Stakeholder Theory is a more recent theory of business that argues against the separation of economics and ethics. It addresses the question of who is most important, the shareholder or stakeholder, and states that short-term profits gained by prioritizing shareholders should not be the primary objective of a business. Rather than focusing on those holding the most shares of stock, in this theory stakeholders include customers, employees, suppliers, local communities, and more. (Historically, groups such as suppliers, distributors, industry regulators, and community residents have been considered external stakeholders having less direct relationships with an organization.) In this newer viewpoint, delivering a world-class customer experience is directly connected to delivering an equally valuable employee experience.
According to this theory, prioritizing the needs and interests of stakeholders over shareholders is more likely to lead to long-term success, both for the business and for the communities that it is a part of. This stakeholder mindset is, in turn, likely to create long-term value for both stakeholders and shareholders, ultimately increasing a company’s share price and financial returns.
The Stakeholder Theory is Not Business as Usual
The stakeholder theory is in opposition to the long-held shareholder theory proposed by economist Milton Friedman, who believed that in capitalism, the only stakeholders a company should care about are its shareholders, and thus, its bottom line. Friedman’s view was that companies are compelled to make a profit, satisfy their shareholders, and continue positive growth.
*Related – Who Is To Blame For Greedflation?
In contrast, Dr. Edward Freeman, professor at Darden School of Business, University of Virginia, and longtime proponent of the stakeholder theory, suggests that a company’s stakeholders are “those groups without whose support the organization would cease to exist.” This view paints the corporate environment as a business ecosystem of related employee groups, all of whom need to be considered and satisfied to keep the company healthy and successful in the long term.
“I actually think if Milton Friedman were alive today, I think he would be a stakeholder theorist. I think he would understand that the only way to create value for shareholders in today’s world, is to pay attention to customers, suppliers, employees, communities, and shareholders at the same time,” Freeman said.
The Ending of Corporate Capitalism
In January 2020, the World Economic Forum came out with a manifesto urging companies to move to “stakeholder capitalism”. Around the same time, the Business Roundtable (BRT) published a proclamation on The Purpose of a Corporation: “We share a fundamental commitment to all of our stakeholders.” Echoing Freeman, the BRT defined stakeholders as customers, employees, suppliers, communities, and shareholders. It was signed by 181 CEOs whose companies represented over one-third of the total market capitalization in the U.S. equity markets. As a result, Fortune described it as “ending shareholder primacy” and the Financial Times called it “abandoning the shareholder-first mantra”.
It’s a fresh vision for long-term value creation and corporate leaders, seeing new opportunities for growth, is getting on board. They are looking beyond financial obligations to individual investors and focusing more on strengthening the interconnected relationships that will ultimately create greater financial health for all concerned.
The Employee Experience Revolution
Great companies help people live extraordinary lives. Great leaders inspire their employees to build lives of meaning and purpose. As a result, they help their employees and customers reach their fullest potential.
This might seem easier said than done. How do you create an employee experience revolution that attracts the type of leaders, team members, and customers that want to be part of such a next-level culture? For starters, companies must stop attempting to extract the maximum profits from every customer and employee to boost the top and bottom lines. Instead—and this is a key difference—they should focus on the vital roles of kindness, generosity, and love in dealing with their customers. And, just as importantly, with their employees. Such an approach is sure to boost customer service motivation while helping your organization be as “zero risk” for your team members as it is for your customers.
*Related – How to Be a Zero-Risk Company
Focusing on Your Company’s Employee Experience in Any Economy
Employee Experience is all the latest rage coming off the Great Resignation. It was a wake-up call to companies and their leaders that, during the great economic boom from 2010-2022, had stopped focusing on the team member experience and all that goes into building a world-class internal culture. It now is every company’s number one priority. And therein lies the key. Just as with delivering a great customer experience, employee experience always needs to be a company’s top priority, in any economy. There is no ribbon-cutting ceremony to being world-class internally or externally. Leaders simply cannot go back to their old ways when it becomes an employer market and the leverage shifts away from the employee to the company.
Episode 109 of the CSRev Podcast – Customer Experience Executive Panel
This episode is from a presentation by Jess Pischel, Consultant with The DiJulius Group, presented at the Customer Service Revolution Conference in Cleveland on Nov 7th, 2022. The title of the presentation is the Customer Experience Executive Panel. In this tell-all session, the top Customer Experience Executives, from multiple industries, unveil how to overcome roadblocks and hurdles while avoiding costly mistakes. Find out what it takes to lead an organization’s entire customer and employee experience from those who have mastered it.
- How to gain executive sponsorship
- How to gain buy-in from the critics and cynics
- How to roll out new training material and implement change management best practices
- The keys to measuring success
- How to make it stick so that your program doesn’t become “flavor of the month”
QUOTE OF THE WEEK
“I believe that we’re starting something that is
bigger than any of us can truly understand right now.”
CX VIDEO CLIP OF THE WEEK
How the Top Customer Experience Brands Financially Out-Perform Everyone Else
Our 2023 Class of our Customer Experience Executive Academy (CXEA) that started in January sold out. So instead of waiting till 2024, we are starting a new class in September ’23. We expect this class to also sell out. Don’t delay and register now!
Are you in charge of your brand’s customer experience? Are you currently, or on track to be your company’s Chief Experience Officer (CXO)? It’s time to start learning the methodology applied by world-class companies to create consistently memorable moments that lead to happy customers and happy employees. The Customer Experience Executive Academy (CXEA) is the Harvard of Customer Experience, featuring:
- The DiJulius Group’s trademarked X-Commandment methodology
- How to improve the 6 components of your customer’s experience
- How to develop a strong Customer Experience Action Statement that brings purpose and meaning to your employees and organization
- How to recruit and develop a team with high customer service aptitude that aligns with your core values
- How to build a culture that always goes above and beyond what is expected during interactions
- How to develop tailored experiential standards for each customer, in each interaction they have with your company
- How to create systems that ensure consistency among departments and locations
- How to implement zero-risk systems that avoid service challenges and strengthen customer relationships
- How to measure your customers’ experience and execute with the data you receive, and
- Become a world-class Customer Service Experience leader!