Page 174 - Performance Leadership

Chapter 10 The Social Role of Organizations • 163

corporation, Wal-Mart, holds position number 30 on that list, quickly
followed by Exxon Mobil, General Motors, and Chevron.
Direct stakeholders, such as suppliers, partners, customers, share-
holders, and regulators, as well as indirect stakeholders, such as the
media and activist groups, offer their contributions. These contribu-
tions include their business or materials or their voice to promote you
or regulations to ensure fair competition. At the same time, stake-
holders have requirements, to satisfy their needs and objectives.
Employees and customers are citizens as well.
However, most publicly traded organizations do not focus on stake-
holder value, but on shareholder value. Shareholders do add value by
supplying capital, but the other stakeholders provide value that is essen-
tial for the existence of the enterprise as well. Employees add value by
driving activities and processes, customers take care of revenue and
drive profit, suppliers take care of materials and services. The govern-
ment provides the necessary infrastructure to do business. Focusing on
creating value for shareholders only, neglects relationships with the
other stakeholders that are also needed to survive. But there is a more
fundamental problem. Shareholders, whether they are acting in the
short or long term, are looking to maximize their returns, which is not
necessarily the same as optimizing the performance of the organiza-
tion. Shareholder value orientation is an effective instrument that pro-
vides guidance for the shareholders, but not for the organization. There
is no saying if creating value is a sustainable virtuous circle or is about
extracting value from the other stakeholders.
Measuring performance with a focus on a single stakeholder leads to
dysfunctional behaviors, which in its turn leads to suboptimal perform-
ance. This is where the social dimension of the performance leadership
framework comes in. It helps organizations determine how the actions
and reactions of the organization’s environment affect the business and
how the business affects the organization’s environment. See Figure 10.1.

Corporate Social Responsibility, a Debated Subject

It is impossible to think about the social dimension of the performance
leadership framework without getting involved in discussions of cor-
porate social responsibility (CSR). CSR is a highly debated subject and