The Problem of Stakeholder Focus

As soon as an organization, a team, or a person, defines their purpose as a focus on one thing above other things, there will be sub-optimization. When I focus on writing, I cannot focus on knitting. Somebody else will have to do the knitting, so I can focus on the writing. And maybe later we can trade my wonderful book for your beautiful sweater. We have to realize that everyone is entangled in a web of economic dependencies, and therefore the purpose you choose for yourself should somehow generate value for the others around you. Or else nobody will give you a knitted sweater.

This all makes perfect sense for complexity scientists, who have known for a while that complex adaptive systems find a global optimum through local optimizations and interdependencies. The parts in a complex system all try to optimize for themselves, but their efforts depend on the constraints imposed on them by the parts around them. With a mix of competition and collaboration the parts interact with each other without any focus on a global purpose. Nevertheless, the end result is often an optimized system. Biologists call it an ecosystem. Economists call it an economy. I call it uncommon sense.

Most management scholars and experts have ignored the insights from the complexity sciences (or were unaware of it) suggesting goals that are too narrow. There are many corporate mission statements in the world expressing ideas such as “Make money for shareholders”, “Put customers first” and “Achieve superior financial results”. In each of these cases the purpose of the organization is (too) narrowly defined as providing value to one stakeholder. Management consultant Patrick Lencioni analyzed the various kinds of mission statements that organizations define for themselves, and he describes that goals have been created with a focus on clients (“Delight the customer”), community (“Serve the city”), employees (“Put workers first”), and business owners (“Create shareholder value”). Besides the limited focus on just one kind of stakeholder, the biggest problem I have with such mission statements is that they usually explain who, but not why.

Among the different kinds of mission statements Lencioni also found examples with a primary focus on industry (“The work we do”) or greater cause (“What we want to achieve”). I think these are better choices, because they allow for local optimization (which is fine) while not turning the focus on just one external relationship (which is not). For example, I could define my purpose as “becoming a great writer” (the work I like to do) or “helping people worldwide to enjoy their jobs” (the greater purpose I’m striving for). I have complicated value exchanges with many stakeholders, including readers, writers, speakers, consultants, trainers, organizers, freelancers, and some even more complicated ones with my spouse, friends, and family. Complexity theory allows only two stakeholders to see themselves as more important than all the others: me and everyone. Dawkins, Hayek, Kauffman, and many other scientists and philosophers would agree that it amounts to the same thing. By focusing on me, while adhering to constraints imposed by others, I help optimizing the whole for everyone.

This text is part of Work Expo, a Management 3.0 Workout article. Read more here.

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