Beyond trade-off thinking: Stakeholders, Synergies and Interdependencies
“Managing for stakeholders is not about trade-off thinking. It is about using innovation and entrepreneurship to make all key stakeholders better off and get all of their interests going in the same direction.” ~ R. Edward Freeman, Jeffrey S. Harrison, and Andrew C. Wicks
Systems thinking is being adopted by business with the concept of stakeholders. Traditional businesses have focused on one main stakeholder – the investor or shareholders. One of the most successful 21st century entrepreneur, John Mackey, is challenging the conventional wisdom of the primacy of one stakeholder.
Stakeholders as the Essence of the Company
Mackey, the co-CEO and founder of Whole Foods, is literally upgrading capitalism for the 21st century. In his book Conscious Capitalism, written with Raj Sisodia, he reimagines companies as being “conscious businesses.” One of the main hallmarks of these businesses is that “they treat satisfying the needs of all their major stakeholders as end in themselves.” This compares to traditional business who “often treat their stakeholders other than investors as the means to achieving their ultimate goal of profit maximization.”
Leading change in this environment means serving the needs of multiple constituents and moving away from a “trade-off” mentality. Mackey makes this point emphatically. “This is one of the most important ideas in this book: If you look for trade-offs, you will always find them….Even if they are not there, our analytical mind can always conjure up potential trade-offs and potential conflicts, and we will begin to see them.”
Mackey created the ‘Whole Foods Market Stakeholder Interdependence Model’ to align the interests of all their major stakeholders. Create “Win6 relationships” is how Mackey explains harmonizing the interests of all their stakeholders.
Whole Food lists their stakeholders as:
• Loyal, trusting customers
• Passionate, inspired team members
• Patient, purposeful investors
• Collaborative, innovative suppliers
• Flourishing, welcoming communities
• A healthy, vibrant environment
Shared Ends Leading to a Healthy ‘Corpus’
It’s clear by this definition that improving the organization means more than just looking at for your own team, department, division or company. You need to balance the part with the whole – balancing your team’s needs with the welfare of the company and all the stakeholders.
Mackey compares the health of a body to the health of a conscious company. “Just like you can’t really understand the health of life by dividing it up and analyzing its parts,” you can’t understand
Conscious Capitalism well until you think with a holistic systems mind set.
He even makes an interesting etymological connection. The word corporate derives from the Latin corpus which means body. Mackey states that all stakeholders “should function as organs of a single body…and all should be respected, valued, and integrated into the functioning of the enterprise.”
“We try to make all our stakeholders feel like they’re part of the tribe. Transparency, great customer service, highest quality, environmental activism – all those things matter to employees and customers and all of our other stakeholders. We really don’t see any difference across our stakeholders and [we] treat them all as one.” – Casey Sheahen, ex-CEO Patagonia
Sticking with the health theme, selfish, short-term interest of one group, at the expense of other group members, can result in a sort of ‘stakeholder cancer,’ according to Mackey.
The nature of systems, in the natural world or the business world, is one of synergies and interdependencies. The business systems of the 21st century are about value creation rather than value division. “We should not ask how best we can distribute the burdens and benefits across the stakeholders, but we can create as much value as possible,” Mackey explains.
Embracing a stakeholder (systems) approach to growth, like John Mackey advocates, allow us to better understand the interdependencies related to healthy change and make a bigger impact on our organizations
This is the hallmark of stakeholder model: creating value for all of its parts.