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Thursday, December 16, 2010

Stakes and Stakeholders

Fifteen years ago I was riding high on the "new wave" of management theory.  I wasn't a manager at the time (and even at the time I was a "manager," from 1999 through 2007, I was primarily a manger of things, and only rarely of people) but a Statistical Process Control Coordinator.

Statistical Process Control was part of that "new wave," and part of the reason why I put those words in quotes:  it was something that was first developed by Walter Shewhart in the early decades of the 20th century and later put into fabulously successful practice by W. Edwards Deming in post-war Japan at the behest of the U.S. government.  A statistical, data-based approach to quality and understanding process behavior was only part - but a major part - of the new management theories that were sweeping industry in the mid-1990's.

One of the other concepts was that of stakeholders.  Every process has stakeholders at multiple levels of the company.  From investors and CEOs to line workers and janitors, in some way everyone was tied in not just to overall company success, but to the success of smaller portions that go to make up the whole.

Take, for example, the relationship between manufacturers and customers.  Manufacturers want to hold onto their customers; they're the ones who buy the manufactured products and make it possible to keep manufacturing products.  The loss of a major customer means hits at every level of the process.  If other customers cannot offset the loss of the customer - particularly if the lost customer accounted for the majority of orders for manufactured goods - then the surplus workforce must be cut.  Not just on the manufacturing level, but customer service, middle management, janitorial - even cafeteria service may be eliminated if there aren't enough employees forking over money for meals.

And the pain goes up the chain, too:  reduction in revenues will lead to a reduction in profits, which will lead to some unhappy stockholders.  Stockholders who may ask difficult questions at the next meeting.

The pain radiates out, too:  all these people losing their jobs participated in the local and national economy.  They bought coffee on the way in to work and ordered out for lunch.  They bought gas to fuel their commutes.  They used their paychecks to buy goods and services, and to feed and clothe themselves, pay their mortgages and their bills, maybe send their kids to college so they might have a better life.  All gone now, replaced by programs provided by a social safety net that some politicians are very eager to eliminate.

Somewhere high up on the corporate ladder there is someone whose job - whose major job, whose only job, perhaps - is to make sure this sort of thing doesn't happen.  You don't put all or even most of your eggs in one basket and then lose that basket.  Is that person a stakeholder?  Will they feel any repercussions from this failure?  Will they lose their house, or at least one of their houses?  Will they have to pull their children out of their exclusive private schools and place them in somewhat-less-exclusive private schools?  Will they have to cut back on the caviar and foie gras?  Will they lose their job?

Probably not.  Some stakeholders are more deeply invested than others.

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