It's not just about having a focus; it's more about where you are placing your focus.

Why CEOs Need to Focus on Shifting from Shareholder Value to Stakeholder Focus: 24 Questions for Building a Better Model

It’s all but official: shareholder value is losing its luster. Companies in the Business Roundtable, from Apple to Walmart to JPMorgan Chase, are making a strong case in their recent Statement on the Purpose of a Corporation that it’s critical to invest in all stakeholders for long term success.

The document was signed by 181 CEOs and called for other companies to join them in creating a culture that delivered excellence to customers by focusing on its relationships with employees, vendors, suppliers, customers, and shareholders. The desired end goal is that when all stakeholders are catered to, they’re also able to generate greater value to shareholders over time.

Though the notion hasn’t been without pushback and doubt, media commentators and politicians are hailing it as a step in the right direction. The move is being touted as a deepening of social responsibility that will ultimately prove beneficial for all — and set a very high bar for companies to remain competitive.

Is your company prepared to become what may be among the biggest corporate shifts of our time? These 24 questions provide a starting point for adopting a stakeholder-centric community:

1. What is the purpose of your corporation?

The report from the Business Roundtable poses a genuine question: what is the purpose of a corporation? The answer is a conglomerate of moving parts: Businesses support the economy by creating jobs, which allow employees to contribute to the economy by purchasing goods and services. Businesses create products and services that people need or want to buy, also helping to spur the economy. Businesses generate tax revenue so that governments can contribute to a better quality of life for all, including providing national defense, healthcare, supplemental income, food benefits, roads and infrastructure, and energy.

Our society as we know it wouldn’t be possible without our economy, which is directly tied to job creation. Therefore, corporations may arguably be considered the catalyst of our economy and society. As a corporation, you have a social responsibility to all stakeholders you serve to continue promoting better living for all.

2. Who are your organization’s stakeholders?

As you begin to adopt a new focus, it’s important to make your initiative as inclusive as possible. This means recognizing each stakeholder in your organization and the roles they play: employees, vendors, suppliers, customers, the community, and shareholders.

Some companies choose to rank stakeholders based on the level of importance to the organization, but this exercise in some ways defeats the purpose of shifting to the stakeholder mindset. The idea is that all stakeholders contribute to the organization’s success, and creating an inclusive environment will allow each group to thrive.

3. Why is it important to shift focus from shareholders to stakeholders?

The current model tends to cater to shareholder interests, allowing shareholders to receive the lion’s share of your successes and have more say over the decisions a company makes. However, as job markets tighten, new skills become in demand, long-standing brands are dying, and competition increases, companies are realizing that there may be greater value in expanding their business decisions to include other stakeholders.

CEOs who are heading down this path do so with the intention of creating value for all, not just shareholders. They recognize that there is no business without customers, and employees are the ones who are tasked with caring for those customers. Without capable, empowered employees, customers are not taken care of. Workers may feel ill-prepared to do their jobs, which could lead to higher turnover and empty positions.

These cycles can spell disaster for companies who don’t or won’t address them. Without including other stakeholders in greater company objectives, value for shareholders will eventually become nonexistent.

4. How will the shareholders react?

Such an organizational shakeup is likely to stir emotion and response from shareholders. Companies should be prepared on how to gain shareholder buy-in and provide support that shifting focus is in the best interest for all.

5. How can we create consistent and transparent guidelines for protecting stakeholder interests?

Documenting a system of governance to protect all stakeholder interests will be key in executing this new strategy. Systems, processes, best practices, and other specifics should be carefully collected and distributed to ensure that all stakeholders are represented in a consistent, transparent manner.

6. Does social purpose also create value?

Can you place a dollar amount on social responsibility, and if so, is it greater than failing to invest in social purpose? If the answer is no, then companies should seek ways where value isn’t sacrificed by doing what they feel is their social responsibility.

7. How can we mitigate conflicts of interest or trade-offs between stakeholders?

One of the biggest points of confusion when focusing on stakeholder value is navigating the inevitable trade-offs when conflicts arise. Case in point: pricing a product at a lower price may result in a higher demand for that product and more value for suppliers, but it may also result in lower wage growth for employees and less value for shareholders. The inverse may also be true: higher-priced products mean more value for shareholders and employees, but not for customers or vendors. Products that are priced too high may result in fewer customers over the long term and end up reducing value for shareholders.

This is one of many examples that companies must consider when choosing how to cater to all interested parties. Long term viability may be unattainable when one stakeholder receives too much or too little focus.

8. How will we address compensation that’s primed for long term incentives?

Employees who feel like they’re only working for a paycheck are unable to feel as though they’re contributing to a greater cause. By encompassing employees in the overall success of a company, their compensation or other benefits may need to be adjusted to ensure each person can partake in the company’s success.

9. Should we shift to a local procurement focus?

Corporations are increasingly interested in giving back to their own communities. Many are making a greater push to purchase local goods, or at a minimum, ordering domestic products to spur the country’s economy at large. Given that local communities are part of the larger stakeholder group, companies may want to investigate their procurement sources and processes for greater impact.

10. What are the environmental consequences?

As changes are introduced throughout the organization, corporations must also consider the environmental impact on their decisions. Many companies use this as an opportunity to find greener, more eco-friendly alternatives that include the environment as a stakeholder.

11. How will we communicate these new values to stakeholders?

Communication will be critical in gaining buy-in and understanding from all sides. Your value will become the driving force behind everything you do, from hiring and onboarding to marketing to your customers. This is an excellent opportunity to strengthen your brand from the inside out and infuse your stakeholder-centric purpose in everything you do.

12. What investments will need to be made to ensure stakeholder success?

Companies must consider the tools, technology, and training they will need to empower their workers. Upskilling, continuing education, automation, and additional spending on employee benefits and perks may be required that will allow the company to serve the interests of its stakeholders.

13. What are our stakeholder expectations?

Depending on the stakeholder’s role, each will have certain expectations from the corporation that should be addressed. For example, customers will expect you to continue producing a high-quality product at a fair price. Employees will expect the same so that customers will continue buying the product and allow them to continue serving them.

These expectations will help to drive key business decisions when considering the best interests for all stakeholders. As we mentioned previously, there will inevitably be some tradeoffs that occur, which is why it’s important to consider the total impact of every decision.

14. How can we proactively resolve disputes among stakeholders?

Stakeholders may have disputes over resource allocation and other issues, even if you’ve carefully mapped out the process. The best defense in resolving disputes is simply to listen to all sides before commenting. Help each stakeholder see the other pieces of the puzzle and how they give and take are essential to everyone’s success.

15. How will we collect and leverage feedback from stakeholders?

Many companies already make it a practice to collect feedback from employees and customers. But an organization that’s focused on all stakeholders must expand their feedback program, including a plan of action to leverage the responses.

Best practices for implementing a feedback system is to include ask for feedback regularly, make it easy for users to participate, offer multiple channels for feedback, and create the right environment for feedback to flourish.

Arguably the most important element of any feedback program is the follow up that shows how you plan to use the suggestions you receive. If you implement changes based on the feedback from your customers or employees, let them know about it. It shows that their input goes in a long way in creating a better product or company for all, and may encourage them to continue offering their opinions.

16. What metrics should we use to gauge the new strategy’s success?

Like every program or department in your company, you’ll need to develop a set of metrics to gauge how well your new strategy is working (or not working). Choosing the right metrics can give you greater insight into how these changes affect your sales and profits, but they can also help you uncover details about employee engagement and satisfaction, productivity, customer sentiments, and other factors that contribute to your success.

Right now, this is largely uncharted territory for many companies. There have been several generalizations made about how focusing on stakeholder success is impacting companies, but so far, there aren’t any clearly defined metrics on how these generalizations were developed.

A good place to start is simply comparing company financials over time. Does business seem to be growing? Are you gaining new customers? Are your existing customers still buying from you?

HR indicators of success could include turnover rates, hiring and onboarding times, number of applicants, and even employee sick days used. You could compare how better benefits or flexible work schedules affect productivity and employee engagement.

You might also include external factors, such as social media buzz and media exposure. Companies may be able to pick up free publicity by spurring the conversation and sharing insights around this shift to a stakeholder focused workplace and even provide guidance for other companies to follow.

17. What do your employees want or expect from an employee-centric workplace?

If you’re at a loss as to how to cater to employee interests, start by asking them. Find out what they need and expect from a job, what leaves them feeling fulfilled, and what makes them want to contribute and grow within the corporate environment. What are their goals? What organizations or causes are special to them? Ask them what’s preventing them from reaching career fulfillment and what tools they believe they need to succeed. This can open the door to multiple conversations that will create an environment that employees want to be a part of.

18. What policies will you need to refine?

As you begin to collect a broader picture of a stakeholder-focused workplace, you may need to re-evaluate your policies to ensure total alignment. HR policies and policies that affect your customers should become top priorities in reshaping your organization.

19. How will the shift help you remain competitive?

We’re in a critical time when unemployment rates are so low that many companies are struggling to find top talent. More people are going back to work, and more people are starting to work for themselves, thanks to the rise in freelancing and remote work. It’s estimated that nearly half of the U.S. workforce will be freelancers by 2020, and employers must find a way to fill the gaps left behind.

One way that companies can compete for talent is simply to adopt the perks and benefits that matter most. Flexible schedules are more desirable than higher pay for most employees, with 84% of respondents saying it’s the most important factor when searching for a new job. Others want a better work-life balance, a culture of wellness, mental health days, paid parental leave, and even a greater sense of purpose that goes beyond working for a paycheck.

By tuning into what your employees desire most, you’re better positioned to achieve a more inclusive workplace culture whose benefits will extend to other stakeholders.

20. How can you communicate an employee-centric environment to potential talent?

Communicating your focus on employee success will be critical in helping you compete for talent. Companies need to be able to communicate these elements in their hiring strategies to boost their appeal to candidates. When done correctly, companies may be able to keep their talent pool filled by being a place where people want to work.

21. What does our plan of execution look like?

Such a major undertaking will require careful planning and execution to ensure all stakeholders are on board and fully aware of what to expect from these changes. Companies should devise a plan of action over the course of several months or years, then break that plan down into smaller objectives and goals.

22. What is our timeline for transitioning to a stakeholder focused model?

Part of your plan of execution should include a timeline for rollout. Set benchmarks and checkpoints along the way to ensure you’re hitting key objectives in a timely and consistent manner.

23. How will we track the progress of our shift to stakeholder value?

Suddenly deciding to move away from shareholder interests to include the interests of all stakeholders doesn’t happen overnight. Rather, companies who invest in careful planning and priorities will need to track their progress to see how and where they’re moving the needle. Allocating resources, setting benchmarks, developing ongoing communication, and gauging metrics will be key in helping companies achieving their new vision.

24. Are we shifting our focus with sincerity?

The true value and success derived from shifting to a stakeholder focus are unachievable without authenticity. It’s not just a matter of trying to break ranks with the way things have always been done in the hopes of gaining attention or with ulterior motives.

To be clear, it’s considered a risky move by some of the most powerful companies and CEOs in the world, especially given that the effects of such a move are still unknown. Therefore, companies should only consider moving forward with a stakeholder-centric environment if they truly believe it is in the best interest of all parties involved.

As more companies consider becoming a more inclusive operation that caters to all stakeholders, we’ll begin to recognize the full effects of daring to do something different.

Robert Moment is a Personal Branding Strategist and Executive Leadership Coach who specializes in teaching CEOs, Executives, Professionals, and Entrepreneurs how to unlock their potential to succeed and be the “Go-to” leader in their industry.

Robert is the author of the following books:

• Executive Leadership Coaching Guide
• Principles of Leadership Development

Visit www.WhatMakesYouStandOut.com to download FREE chapters of Principles of Leadership Development.