Stakeholder theory, or, who pays for the coffee?

Who are your stakeholders? Who would you consider important enough to your business, that you would consider buying them a cup of coffee?

The list of stakeholders is often longer than we realise, but can include:

• Investors
• employees
• creditors / funders
• customers / clients
• activists
• suppliers
• etc.

Let’s look at a few scenarios.

Employees

The tea lady was a common feature in offices earlier in the last century. Tea breaks were clearly defined periods of time to improve efficiencies but required an extra salary. Many decided to do away with the extra salary and have staff make their own cups of tea. Inevitably this led to longer breaks at random times. A cost benefit analysis as to whether the extra salary of a tea lady provided a more structured workplace and greater productivity would be an interesting activity. But it may be that in some environments, the benefits of the cross fertilization of ideas in the tea room, and improved wellbeing from the ‘switching off’ to go and get yourself a cup of coffee is worth the momentary loss of productivity. I suspect the answer may be different depending on the industry.

There is even a variety of opinions about where morning tea supplies sit on budget and what is included. I recall one entity spending almost a year discussing whether the company should provide Milo for the staff or whether the staff had to bring their own. I have also seen another company that provided morning tea supplies so generously that they effectively fed a number of staff almost 24/7. Just like the ‘tea lady’ discussion, there are pros and cons regarding morning tea supplies. Employers have long known the benefit of providing caffeine for employees, but we rightly have become more aware of the importance of staff wellbeing in recent times. (My practical advice to spending a year debating this, is go with popular culture. Consider buying supplies from an appropriate office supplier, limited to what they stock).

For Purpose[i] entities (NFP’s) find this particularly challenging where staff are not only expected to take much lower salaries, they are also expected to work with fewer resources and incentives. I have heard many discussions that patronizingly refer to even the slightest of an employee benefit as ‘Tim Tam’ money. The reasoning behind this phrase is that donors don’t give money to charities expecting that staff can have indulgent biscuits like Tim Tams. While funds for ‘For Purpose’ entities are usually tight, it doesn’t stop the need for ensuring the wellbeing and motivation of staff, especially when requiring them to go above and beyond. A further complication for ‘For Purpose’ companies is that some work in less pleasant environments where job satisfaction might be in short supply, or even worse, vicarious trauma. Wellbeing costs must be considered.

Partnerships?

There have been many awkward moments while deciding who pays for the coffee at cafe registers. Many effective collaborations have formed over a cup of coffee that have ‘added value’ to many organizations. Players with an unhealthy understanding of game theory may see this as an opportunity for power games but both game theory and stakeholder theory steers away from power struggles. But everyone still has to work within their budget.

So, who pays for the coffee?

Stakeholder analysis is a great way to understand where our efforts need to be placed to ensure effective relationships.

Stakeholder Management has come a long way from our embryonic exposure from R. Edward Freeman’s, Strategic Management - A stakeholder approach and Porter’s Five Forces that helped to enlarge our view of the influences on an organization.

Freeman’s definition of a stakeholder is a group or individual who can affect, or are affected by, the achievement of an organization’s mission. While the list may be too long to enable us to embrace all, we often underestimate the damage done by slighting the wrong group.?

For example, once upon a time you could get away with almost treating a supplier with disdain, after all they should be grateful that we are giving them our custom. But with increasing market failure and supply chain issues, disappointing our suppliers may be to our detriment.?

Yet for the cost of a cup of coffee in the right setting, we can save thousands by improved efficiencies in areas from property management, personal management instruction, supply chain issues, and the list goes on.

My husband and I had a solution for coffee expenses that worked for us for many years. We were both working from home for a ‘For Purpose’ company with limited resources. (This is the germination of my thoughts on Conflicts of Interests, but that is an article, or hopefully a PhD thesis, for another time). We became members of a coffee shop franchise with ‘buy one get one free’ benefits that had a cafe close by. We frequently held meetings at the cafe and were able to comfortably buy someone a coffee any time.?

The point of this example is that solutions should be sought, because stakeholder theory is important and worth investing in.

When conducting Risk management and WHS seminars or meetings I always stress the importance of resourcing and rewarding WHS committees.? WHS committees are usually volunteers who are expected to add extra tasks to their already busy workload, so the least we can do is put a packet of Tim Tams on the table during their meetings. And I really do mean - that is the least we can do. Many Audit committees and board meetings have had to discuss the lack of attendance at WHS meetings but don’t always make the connection between the lack of incentive to attend and poor attendance.

Any good manager knows the value and importance of a cup of coffee for relationship management. And it is likely that the budget will have to accommodate greater expense than coffee and a packet of Tim Tams, but the principle stands.?

·?????? Think through how you can best improve the wellbeing of your staff, to enhance future productivity.?

·?????? Make the effort to ensure your structures (such as budgets and policies) enable managers to buy that cup of coffee for that potential partner which will ‘add value’, or a pack of Tim Tams for the WHS committee.

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[i] The term Not For Profit can be unhelpful as it has long been expected that even NFP’s must turn a profit for sustainability. Their purpose however is usually not just for profit but for a specific purpose, hence the term, For Purpose. The term itself can come across as a clumsy expression but it is worth using to counter the misnomer of NFP.

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