Alex Edmans Charts Implementation of Stakeholder Capitalism Principles
The reason why Alex Edmans’ book “Grow the Pie: How Great Companies Deliver Both Purpose and Profit” is among the five books that come with Enterprise Engagement Alliance membership becomes apparent when watching this EEA YouTube show. Edmans doesn’t just make a business case for Stakeholder Capitalism, he provides a practical framework for implementation.
Click here for the EEA YouTube show. Or click here for the Stakeholder Capitalist podcast version.
Summary of Key Takeaways
This EEA show is so jam-packed with insight and specifics, these highlights cannot do justice to the breadth of his recommendations.
- Edmans explains that Stakeholder Capitalism implementation is about making money by growing the pie, rather than by focusing on how to divide it. Great companies grow the pie by fostering a culture of innovation continually seeking new ways to create value.
- Solving societal problems can be profitable when aligned with organizational purpose and capabilities. For example, the cellphone company Vodaphone used its technology in Africa to create an application for sending money that helped serve a large community of unbanked people. The service lifted many out of poverty and created a new profit center for the company. The company would have received no accolades, nor any risk of negative publicity had it not undertaken this initiative, but it would have missed an opportunity.
- Environmental, Social, Governance (ESG) practices and metrics have value but often focus too much on risk aversion. The big opportunity is to see how organizations create value by addressing the ESG issues most closely related to their lines of business. Companies need to be looked at individually based on their purpose, type of business, and footprint. The focus should be on materiality—what is critical to their business. Out of the many ESG issues, an organization might choose to focus on the three or four most material to their businesses.
- Investing in people is good business. Edmans' study of the 100 Best Companies to Work For in America over 28 years of data found that firms with high employee satisfaction outperformed their peers by 2.3% to 3.8% per year in long-run stock returns – 89% to 184% cumulatively – even after controlling for other factors that can affect returns, such as industry category.
- Employees were traditionally viewed by businesses as a raw material from which to extract as much labor and productivity as possible, but that is now changing as organizations recognize the critical role played by people in value creation.
- Purpose statements should not be confused with altruism—it’s impossible to please all stakeholders. The organization’s purpose defines how it creates value and should focus on excellence, not compliance. The purpose statement is the foundation upon which organizations make and prioritize decisions and should be focused and deliberate and answer these questions: why does the company exist? Who does it serve? What is its reason for being, and what role does it play in the world? For instance, Costco promises to deliver quality products and services at the lowest possible price, so consumers understand the tradeoffs they’ll experience. On the other hand, Rolls Royce promises that it will focus on quality and innovation above all, creating a different expectation of tradeoffs.
- Purpose should focus on leveraging your organization’s competitive advantages and should be a little edgy or uncomfortable. For instance, the Netflix purpose statement focuses on the importance of employees but makes it clear that excellence is expected.
- When looking at how to grow the pie purposely, look for problems to solve for which your organization has the expertise and resources to address more creatively than others. The most sustainable purposeful social contributions are those related to the purpose, goals, or expertise of your organization.
- The issue of stakeholder engagement is more critical than ever. The new focus on people management requires the ability to empower people, create an attitude of ownership, and reward people meaningfully for their contributions so that they act proactively for the benefit of your organization.
- The best metrics focus on the specific methodologies organizations apply to fulfill their purpose and address key goals and objectives, rather than trying to create a one-size-fits all approach.
Master the “S” of Environmental, Social, Governance (ESG), A.k.a. Stakeholder Capitalism
The Enterprise Engagement Alliance at TheEEA.org is the world’s first and only organization that focuses on outreach, certification and training, and advisory services to help organizations achieve their goals by fostering the proactive involvement of all stakeholders. This includes customers, employees, distribution and supply chain partners, and communities, or anyone connected to an organization’s success.
Training and Thought Leadership
- Founded in 2008, the Enterprise Engagement Alliance provides outreach, learning and certification in Enterprise Engagement, an implementation process for the “S” or Social of Stakeholder Capitalism and Human Capital Management and measurement of engagement across the organization.
- The Enterprise Engagement Alliance provides a training and certification program for business leaders, practitioners, and solution providers, as well as executive briefings and human capital gap analyses for senior leaders.
- The EEA produces an education program for CFOs for the CFO.University training program on Human Capital Management.
- Join the EEA to become a leader in the implementation of the “S” of ESG and Stakeholder Capitalism.
Engagement Digital Media and Marketplaces
- The ESM information portal and The Enterprise Engagement Advisors Network solution provider marketplace cover all aspects of stakeholder engagement, and the EEA information library lists dozens of resources.
- The RRN information portal and Brand Media Coalition marketplace address the use of brands for gifting, incentives, recognition, and promotions. The BMC information library provides information and research resources.
Video Learning
The EEA Human Capital Management and ROI of Engagement YouTube channel features a growing library of 30- to 60-minute panel discussions with leading experts in all areas of engagement and total rewards.
Books
- Enterprise Engagement for CEOs: The Little Blue Book for People-Centric Capitalists. A quick guide for CEOs.
- Enterprise Engagement: The Roadmap 5th Edition implementation guide. A comprehensive textbook for practitioners, academics, and students.
Enterprise Engagement Advisory Services
The Engagement Agency helps:
- Organizations of all types develop strategic Stakeholder Capitalism and Enterprise Engagement processes and human capital management and reporting strategies; conduct human capital gap analyses; design and implement strategic human capital management and reporting plans that address DEI (Diversity, Equity, and Inclusion), and assist with managed outsourcing of engagement products and services.
- Human resources, sales and marketing solution providers profit from the emerging discipline of human capital management and ROI of engagement through training and marketing services.
- Investors make sense of human capital reporting by public companies.
- Buyers and sellers of companies in the engagement space or business owners or buyers who seek to account for human capital in their mergers and acquistions.
For more information: Contact Bruce Bolger at Bolger@TheICEE.org or call 914-591-7600, ext. 230.
