taken back after a set time period and adjusted against the future deliveries. Needless to say the company makes a handsome profit. Their senior managers take home handsome bonuses. Now look at it from the dealers’ and suppliers’ perspective. In a cluttered market, they are taking all the risk. What about the suppliers? These are small companies with limited pockets investing upfront with the hope that they will get paid after six months.
The FMCG company is operating on zero risk by squeezing both the dealers and the suppliers. Why would the company’s stakeholders stay invested with it when the market disrupts? Why would the supplier invest in R&D when they are engaged in a 180-day fight for survival? Some companies assume that they can take the biggest piece of the cake and leave the crumbs to their stakeholders. It works well during steady periods and fails miserably when the market disrupts. One can already see the tremors caused by innovative new entrants who are disrupting the Indian FMCG market through new value propositions.
No company can gain the trust of their stakeholders by acting like a bull in a china shop. Winning is not about making someone else lose. Winning means winning together with your stakeholders. When your stakeholders experience this intent of yours, they will want to invest in your future.
assumption 02: alignment deserves an ‘A’ rating Highly achievement-oriented senior leaders love ‘yes boards’ and ‘yes employees’. After all, these senior leaders have a clear vision and strategy. They need boards who assure support and look the other way when things do not seem to go as per plan.
Alignment is overrated in companies. Professional managers value loyalty. They believe that they know what to do, why to do, and how to do. They need a few wise men and women to put their stamp of approval as required by the Companies Act. Similarly, they need machines and wherever unavoidable, human beings, to execute their plans. Questioning and challenging strategy or ways of working is deemed unpatriotic.
When boards and employees stop thinking, they cease to be stakeholders of the organization’s future. Such board members and employees play safe by leaving the company before the market disrupts, exposes their lack of talent, and destroys their reputation. We cannot really blame them as
Alignment is overrated in companies. Professional managers value loyalty. They believe that they know what to do, why to do, and how to do.
they played the part expected by the senior management. It is just that in times of disruption, this asset-like quality becomes a fatal liability.
assumption 03: expertise is everything
Organizations like to surprise customers with new products and services. After all, they know what customers want and what they care for more than customers is themselves. Managers love quoting Steve Jobs. Is he not the person who famously said that if customers were asked to improve the music listening experience back in a day when CD players ruled, they likely could not have envisioned the iPod? Steve Jobs never said bar your ears from listening to customers. He said listen to what the customer needs and not what the customer wants. Organizations and employees have stopped listening to customers. If telecom companies really listened to customers, they would have realized it is not price cuts that customers are clamoring for. They badly want a reliable service. No company can get the customers to stay invested without truly listening to them.
assumption 04: want to become indispensable to customers, want to make employees dispensable Organizations are touchy about losing customers. Managers wail at any marginal drop in market share and profitability. How can customers betray us? Organizations want unconditional loyalty and are willing to do anything to make customers addicted to their company. Employees can make this loyalty a reality by creating a personal connect with customers whom they serve. Any such personal connect raises red flags. Companies worry about employees becoming indispensable. What if the customer loves the employee more than the company? Most job rotation programs, succession plans, and training are an
If telcos listened to customers, they would have realized it is not price cuts that customers are clamoring for. They badly want a reliable service.
offshoot of this worry and not a genuine desire to make employees indispensable. Why would employees who know this intention invest their physical, emotional, and intellectual energies, especially when the company needs them the most?
assumption 05: culture is a privilege
Companies proudly sell the idea of ‘great place to work’ to employees. Their HR departments talk about the company’s culture of fairness, respect, and camaraderie as part of the total value proposition they offer to prospective employees. A CEO with whom I worked in the past tried hard to get the best place to work award. ‘We could show the award as a carrot to hire people for lower salaries’, he would say.
In a democracy where fairness, respect, and equality are guaranteed by our constitution, can an organization provide great work culture as a privilege? It is the right of every employee to work in a great culture and if a company does not know how to build such a culture or does not want to, it simply does not have the right to exist.
Once you decide to bust the assumptions that stunt stakeholders’ investment in your future and wear new lenses, you are ready to introduce new ways of working. Here are a few: co-create a shared vision with all the stakeholders
If we are convinced that we can win only together, we need to co-create with our shareholders the vision, values, and strategy. There are a variety of methods available that use systems’ thinking technology to enable such a dialog. Conventional strategic thinking, which appears more like a conspiracy theory for other stakeholders, does not build enough trust. For example, having a shared vision with stakeholders enabled NASA to land man on the moon. When a vendor realized a big mistake they made in designing a part, instead of keeping quiet, they informed NASA, redesigned the part, and worked towards the shared deadline of 1969.
break the walls
The boundaries between departments, board members, customers, employees, and suppliers result in stagnant communication. Each stakeholder operates on outdated expectations and information about each other. Breaking the walls means allowing communication to flow seamlessly. A hospital chain practises an example of this. Each board meeting of this hospital chain takes place at one of their treatment centers rather than at the isolated headquarters. The meeting begins with a patient talking about his or her recent experience at the center.
embrace non-customers, non-suppliers, non-employees, and non-competitors
Your future stakeholders may be hiding somewhere. They may not fit in your definition of stakeholders now. Most of them may not believe that your products are for them. For example, if you are a toy company, your primary customers are children. However, as more and more people live longer, retired people may become a large customer base. Apart from getting the badly needed recreation from toys, they will serve to keep them physically fit. How about a sales head for non-customers or a purchase head for non-vendors? Engaging with such non-stakeholders will give ideas for the company and build early stakeholder connect.
The prosperity of every stakeholder is important for the industry. Only when stakeholders clearly see themselves as part of a successful future will they want to stay invested. Boards would do well to reward their company’s leaders for keeping the industry healthy. This means ensuring that all the stakeholders win in the present as well in the future. ■
Only when stakeholders clearly see themselves as part of a successful future will they want to stay invested.