“Behind good brands lie stakeholder companies.” –Will Hutton, political economist, author, and columnist and Co-Chair of The Purposeful Company.

A few years ago I learned a stakeholder lesson the hard way… We had moved into a house that had a lot of deferred maintenance. One of those things on the list was getting our fences repainted. We finally got around to getting that done when we also had the outside of the house repainted.

I went into the project thinking that my neighbors on both sides would want the fences to be painted with the color of their houses – and that they would WANT to have that left up to them and their preference. And that they wouldn’t want my contractor intruding on their properties on our timetable. I proceeded with the contractor to have just our side of the fences on both sides painted the color of our house.

Well… shortly after completing that work, I heard from both neighbors independently. They both were upset that their side of the fence didn’t get painted the color of my house at the same time we were doing our side. I was surprised, to say the least. I had thought I was being considerate and they thought I was just the opposite. Sigh.

And, of course, what I didn’t think of was that they were stakeholders in how my property looked – it mattered to them what they were seeing and the impression our house and property made. I just didn’t think to include them in the process.

Perhaps seeing my neighbors as stakeholders in fence painting might be obvious to you – but it wasn’t to me. I thought I was being considerate by not having my painters invade their yards.

I learned that stakeholders are not always apparent up front. They’re not always the first set of people we think of OR, in this case, HOW we think of the impact to them. Only by engaging them, being curious, and communicating do we get to understand what a win for everyone might look like.

Business stakeholders can be hidden or excluded or just plain missed in our efforts to keep things moving and reach success. But if we miss them in our strategies and plans, we can run into impacts later.

In August 2019, The Business Roundtable created some significant buzz by reopening a conversation about companies and the stakeholders they serve.

Until around 1970, US companies’ management served five types of stakeholders: employees, customers, shareholders, the community, and suppliers. Here’s the general thinking about the role and mutual investment for each of those:

Employees As Stakeholders:

Your employees count on the ongoing success of your business so they can continue to work and receive income. In the best cases, employees invest themselves – their time, energy, and dreams – in the outcomes of your business and they take actions to make those happen. Seeing employees as stakeholders, rather than transactional workers, gives you the opportunity to create something bigger together.

Customers As Stakeholders:

Your revenues come from customers – serving them and making sure you’re providing a good value exchange keeps them happy. The best case: they become loyal and encourage their family and friends to buy from you as well. That reduces your selling and marketing costs significantly and increases the stability of your business. Treating them as stakeholders keeps that value exchange and loyalty potential in the foreground.

Shareholders As Stakeholders:

If you do have shareholders, or investors of any kind, these relationships involve an exchange of equity value and usually expertise to help you build your business faster or at all. In today’s world, we value these stakeholders more than other stakeholders to the detriment of long-term health and success (more on that below). The advantage to thinking of them as stakeholders puts the relationship on a equal footing that implies an exchange – not just financial, but also thinking, skills, and recommendations to move you forward.

Community As Stakeholders:

The health of your community – the people, services, business, institutions, and environment – reflects the health of each of its individual parts, like your business. Your business choices for how you relate to the greater community impact the health of everyone and everything in some way, big or small. The community is likely the easiest one to forget and the impact you have feels hidden or insignificant. The habits small businesses create can grow into problems as the business scales. And likewise, the habits of many small businesses together add up to create measurable impacts, positive and negative, in the community. Your contribution to your community starts with treating it as a stakeholder with an exchange of quality of life, stability of business, and general health of the people and environment surrounding you.

Suppliers As Stakeholders:

These may be your subcontractors, other businesses, utilities, or services of any kind. This support system is what enables you to keep focusing on the heart of your business. They’re invested in keeping your business going so they can continue to thrive. And while they may not recede into the background as much as your community, we do tend to forget about them as stakeholders. Without them, you have to do it all: off the grid, all the services, everything. Keep them happy and they’ll go the extra mile for you (well, maybe not utilities, but you never know).

Starting in 1970, the Chicago School of Economics, and Milton Friedman, shifted from all these stakeholders to asserting that the only ones that matter are shareholders. This is an ongoing discussion with disagreement about what the business focus should be. You can read about the pros of all five stakeholders here and the argument for only shareholders as stakeholders here.

I want to live in a world where the community health matters and that’s reinforced by the health of all its members, reflected in all stakeholders. Those businesses make a positive difference in the world and to the individuals running them. And that is why Will Hutton makes the statement in the quote, repeated again below, about good brands: businesses that people love generally serve multiple stakeholders at once and build a following because of their expanded commitment to them.

“Behind good brands lie stakeholder companies.” –Will Hutton, political economist, author, and columnist and Co-Chair of The Purposeful Company.

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