Most companies face issues from time to time when they have to make a decision which may lead to a conflict between different stakeholders (not just shareholders). How should they deal with this conflict? Of course companies exist to make a profit but what about in terms of day to day stuff? Let’s say there is a certain Daytona Beach maternity photographer who is outperforming everyone else. How should the company decide which interest group to put before the others?
In terms of hierarchy of needs, I think any business could and should use this simple framework to decide who the most important person in a business is
1) This always without fail has to be the customer
2) The employees. They are the ones making the profit and employed as ambassadors to the customer on the companies behalf
3) The shareholders. Without their investment and support their would not be a business
4) The board of directors
In the 1990s, AMEX had to restructure and I always remember this anecdote. The new President decided to stream line and got rid of many Vice Presidents and other senior people in the business. This was difficult for him as he had known many of them for years and his move was criticized as there was a feeling that the company was going to be losing too much knowledge in one go.
After a year or so, when he was asked about the effect of those firings, he is reported to have said that what he regretted was the fact that it made no difference to the business at all from a capabilities point of view. Senior management and Middle management need to be constantly reviewed and the question needs to be asked – are they still adding value?
The interesting thing though is that when you look at an organization chart, the Board of Directors are at the top to denote seniority. I am in the camp that likes reverse charts, which show how important someone is in an organization depending on how closely they are involved with the client in either selling a solution to male cat spraying to them or producing the product for them.
SAS airlines went through a radical change in the early 1980s which transformed the business and one of the key changes they introduced was giving reservation and booking staff the authority to deal with customer’s complaints and issues. Staff had real power and everyone else in the organization was meant to support this chain.
In terms of the importance of customers, you would hope that this is self-explanatory but I am amazed at how frequently companies forget about the principle of consumer sovereignty. To help focus on this point, let me badly quote you Jack Welch.