Stakeholder Interests Have to be Balanced

One of the things that I have been trying to do is understand exactly what is required when doing due diligence on a company, whether it is well established or a startup.

Part of that evaluation is undoubtadly understanding why the organisation exists, what the problem is that it solves, and whether its value proposition resonates, but there is another dimension which is equally important - how it approaches the management of its various stakeholders.

While I was researching the topic I came across this article by Charles J. Fombrun on Forbes.com about How To Restore Your Company's Reputation which describes why some organisations have suffered because they have paid more attention to short term financial results than longer term value.  The article identifies 7 key indicators that need to be addressed:

• Product quality
• Innovation
• Financial results
• Citizenship
• Leadership
• Workplace
• Governance

Companies that concentrate on delivering financial results to the detriment of the other dimensions will suffer.  Having working in a couple of companies - I have seen how this mistake can be made by both large and small organisations.  Real examples are easy to identify in the market today, especially in the tech sector.  As they seek to reverse their share price slides, it will be interesting to see how they execute against the other indicators.

Fombrun points out that organisations seeking to recover "will need to listen closely to the concerns of their stakeholders, demonstrate authentic care for their communities, commit to a shared set of values with their employees--and stand behind these beliefs even at a cost to short-term performance. That's the only way can they develop enduring, sustainable, value-creating results and restore their corporate reputations." 

The article is certainly worth a read and remembering the pointers that it leaves for those that can influence the strategic direction of an organisation.