Which Stakeholder Is Most Important Is Always Shown By Your Actions

nonprofit stakeholder

Whether you are a nonprofit organization or a for profit business, your true motives, and thereby your core values are reflected more strongly by actions than by press releases!

Everyone has heard the old adage “Actions speak louder than words.” Yet, time and time again the very actions undertaken seem to be at odds with the core values posted prominently on an entity’s website.

Let’s explore the three most common stakeholders of nearly every organization or business, and then highlight two example actions. The underlying nature of these actions may seem rather obvious, but they are in conflict with not only other stakeholders but also with those well crafted core values.

1. Mission Recipients and/or Customers

The first stakeholder group seems obvious since the core reason for any charitable organization and/or commercial business is to perform some sort of action to serve this group.  

Thankfully, both types of entities in their formative years pay very close attention to this stakeholder group. In fact, new business and new charities alike are fanatical in reaching to this group in order to understand their needs and to literally design new products and/or services to serve them.

Words and actions like the following emerge:

Focus Groups, Surveys, Beta Tests, Small Group Discussions, Grant Requests, Operational Plans, Pitch Decks, Research Projects, Feedback Loops

Focus and care for this stakeholder group could not be higher in most cases. This is wonderful and usually results in delighting the mission recipients and/or customers!

Seems like a perfect place to be and to work diligently to stay, right?

2. Employees and/or Volunteers

The second stakeholder group is often the first one to be overlooked. Perhaps it is because they are sort of locked in. Maybe, it is because they are so close at hand, like a family member that is easier to take for granted.

No matter what the reason, is it not ironic the group responsible for delivery service to the first stakeholder group and for delivering a return on investment for the third stakeholder group is not treated as equally important to the other two?

The employees, and in many cases involving charities, the volunteers are the backbone as well as the heart and soul in making products and/or services come to life daily. Every customer and/or mission recipient can tell when there is a “Can Do” spirit in the team that is serving them and when the daily work is performed in a lackluster fashion.

3. Owners, C-Suite, Stockholders, Founders, Funders, Donors and/or Board Members

The third stakeholder group is usually considered the most disparate when viewed by the outside world.

Because of the altruistic nature of nearly every charitable organization, the possible exception being certain private foundations where funds are being funneled to questionable endeavors, comparisons between for profit and nonprofit might be harder.

Nonetheless, many actions taken after the formative years of any organization tie back directly to this group.  

We see this happen in the charitable sector where actions are taken to please or placate the desires of a large donor or a foundation making a grant. In some cases, the funding takes the charity far off their original course and stated objectives.

For this same group there are also examples of a founder or a board member causing the charity to make a sharp deviation from their original mission thereby harming one or both of the original stakeholder groups.

In the commercial sector so many actions are taken to please the owners or stockholders. In fact, for most of you reading this post, your mind is already crowded with example after example.

Actions

Now that we have outlined the three stakeholder groups and how tightly woven they are with each other let’s take a look at a couple of actions and their effect on the various groups.

Grant Stipulations and/or Restricted Gifts

This may be the most common action where conflict can occur in the nonprofit world. It could be a foundation stating they only issue grants for new projects and never to cover current daily operations, or a major donor with a desire to take the charity in a whole new direction with a game changing gift with restrictions on being used for a project outside the current mission.

What could possibly go wrong with either of the above scenarios?  

In both cases, because of the desire to receive large funding amounts, the first stakeholder group of mission recipients may be ignored totally with any portion of the funding. In fact, in the excitement to begin a whole new mission direction or offshoot the eye might be taken of the ball in fulfilling previously stated mission objectives.

Finally, the current employees and volunteers might not be able to perform the work needed on the new project or direction, and thereby might not feel comfortable doing the work or worse yet, might need to be replaced!

In the set of actions shown above either the first stakeholder group of mission recipients or the second stakeholder group of employees/volunteers (or BOTH) can be hurt. This is where the resulting effect of such actions must be considered by the third stakeholder group when making such key decisions.

Improving Stock Price

Time and time again actions are taken in the commercial world to greatly benefit the value of a company’s stock. Unfortunately, the total impact to the other two stakeholder groups is not given as much weight or consideration. Let’s explore an example.

Since a larger company can impact more customers and employees let’s use a fictitious publicly held company that has grown even larger by acquiring other companies. This of course means they have also acquired additional customers and employees. In other words the size of the stakeholder groups can grow by leaps and bounds.

The board and the C-Suite of this company decides to “shift resources” in order to achieve a higher return on investment from certain product lines. The notion is that this will lead to better overall financial results thereby raising the stock price.

One can easily see that this can be of great benefit to the third stakeholder group of stockholders, owners and C-Suite staff.   

However, if the shifting of resources to focus on some products rather than others results in long term employees being fired or the resources supporting existing product lines reduced, both the customer stakeholder group, as well as the employee stakeholder group will be greatly affected.

These effects can range from loss of employment, a possible devastating outcome if there were no plans underway for changing jobs, to effects on remaining employees. (This is due to high level positions sometimes taking a year or more to replace.)

For the remaining employees, they oftentimes cannot provide the same level of service to customers nor the same level of product/service enhancements in the future. This is especially true if they are not aware of such a drastic change coming and it is dropped upon them out of the blue.

Obviously, all of the above can combine into truly undesirable outcomes for the customer stakeholder groups of the product lines where staffing and other resources are reduced.

Summary

All three stakeholder groups outlined above should be taken into consideration with as close to equal value as possible for all strategic decisions. The two examples illustrate the disastrous potential outcomes for one or more of the stakeholder groups when their interests are not part of the overall decision to take certain actions.

Thankfully, there are just as many or more strategic decisions we are all aware in both the charitable sector as well as the commercial world that keep all three stakeholders groups delighted.  It is no coincidence that those organizations keeping all three groups happy are often the revered in either sector!

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Jay Love

Jay Love

Co-Founder & Chief Relationship Officer at Bloomerang
A 30+ veteran of the nonprofit software industry, Jay Love co-founded Bloomerang in 2012. He currently serves on the board of the Center on Philanthropy at Indiana University and is the past AFP Ethics Committee Chairman.
Jay Love
By |2019-01-24T16:11:35-04:00January 26th, 2019|Nonprofit Sector, Nonprofit Sustainability|

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