lecture_notes-week four lecture notes

8/13/2019 Lecture_Notes-Week Four Lecture Notes

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New Models of

Business in Society

Week 4:

Creating Value for Stakeholders


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Week 4: Creating Value for

Stakeholders

4.1 The Emergence of a Stakeholder Approach toBusiness

4.2 Its Purpose not Profits

4.3 The Interconnection and No TradeoffPrinciples

4.4 The Friction Principle

4.5 Conscious Capitalism 4.6 Employee Engagement

4.7 Examples of Creating Value for Stakeholders


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4.1 The Emergence of a Stakeholder

Approach to Business

Brief History of the Stakeholder Idea

The definition of stakeholder

Any group or individual who can affect or be

affected by the achievement of your purpose

Sometimes its useful to think broadly, NGOs,

governments, media, etc.

Sometimes its useful to think more narrowly, justthink about customers, suppliers, employees,

financiers and communities (or society).


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Stakeholder Theory: The Basics

All businesses create (or destroy) value for

stakeholders.

Successful businesses constantly find the

intersection of stakeholder interests.

Conflict can be used catalytically for value

creation.


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Stakeholder Theory: The Basics

We never trade off the interests of one versus the other

continuously over time.

We act with purpose that fulfills our commitment to stakeholders.We act with aspiration towards fulfilling our dreams and theirs.

Stakeholders consist of real people with names and faces andchildren. They are complex.

We need to generalize the marketing approach.

We engage with both primary and secondary stakeholders.

We constantly monitor and redesign processes to make them betterserve our stakeholders.

(c) 2010, R. Edward Freeman.


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4.1 Engagement Question

Draw a stakeholder map for yourself. Who can

affect or be affected by what you do? Do you

have a purpose? [You can answer this for an

organization you belong to or just for

yourself.]


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4.2 A Good Purpose Is:

An answer to a Why Question

Inspiring

Puts a stake in the ground

Sets you apart, makes you distinct

Sets the stage for value creation for stakeholders

Makes you ask: Does Your Business Matter

Source: C. Montgomery, The Strategist, HBS Press. 2012.


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4.2 A Good Purpose is NOT

We will provide branded products and services of

superior quality and value that improve the lives of the

worlds consumers, now and for generations to come.

As a result, consumers will reward us with leadershipsales, profit and value creation, allowing our people,

our shareholders, and the communities in which we

live to work and to prosper.

The best company in XYZ industry, specializing in

satisfied customers

Source: C. Montgomery, The Strategist, HBS Press. 2012


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Southwest Airlinesdedication to the highestquality of Customer Service delivered with asense of warmth, friendliness, individual pride,and Company Spirit. www.southwest.com

NikeTo bring inspiration and innovation toevery athlete in the world www.nike.com

BMW: The only manufacturer of automobiles andmotorcycles worldwide that concentrates entirely

on premium standards and outstanding qualityfor all its brands and across all relevant segments.

www.bmw.group
http://www.southwest.com/http://www.nike.com/http://www.bmw.group/http://www.bmw.group/http://www.nike.com/http://www.southwest.com/


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MicrosoftAt Microsoft, our mission and valuesare to help people and businesses throughout theworld realize their full potential.www.microsoft.com

National Audubon SocietyTo conserve andrestore natural ecosystems, focusing on birds,other wildlife, and their habitats for the benefit ofhumanity and the earths biological diversity.

www.audubon.org

Starbucks CoffeeTo inspire and nurture thehuman spiritone person, one cup and oneneighborhood at a time www.starbucks.com
http://www.microsoft.com/http://www.audubon.org/http://www.starbucks.com/http://www.starbucks.com/http://www.audubon.org/http://www.microsoft.com/


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Think about organizations of which you are amember:

Whats its purpose?

Does it inspire? What why question does it answer?

Does the purpose make the organizationdistinctive?

Think about an organization you know thatdoesnt seem very purpose driven. What aresome its issues?


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4.3 The Interconnection and

the No Tradeoff Principles

Interconnection: Because Stakeholder interests gotogether over time, we need solutions to issues thatsatisfy multiple stakeholders simultaneously.

Value creation for one stakeholder implies value

creation for many, in successful companies. Win, win, win, win, win

No Tradeoffs: We try to never trade off the interests ofone stakeholder versus another continuously overtime. What happens when you do this?

How does making customers better off


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How do the no tradeoff and interconnection

principles apply to how you spend your time?

Do you constantly make tradeoffs, or look for

ways for tradeoffs to disappear?


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4.4 The Friction Principle

We need intensive communication and dialoguewith stakeholdersnot just those who arefriendly.

Critics are a source of value creation.

Friction among values, stakeholders, even timecan be a source of value creation.

The Friction Principle: Conflict between andamong stakeholders, conflict around values,critics, even time horizons, can all be sources ofvalue creation.


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4.4 Examples of the

Friction Principle

Tobacco

Aetna

McDonalds Amazon story Utilities listening to interveners

Good management with respect to customers.

How does a company deal with customers andemployees who are difficult to satisfy?


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4.4 What Makes a Company

Successful

Customers whose lives are better because of your

products and services

Employees who are engaged

Suppliers that make you better

Communities that are supportive


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4.4 What Makes a Company

Successful

Managing multiple stakeholder relationships

simultaneously:

Finding the intersection of stakeholder interests

Avoiding Tradeoffs

Using the friction of conflicting interests and of critics

to produce innovation

Seeing business and ethics as necessarily connected


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Do you spend most of your time dealing with

people who agree with you? How do you deal

with your personal critics?


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4.5 Conscious Capitalism

One way to put some of these ideas togetherhas gelled under the rubric of ConsciousCapitalism http://www.consciouscapitalism.org/

Four key principles that they argue arefundamental to running a great business:

Purpose greater than profits

Multi-stakeholders without tradeoffs

Conscious leadership

Conscious and supportive culture
http://www.consciouscapitalism.org/http://www.consciouscapitalism.org/http://www.consciouscapitalism.org/


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4.5 Conscious Capitalism

As businesses become more aware (more

conscious) of their effects in society, they can

consciously create more value for their

stakeholders.


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4 6 E l E t i th


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4.6 Employee Engagement in the

New Story

Puts together a comprehensive model of the role ofbusiness in society Purpose greater than profits

Multi-stakeholder View

Conscious Leadership Conscious Culture

Lets focus on these last two principles for a fewminutes. Many of these new story companies pay anenormous amount of attention to employees.Productive and happy employees who share yourpurpose will do great things for other stakeholders.Thats the idea.


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4.6 Employee Engagement

CEOs tell how this works:

Gardner on CC and Employee Engagement

Tindall on Engaging People

These ideas should come as no surprise. Lets

see what the research says about thriving

employees.


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4.6 What are Thriving Employees?

Thriving employees are not just satisfied and

productive but also engaged in creating the

futurethe companys and their own. Thriving

employees have a bit of an edgethey arehighly energizedbut they know how to avoid

burnout.

Source: Gretcher Spreitzer and Christine Porath, Creating Sustainable Performance, Harvard Business

Review (January-February, 2012), p. 94.

4 6 F M h i C t th


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4.6 Four Mechanisms Create the

Conditions for Thriving Employees

1. Providing decision-making discretion

2. Sharing information3. Minimalizing incivility

4. Offering performance feedback




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4.6 Thriving Employees

Demonstrate 16% better overall performance (as

reported by their managers)

125% less burnout (self-reported)

Are 32% more committed to the organization

Are 46% More Satisfied with their jobs



h i i l &


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4.6 Thriving Employees &

Performance

Blue-collar workers who scored high on thriving

performed 27% better overall than their lower-

thriving colleagues.

Thriving blue-collar workers were 53% more likely toexperience positive career progression than other

employees.

White-collar workers who scored high on thriving

performed 16% better overall than peers with lower

scores.




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Have you ever been a part of an organization

where the employees were thriving, and you

were thrilled to be a part of the organization?

What did that feel like? Was there a negativeto this organization?

4 7 Examples of Creating Value for


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4.7 Examples of Creating Value for

Stakeholders

Whole Foods MarketJohn Mackey

The Container StoreKip Tindall

The Motley FoolTom Gardner


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What do you see as the main challenges for

companies like Whole Foods, and other

Conscious Capitalism companies?

Further Reading and Resources for


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Further Reading and Resources for

Week 4

Conscious Capitalism: Liberating the Heroic Spirit of

Business, by John Mackey, Rajendra S. Sisodia, Bill

George

Managing for Stakeholders: Survival, Reputation and

Success, by Edward Freeman, Jeffrey Harrison andAndrew Wicks

Managing for Stakeholders, Technical Note by

Edward Freeman

Videos about Stakeholder Theory:

http://www.youtube.com/playlist?list=PL15B809B055A

2C795
http://hbr.org/product/conscious-capitalism-liberating-the-heroic-spirit-/an/10845-HBK-ENGhttp://hbr.org/product/conscious-capitalism-liberating-the-heroic-spirit-/an/10845-HBK-ENGhttp://yalepress.yale.edu/yupbooks/book.asp?isbn=9780300125283http://yalepress.yale.edu/yupbooks/book.asp?isbn=9780300125283http://store.darden.virginia.edu/managing-for-stakeholdershttp://www.youtube.com/playlist?list=PL15B809B055A2C795http://www.youtube.com/playlist?list=PL15B809B055A2C795http://www.youtube.com/playlist?list=PL15B809B055A2C795http://www.youtube.com/playlist?list=PL15B809B055A2C795http://www.youtube.com/playlist?list=PL15B809B055A2C795http://store.darden.virginia.edu/managing-for-stakeholdershttp://store.darden.virginia.edu/managing-for-stakeholdershttp://store.darden.virginia.edu/managing-for-stakeholdershttp://yalepress.yale.edu/yupbooks/book.asp?isbn=9780300125283http://yalepress.yale.edu/yupbooks/book.asp?isbn=9780300125283http://hbr.org/product/conscious-capitalism-liberating-the-heroic-spirit-/an/10845-HBK-ENGhttp://hbr.org/product/conscious-capitalism-liberating-the-heroic-spirit-/an/10845-HBK-ENG

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