Copyright 1997 AXIS Performance Advisors, Inc.
In the past a conversation about organizational values had to do with choices between right and wrong. If an organization kept on the side of the law, then it was assumed to be operating on the side of right. Things aren’t so simple any more. It’s no longer just right versus wrong. Increasingly the debate is between right versus right. The issues become much more complex as we come to recognize how far reaching the impact of an organization is.In our research on values, we introduced the notion that all organizations must consider the needs of five distinct stakeholder groups. First there are the owners who care most about the bottom line. Then there are the customers,the people who care about the products and services they pay for. There are also the employees, the folks on whom we depend to keep our businesses running. Then there is the local community which provides the infrastructure on which our organizations are based, and the global community which we define to include the environment and the international pool of labor and consumers. Doing what’s right for them all presents some interesting challenges.We were curious to know how organizations balanced the needs of these groups and what, if anything, they were doing to serve them. We also wondered if employees felt that their organizations were giving appropriate attention to each of the stakeholders, and whether there was a difference between the values demonstrated by an organization and the values held by its members. What we found confirmed many of our suspicions.
In our survey, we asked people to indicate the extent to which the needs and interests of the five stakeholder groups were considered in organizational decisions by allocating 100 percentage points among them. Respondents were asked first to indicate how they how they would weight the stakeholders if they had decision authority, and then to indicate how they saw their organizations weighting them. Generally speaking, people across all industries and business sectors believe that owners and shareholders are given too much deference and would like to see more consideration given to the non-traditional sectors of stakeholders (see Figure 1). It is also interesting to note that employees still place a higher value on customers than they do even on themselves.It looks like all that TQM training has taken hold.
While individuals would like to see the emphasis on various stakeholders pretty balanced (from 13% to 26%), they perceive that their organizations give much more emphasis to owners (almost 40%) and not enough to the others.
All levels of the organization (executives to front line employees) are closely aligned in how they would LIKE the emphasis to be. But the perception of how things are varies dramatically. For example, front line employees view owners getting more emphasis than the executives do. For the three main stakeholders (owners, customers, and employees),the perception varies in a step-like fashion with where you are in the organization.
We were also curious to see if perceptions or values changed with position in organizations. Figure 2 compares the responses of survey subjects in each of three categories: executives, mid-level managers, and front-line workers. When talking about how things should be, there is near perfect alignment. When talking about how things seem to be now, however, we see perception changes with position.
Taking the big picture view of the two sides of the graph first, we find that there is perfect agreement in the relative ranking of the stakeholder groups in both how they should be ranked and how they actually are ranked.People at all levels agreed that in today’s organization owners come first with customers and employees taking a distant second and third respectively.If given the opportunity to change, members at all levels of the organization would all like to see that ranking reversed, putting customers on top and owners behind employees in consideration. It is also interesting to note that there is virtually no significant difference in how the various members of the organization would rate each stakeholder if they had the choice.None of the stakeholder categories differs by more than 3% on the left side of the chart.
The same cannot be said, however, of the way members view the current weighting of stakeholders. Our data shows that the closer a person is to the “top” of the organization, the smaller the disparity between the way things are and the way they should be. This seems logical since executives presumably not only have a more complete picture of what their organizations are doing, but more influence over major decisions and policy setting as well. At first we thought it curious that there was any difference at all between how executives thought things should be and how they actually were. If they couldn’t affect change, then who could? After some consideration,however, we admit that there are many mitigating circumstances that explain the data. Changes of the kind the data suggest are neither made easily,nor quickly. And to make it harder, there are few good models of how to put this all into practice.
In addition to weighting the stakeholders we also asked respondents to share with us the strategies their organizations were using to serve them.We listed six common strategies for each stakeholder group. Since six strategies don’t cover all that organizations may be doing, we also left a blank line in each section to invite respondents to share any strategies we missed.The graph and table on the next page summarize the responses.
Data points indicate the percentage of respondents who indicated that their organizations engaged in a particular practice. Item numbers correspond to the strategies enumerated in the table below.
52% Grow business/market share (#1)
51% Create a demand for your product/service (i.e., through advertising,lobbying, etc.) (#2)
58% Develop new products/services (#3)
62% Cut costs (#4)
45% Minimize legal liabilities (#5)
40% Focus on long-term over short term gain (#6)
52% Involve employees in key business decisions (#7)
60% Develop employees (e.g., sabbaticals, training, good projects) (#8)
46% Share the wealth equitably (e.g., by avoiding huge discrepancies between executive and employee pay, offering gain sharing and profit sharing plans, creating ESOP’s, etc.) (#9)
48% Actively help and avoid discrimination of such disadvantaged groups as low income, people of color, homosexuals, etc. (#10)
15% Provide on-site services such as day care, dry cleaning, etc. (#11)
54% Encourage a balanced lifestyle (reasonable work hours, flexible schedules,parental leave) (#12)
54% Partner with customers to identify emerging customer needs (#13)
25% Avoid selling customers more than they need (#14)
63% Actively solicit customer feedback and respond to their preferences and needs (#15)
34% Include customers on your teams (#16)
45% Guarantee quality (e.g., warranties, ISO certification, replacement policies, money back guarantees) (#17)
29% Build self-sufficiency (i.e., create reliable products not needing maintenance, easy to use processes not needing training, or services that clients can repeat for themselves) (#18)
23% Open facilities for community use (#19)
34% Encourage employees to volunteer on company time (#20)
65% Provide living-wage jobs (#21)
37% Improve the standing of your entire industry (i.e., through standards,voluntary reporting, etc.) (#22)
34% Attend to land use needs (e.g., preserving wetlands, planning for green spaces, siting near mass transportation, preserving integrity of neighborhoods)(#23)
34% Partner with vendors (e.g., offering joint training opportunities,using win-win negotiating tactics in purchasing, etc.) (#24)
32% Offer products/services for which there is a compelling social need(#25)
43% Minimize our consumption of energy and resources (#26)
31% Produce environmentally friendly products (minimize packaging, make recyclable products, etc.) (#27)
35% Share our wealth (make charitable contributions, share our research with others, etc.) (#28)
31% Use the organization’s influence to improve society (lobby for environmental protection, etc.) (#29)
18% Advance human rights (e.g., by shunning products from companies using unjust labor practices, improving the standard of living in developing countries,etc.) (#30)
The points above the line in Figure 3 indicate strategies that are over half the respondents. Not surprisingly, most organizational energy is expended on owners and shareholders. Employees fair well too, all but one of the strategies listed being used by half or more of the organizations surveyed. Though most people think customers deserve more consideration than any other stakeholder group, not many organizations make use of the customer focused strategies listed on the survey.
Generally less than a third of the organizations surveyed engage in efforts aimed at communities or society. The only item that scored above the 50%mark is “provide living-wage jobs.” This could easily be due to minimum wage laws or our current labor shortage.
Clearly, despite all the rhetoric about “customers first,” organizations still put the interests of their owners and shareholders at the top of their consideration. The other thing that is clear is that this ranking does not match the value set or priorities of most of the people working in our organizations.
We wonder about the implications of this data.
We distributed over 800 surveys to members of organizations across all
business sectors. While most of our surveys were sent to organizations in
the Pacific Northwest, we also were able to distribute about 20% nationally.
We included 65 responses in our data base. [NOTE: we chose to exclude responses
from one to two person organizations because we felt they did not represent
the workplace experience of most people.]
The survey asked people to indicate the extent to which the needs and
interests of the five stakeholder groups (owners/shareholders, customers,
employees, local community, and the global community) were considered in organizational decisions by allocating 100 percentage points among them.Respondents were asked to first indicate how they would weight the importance of the various stakeholders if they had decision authority, and then to indicate how they perceived their organizations weighted them.
We also asked respondents to indicate the practices their organizations engaged in to serve the needs of each stakeholder group. They were able to choose from a list of typical practices as well as write in any practices not listed that their organizations used.