Enterprise Engagement Alliance 2022 Class 1 Stakeholder Management Theory and Practice

EEA Stakeholder Management Class 1: Introduction to the Foundation of Stakeholder Capitalism

Contrary to the negative attention the Stakeholder Capitalism is receiving in the conversative and progressive media conflating it with “Woke Capitalism” for fig-leaf marketing, Stakeholder Capitalism focuses on creating value for customers, suppliers, employees, communities and for the people with the money to invest. This first class in the new Enterprise Engagement Alliance curriculum focuses on the fundamental principles underlying Stakeholder Capitalism through an interview with Ed Freeman, Professor, University of Virginia Darden School of Business, author of Strategic Management, A Stakeholder Approach; Managing for Stakeholders, The Power of And, and other books.

Below are key takeaways from the first course of the completely updated 2022 Enterprise Engagement Alliance Stakeholder Management and Enterprise Engagement curriculum focused on helping organizations implement a strategic and systematic approach to human capital management, measurement, and reporting across the enterprise.

The recording with questions from the audience will be available for four weeks on the EEA Curriculum library and then will only be available to EEA paid or academic members.

This session addresses Stakeholder Management practices, which advocates for a strategic management approach that addresses and accounts for the needs of all stakeholders, including not only shareholders but employees, customers, supply chain and distribution partners, and communities.

1. What is Stakeholder Management?
Freeman uses the same definition for Stakeholder Management and Capitalism, a philosophy rooted in the principle that successful businesses create value for customers, employees, supply chain and distribution partners, and communities.

He had no other motive in writing the Strategic Management: A Stakeholder Approach in 1984 other than to help coalesce the work of earlier thinkers on the role of stakeholders into a practical process any organization could implement.

According to Freeman, “the task of executives is to create as much value as possible for stakeholders without resorting to tradeoffs. Great companies endure because they manage to get stakeholder interests aligned in the same direction.”

Stakeholder Capitalism is all about having profits but in a way that is admirable to people, instead of reviled, as is often the case.

Implementation is not rocket science. It means rethinking what we are already doing but taking into account the interests of other stakeholders affected by that action and what can be done to enhance the connectivity and alignment.

2. Key Principles
Organizations need to start with a clear purpose that is not just a poster on the wall or on a business card but principles that get baked into the organization’s culture and operating system—easier said than done.

Clear principles set the stage for discussion; good judgment is required to find solutions that address the interests of all stakeholders.

It’s not necessary to turn an organization upside down to test the principles of Stakeholder Management: a good place to start is employee engagement, which is a significant issue for many organizations, or sales engagement--how can the organization improve the customer experience. The best solutions are based on purpose and are strategic, systematic, and measurable, not bells and whistles and widgets du jour.

To make these connections, it’s necessary to break down the silos between departments that create confusion, inefficiency, and unnecessary distress.

3. Skills Required of CEOs and all management in Stakeholder Capitalism
Creative thinking—the ability to imagine new solutions that defy the old notion that organizational resources are limited.

Communications and negotiation—the ability to convey key messages clearly and find common ground between stakeholders and the organization’s purpose, mission, and values.

Emotional intelligence—understanding how each person wishes to be treated, appreciated, what their needs are, rather than rolling them up into a statistic.

Purpose, Values, and Feedback—the ability to articulate and manage through feedback the give and take of organizational purpose, values, and stakeholder interests.

4. The Future of Stakeholder Capitalism
Freeman believes that the shift to Stakeholder Capitalism is well into the fourth if not the fifth inning in US baseball parlance, because there are many practitioners who have achieved success without necessarily using the Stakeholder Capitalism nomenclature or seeking special attention. These include companies such as Motley Fool, Container Store, John Mackey’s Whole Foods and other practitioners of Conscious Capitalism, B-Lab companies, and, and many others, he points out.

The shift away from Shareholder Capitalism is inevitable, he believes, because Stakeholder Capitalism is just better business.
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