Customers, Shareholders, Employees, and Community – Who Matters Most?

If you are building your business, how do you decide who is “most important” amongst your constituents?  The answer to this question lies in why are you in business.  Are you in business to sell a product and/or a service at a profit?  If you are a commercial or “for-profit” entity, then I certainly hope you answered yes to this question!

Customers First

The first premise of being in business to make a profit is to recognize that without customers you don’t have a business.  So in establishing who has precedence it is first and foremost the customer.  This doesn’t mean the customer is always right or that all customers are created equal.  It does mean recognizing that the value of a customer is over the life of your business and an on-going relationship.  It also means meeting or exceeding customer takes precedence over other stakeholders.

For instance, high speed internet and other services were installed for a today new neighbor today. .  When the installer left, my high speed internet and other services had ceased to work.  There was no delay in realizing this, as we were using the services at the time.  Immediately upon placing a call to report the issue, I was told the service provider “couldn’t” have the installer turn back and correct the issue.  Some time at least 15 hours after they caused my services to go down, someone will be coming to check out the issue of “no service”.  Fortunately, I still have traditional phone service and a dial-up connection available.  I’m paying for redundant systems, because I don’t trust the cable service provider to care about the impact of my not having a phone in case of emergency or being able to pick-up my e-mail and access my business website from home. Of course I can get a credit for the time period without service…I can’t even buy a gallon of gas with it!  That brings up another of the stakeholder questions.

Shareholders Next

What happens when the customers feel they are being gouged and sacrificed to excessive profits, too high executive compensation, employee interests, and market value?  Although the business has a responsibility to make a return on the investment of its shareholders, is it sound strategy to create a hostile or adversarial relationship with your customers to make short-term gains?

Unless you live in a world where your customers do not have options or will never find an alternative to your product, in the long run you can’t afford to price your product or service in a manner that hurts the customer. Tomorrow does come when customers actively seek alternatives.

Shareholders are ultimately the losers when a business fails to understand customers must have top priority.  Shareholder dividends and market valuation are definitely impacted significantly by current earnings reports; they are also impacted by the historic trends and future prospective earnings.  Companies which are boycotted lose earnings and long term value. All things are “variable” in the long term.  Motivate your customers and create opportunity for viable substitutes to enter the market, and you will find competition from unexpected sources.

Employees Make It Happen

Without employees business doesn’t happen.  Recognizing that every level of an organization contributes to success and profitability is critical to keeping things on track, efficient, and effective.  The greatest CEO in the world cannot generate meaningful, sustainable results without the supporting cast to execute the vision.

The vision is not enough, nor can an organization achieve its full potential without strong leadership.  So employees need to be fairly compensated and share in the success that is generated.  Top heavy compensation leads to dissatisfaction in the ranks and less than full effort toward the objectives.  Employees make or break the business – they may go the extra mile or they can sit back and watch what happens.

Community – No Business is an Island

Isolationist practices and ignoring a business’s position, role, and responsibility in the context of its environment – economic, political and community – just isn’t feasible in today’s age of technology and communication.  Regardless of the size of your business, you interact with and are impacted by the external environment.

The “community” walks through your doors every day as an employee.  It monitors your results in the media.  It changes the way you do business through regulations, competition, and a myriad of other activities.  You can be a passive player and take what the “community” hands out, or you can actively engage and participate.

As a business, all of your stakeholders come from your community.  They benefit directly and indirectly from your activities.  How you conduct business reflects on them and determines at least part of their “return on investment”.  A business which establishes and maintains a high standard of conduct will reap the benefits.

A business which equates spreading around some cash to being a member of the community should keep in mind that true friends cannot be bought.  So those “loyal” to you while you are spreading dollars around may be nowhere to be found when times are tough or you come under fire.

What Matters Most?

In the final analysis, the business that conducts itself ethically and acts fairly will be able to satisfy the needs of ALL its stakeholders – today and over time.  The business that recognizes it must get through the short term to get to the long term will be able to craft its strategy and operations to reach and retain its customers.  By reaching and retaining those customers, it will build market share, shareholder value, employee involvement and commitment, and community “partnership”.  It is the business which can clearly recognize and prioritize the “trade-offs” that will have the sustainable business model and competitive advantage.

Copyright ©2006 FOCUS Resource, Inc.

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