As we build a business, especially in the early days, we pay attention to certain stakeholders first and foremost—our investors, our founders and key people, likely our customers. But that’s not always the case depending on the product we’re producing.
A common mistake new businesses make is not seeing the system of stakeholders broadly enough, and not having a strategy to work with all of them in a cooperative way to maximize the relationships. Your stakeholders include everyone who interacts with your company: employees, potential employees, investors, customers, potential customers, suppliers, community, government, competitors, your family, your employees’ families. Many companies also look at intangibles like the environment or social values like sustainability as stakeholders too.
When you take a broad view of who your stakeholders are and you consider them all as allies who can help you build a better business, you begin to see the leverage points where you can get the most benefit for all concerned.
Using a cooperative model helps you build great relationships that support and reinforce your goals. This model is from Ed Freeman, from the Darden School of Business at the University of Virginia, who spoke at the Conscious Capitalism 2013 conference last weekend in San Francisco (see a quick video of the theory here).
The four principles Freeman offers to make the most out of your stakeholder relationships are:
1. Interconnectedness of stakeholders. What matters most isn’t which stakeholder is most important, but the fact that they are all connected. What affects one affects all, so it is critical to see them all as a part of a larger system.
2. No trade-offs. One stakeholder’s interests don’t matter more than another’s. If you look for trade-offs, you’ll find them. Instead, insist on no swapping of one stakeholder’s needs in exchange for another’s, and you tap into the greatest of all human powers – creativity. When you don’t allow your team to sacrifice one side for the other, they must be creative in finding mutually agreeable solutions, which are absolutely possible.
3. Conflict is a good thing. Between and amongst stakeholders, between one value and another. These pressure points trigger our imagination and force us to create more value in our solutions and approaches.
4. Human complexity. People are complicated! Business is a deeply human activity, and whole human beings show up at work. Recognize that all of the people involved in your organization - all of the stakeholders - are complex. The traditional carrot and stick model of reward and punishment conjures what image? A jackass. People are more complicated than jackasses, but if we treat them that way they will act like one. Recognize that you need a personal and specific approach to deal with each of your stakeholders, there is no one-size-fits-all approach.