Research confirms the most important stakeholder group
Recent research has proven that the most important stakeholders of large organizations are definitely employees – they come ahead of customers, suppliers, community groups, and especially far ahead of shareholders,
For his PhD research, Nigel de Bussy from Curtin University in Western Australia, conducted a national study to identify the stakeholders who have the most impact on corporate financial performance.
He surveyed 626 Australian companies each employing more than 100 people to measure how well stakeholder orientation towards shareholders, employees, customers, suppliers and the community correlated with corporate financial performance.
A stakeholder is a group or individual who can affect or is affected by the achievement of an organization’s objectives. Stakeholder orientation is about creating social as well as economic value for stakeholders, listening and responding to stakeholder concerns, with a spirit of goodwill between the two parties.
De Bussy reported that employees are the most vital stakeholder group by a long way. He found that companies that actively engaged in stakeholder orientation activities achieved stronger financial performance, with a correlation of 0.84 for employee programs compared with the correlation for customers (0.36), suppliers (0.35) and communities (0.32). The correlation of financial performance with shareholder orientation was minimal at 0.08.
The rigorous research was conducted among chief financial officers and not among public relations practitioners or marketing executives who may have been biased about the impact of stakeholder orientation because they are directly involved with driving such efforts. CFOs were also considered to be better able to comment on their organization’s financial performance.
If people quote the mantra that business should be totally focused on the customer, you can tell them the pre-condition is that they need to focus on their employees as the top priority because employee satisfaction leads to customer satisfaction. Organizations ‘need to get their house in order’ before they focus externally. Yours should should make sure it does the same.