August 13, 2018

There are four canonical "stakeholders" in business:

  • Owners (shareholders)
  • Employees
  • Customers
  • Vendors/suppliers

Some businesses don't have all, but most do. This "4-stakeholder model" has given me a few good insights over the years:

  1. An executive's job is to balance the needs of these four groups—that's the "what". You can spend a life learning the "how", but I think balance is a good north star.
  2. The needs of the four are always in tension. Low prices vs. comfortable jobs vs. maximum profit. A common cause of business failure is things tilting too much toward one group (e.g. a union gets too much power and wrecks the company's cost structure).
  3. Different national cultures value the well-being of the stakeholders differently. The US traditionally was rather ownership-oriented but there's no guarantee that won't change. Whereas in some other countries (e.g. Japen) they try really hard to guarantee lifetime employment, seeing it as a necessary and natural thing to do.

This model underpins Saturday's Are There Enough.

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