In this post, you will see why small & medium sized businesses need to engage in stakeholder capitalism and how to do it.
When you pull back through the political drama of the World Economic Forum, there is one key point that the forum is advancing. It’s this: businesses need to exist for more than just the shareholders. It needs to exist to serve all stakeholders.
This seems hopelessly out of reach for most businesses, when there are more immediate demands that they need to address. Payroll, hiring and retaining key employees, receivables, etc seem much more urgent.
In face of these daily challenges, shouldn’t the owners of the company put their own interests first? Not taking steps to reshape your business can be fatal in the long-term. Especially for small businesses that can feel the effects of any change in the economic climate.
The best way to serve your own interests is to engage in Stakeholder Capitalism.
Stakeholder Capitalism is not about putting the business owner’s interests at the expense of everyone else. It is instead about holding it on an equal footing with all other stakeholders that touch your business.
Now more than ever, founders and business owners of small, medium, or large companies need this if they are to recruit & keep top talent and grow—in good times or bad.
Engaging in Stakeholder Capitalism is the best way to do it to stay competitive and relevant in the marketplace for customers, vendors, and talent.
How to Make Stakeholder Capitalism work for Small & Medium Sized Businesses
1. Expand the business purpose and mission.
Small businesses often exist to serve its owners, but expanding its mission can mean a shift in actions to improve the business.
For example, a dentist can exist not just to make a living, or as most cliched ads say “to make you smile.” But instead, a dentist exists to improve public health in a community. The scope of activities that the office now stands for grows.
In service of such a larger mission, the dentist is more likely to do more outreach work. It means speaking. It means working with healthcare providers and holistic practitioners to improve health of the community. The goodwill, authority, and trust that comes with acting on such a bigger purpose and mission can grow the business and create a line-up of talented staff that wants to work for such a person. It means using the office in the off-hours to host learning workshops for members of the community.
And if this works at the level of a dentist, it can definitely work for larger businesses.
Is your mission and purpose centered around your needs, or is it an expansive vision that incorporate all stakeholders? The first step of stakeholder capitalism begins with growing that.
2. Re-map the value.
This means looking at value creation in the organization with a fresh lens. While previously the dentist generated value when she was working on a patient, now the dentist is generating value when she is also engaged in education, outreach, or taking a leadership position in her community to improve public health outcomes.
She is becoming the hub of these activities and conversations in her community, and she is emerging as a leader in it through the sole virtue of her accommodating the dialogue.
This can be scary at first. But as the hub of creating greater health in her community, she is going to attract more customers, more media, and better talent to work with her clinic.
Have you looked at exactly what parts of your business generate value for stakeholders? How would it change if you embraced a bigger vision?
3. Engage others in the conversations
Whether it be vendors or employees, stakeholder capitalism is an inclusive model of growth. Management and the workforce are removed from one another. But stakeholder capitalism demands that everyone becomes an active participant in the conversation on how to create greater value.
Demanding that from employees and creating that for vendors and customers is where the magic happens.
After screening for technical skills, and overall personality fit with the business, also understand their alignment with your bigger mission & purpose.
Help vendors understand your greater vision and back it up with news at every interaction with the vendor. This is about walking the talk. This is likely to galvanize both vendors and employees to step up and find greater ways of contributing to this broader vision, while enriching themselves in the process.
A dentist who is on a mission to not just get patients in chairs, but to improve public health in her community is likely to develop a closer relationship with her vendors and employees. Vendors are likely to spotlight her in their trade publications (expanding her reach further), but also make her an example for others to follow.
This type of leadership gives even small businesses an unbeatable advantage – even in hard economic times.
Have you involved your stakeholders in a conversation about your bigger vision? How can you involve them more frequently?
4. Adapt Incrementally
Finally, evolve your mission, purpose and change the business when time comes. This is supposed to be a co-creative process. When you engage in dialogue with other stakeholders in the service of your mission, try to understand their pressing needs, wants, and desires. Understand what is most important to them.
A dentist might find that her patients struggle mostly with diet and nutrition in order to keep their dental health sound. Her next steps might involve partnering with a nutritionist or dietitian or even a meal-prep company and providing another level of service to her stakeholders.
This can lead to untapped revenue potential while also serving her stakeholders in greater ways than ever before.
The Business Roundtable, leading executives from across the world are embracing this. Now is the time to do the same for your organization, whether it be a small, medium or fast-growing business.
Have you engaged in a dialogue with your stakeholders to understand what other things they are looking? Have you tried serving those needs? Stakeholder Capitalism is not a seasonal trend, but here to stay.