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Change from shareholder value to stakeholder management

Top international companies are saying goodbye to shareholder value in favour of a focus on all stakeholder. What does stakeholder management mean for companies? Read about strategic advantages and how to implement them in your company.

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  • Change of mind from shareholder value to stakeholder management at top international companies
  • Stakeholder management offers strategic advantages for sustainable business success
  • Experience Management enables companies to measure experiences of all stakeholders based on data

Since the 1980s, companies have been pursuing the concept of shareholder value and equating it with their enterprise value because it was assumed that a growing capital value automatically also represents an advantage for employees, customers and society in general. But in a fully networked world with dwindling resources, increasing competition and an increasing shortage of skilled workers, CEOs are increasingly coming to the conclusion that aligning corporate strategy exclusively with the financial goals of shareholders increases economic inequality. So instead of “making the owners richer and richer on the back of the employees“, as Wall Street Journal wrote, the trend is to consider all stakeholders equally when managing the company.

Stakeholder management does not only benefit economic players. The concept offers concrete strategic added value for companies and thus also for shareholders:

  1. If managing directors or board members involve important stakeholders in the corporate strategy, they experience faster acceptance for new projects or important changes of course.
  2. “The customer is king”; and also the employee and the supplier and society: If companies know what their stakeholders really want and can meet the requirements, this inevitably leads to success and company growth: win-win for everyone.
  3. “Do good and talk about it”: If companies assume responsibility for society as a whole, this contributes to a positive image and provides decisive competitive advantages.

In order to manage the various economic players, you have to know what moves them. But do managing directors or board members know their stakeholders at all? Successful companies will be experience companies: With Experience Management (XM), the experiences and needs of stakeholders can be measured and intelligently evaluated in real time. In the future, this will open up unprecedented opportunities for companies to get to know their stakeholders in a simple and data-based way. With the help of Experience Management, the change from shareholder value to stakeholder management is by no means just a promise but can also be put into practice.

Is capitalism dead?

181 CEOs of the Business Roundtable in the USA said goodbye to the mantra of shareholder value in the Wall Street Journal in August of this year. Instead, they redefine the purpose of a company and from now on want to consider all stakeholders – employees, customers, suppliers and society as a whole – alongside their shareholders when making corporate decisions. “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity”, says the “Declaration on the Purpose of a Company“. Included in this are global players such as Amazon, Apple, SAP, Bayer, Siemens and Exxon. These globally active companies cast their shadow over the entire economy. Are we currently turning our economic system upside down? Marc Benioff, entrepreneur and founder of Salesforce, calls for a revolution: “There is no question that capitalism as we know it is dead.” But this is not the case – it is much more a learning from experience. What is theoretically true may not necessarily work in practice. After all, a company and its owners are not islands, but have always interacted with their environment. Stakeholder management is therefore more like capitalism with a big shot of reality.

In an entrepreneurial ecosystem, all stakeholders have an influence on business success and expect – rightly so, by the way – that they are valued and treated according to their needs.

Who determines the value of a company?

In theory, a company’s social responsibility has so far been exclusively to increase profits for its shareholders. The success of a company then depends on the extent to which the shareholders’ goals are met. In an ideal constellation, increasing profits would also be beneficial for society as a whole. In practice, however, the macroeconomic consequences of shareholder value are controversial. Experience has shown that companies and society influence each other and that management must at least know the requirements of external capital providers, customers, suppliers and social needs in order to be able to develop realistic corporate goals. If important stakeholders are not included, this can sometimes damage business, as McKinsey found out in a study. According to their findings, around two-thirds of large projects fail, because stakeholders are not picked up. One example is Stuttgart 21, where there were massive blockades on the part of the population.

How to implement stakeholder management

Stakeholder management has never been so easy. Because platforms for integrated market research such as those of the SAP subsidiary Qualtrics combine data from operational IT systems (O-Data) with empirical values (X-Data) generated from surveys. This opens up unprecedented opportunities for companies. They can now find out, based on data, what really drives, motivates or disturbs their stakeholders – be they customers, employees or suppliers. We can link existing IT systems directly with survey tools and thus send individual surveys directly to the stakeholder’s device in real time.

How to integrate stakeholder management into your corporate strategy:

  1. Analysis of Stakeholder Behaviour
    At the outset, it is important to define the various stakeholders: Who is a supporter? Who is a potential opponent? Who is influenced by the corporate strategy and to what degree? CEOs should get an idea of their stakeholders’ profile in order to better predict how they will behave in terms of business decisions. So find out: What do your customers, employees, suppliers and shareholders expect from your company?
  2. Mapping the Stakeholder Experience
    Analyze stakeholder challenges. How do different people deal with the company? What do they think of the company and how do they interact? What is their experience of interaction? After all, the point is to identify supporters or opponents of entrepreneurial plans, to ask for the why, and thus to develop the best possible corporate strategy that brings sustainable success.
  3. Ongoing Experience Management
    Nothing is more consistent than change. You can never get enough feedback from your stakeholders. Measure, analyze and optimize on an ongoing basis. The new way of thinking in the company should be driven “from above”. After all, managing directors are responsible for promoting a new corporate culture that focuses on all stakeholders. This leads to better products for customers, better working conditions for employees, favourable conditions with suppliers and more profit for shareholders.

Conclusion: Show more composure

We are at a time when CEOs are faced with dwindling resources, unpredictable environmental conditions and increasing competition for well-trained professionals. The sole focus on profit maximization restricts their room for maneuver and hinders them from looking for innovative solutions. In addition, your customers and employees today have unprecedented opportunities to inform themselves; they may question dubious business decisions. A survey of the career website Glassdoor, in which 1020 test persons took part, showed that 77 percent of those surveyed gave just as much weight to corporate culture as to salary; 79 percent informed themselves in advance about the philosophy of future employers. Corporate social responsibility and good working conditions are thus becoming critical factors. Companies that manage to involve all stakeholders and above all attract employees with a long-term commitment will continue to be successful in the future. Experience Management helps you to consider the expectations of different stakeholders.

After all, economic laws are not carved in stone, but made by people. So they can also be changed. The change of mind from shareholder value to stakeholder management is a first step in the right direction. Investors have included sustainability as a criterion in their assessment of companies and thus set new standards.

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