Now is the time to switch you organization from shareholder-focused to stakeholder-focused
April 18, 2020
(This post is based on a Wharton Business School article, Ten Guidelines for Creating Opportunities in a Time of Crisis.)
Two events are forcing corporations to change how they operate. One is an existing long-term trend, the other is an immediate emergency.
The existing long-term trend: the rise of Millennials and Gen Z in the workplace and the marketplace. As employees, they want to work for companies that are changing the world. As consumers, they buy from companies that have a positive social impact.
The emergency, of course, is the COVID-19 pandemic. Around the world, governments have triggered massive fiscal responses to help companies and workers. In the USA alone, the first wave of support was $2.2-trillion. The retooling of automotive companies to produce medical equipment, and the switch by distillers to make hand sanitizer, are examples of corporate response. Ongoing, we will see a rethinking of the relationship between the private and public sectors.
Both of these show us why switching to a stakeholder focus is increasingly important.
- As companies slim down and shed staff, paradoxically they will have to become even more highly focused on the employees that remain. Firms will need to deal with their employees as people, and not only in their narrow role as employees but as human beings.
- Companies will have to learn to interact more effectively with the public sector and the not-for-profit sector as part of the broader stakeholder orientation.
- They will also have to shift their attention from serving just their shareholders to other stakeholders in society.