This story originally appeared on Forbes.com on November 5, 2018.
Over the last year or so, I’ve noticed stakeholders getting more airtime, focus in meetings and more deference in editorial rhetoric. It feels like the pendulum is swinging back to the idea that companies should serve a purpose higher than shareholder profits. More leaders are recommitting their companies to their communities and the greater social good.
That’s good and right, but as the co-founder of a consultancy that focuses on culture, I’ve also noticed that not all stakeholders are featured equally in this shift.
On the outside, consumers are investing money and social airtime into brands that share their values. Businesses are responding with deeper investments in public purpose, proving their positive contributions to their communities and the world. At the same time, they’re demonstrating and delivering their value to these increasingly powerful stakeholders.
But on the inside, employees — essential company stakeholders — are often still overlooked. Businesses have become adept at projecting a culture of caring. But behind the glass, do they treat their employees as true stakeholders? How many leaders actually put employee growth and well-being on a level footing with shareholder value and the public good?
The truth is employees are the greatest asset of almost every business. Treat them as less than that, and the impact can usually be felt by every other stakeholder, investors included.
Purpose Is Not Enough
As pointed out in this article, Salesforce CEO Marc Benioff believes that putting company purpose over profit can promote employee engagement. Dan Pontefract, the article’s author, writes, “If an organization exhibits a high degree of purpose in its mission and objectives — taking a stand to benefit society — there is a very good likelihood that employees will more easily demonstrate purpose in their roles at work, become engaged, while adding to their own personal sense of purpose in life as well.”
It’s well said, but I also hope we can go further. Today, inspiration is not enough to empower your employees with real purpose. I believe that employees will only feel and act like true stakeholders if they understand their role and value in delivering on this higher purpose, and if they believe they will share in the benefits of success.
A Salary Isn’t Enough Either
Too often, employees are treated as a resource, managed and mined. They work in service of a company’s stakeholders. Value is extracted but not returned. They’re not stakeholders in their own right. They’re commodities, replaceable.
Pay them well. Treat them with respect. This is all good, but it’s not enough if they know they serve a company that doesn’t believe it must serve them in return. This cuts employees out of any shared value, created and experienced together.
The Costs Of A Commodity Workforce
When employees feel that they are commodities, why would they invest more in their employer’s success? What loyalty should they have to their employer when another offer comes along?
Think about how this impacts the business — any business. In its 2017 State of the American Workplace report, Gallup “estimates that actively disengaged employees cost the U.S. $483 billion to $605 billion each year in lost productivity.” Employees who don’t see themselves as stakeholders might be less inclined to deliver high-quality work, which leads to poorer products and services, which leads to big loss numbers like these.
They also might be less likely to stick around. The Society for Human Resource Management puts the cost of replacing an employee between 90–200% of the employee’s annual salary.
The truth is that apathy infects all aspects of the business: productivity, profitability and purpose. And it’s expensive. Really expensive.
It’s why Zappos offers new employees a payout to quit, and why parent company Amazon has adopted a similar practice. Employees who accept the offer aren’t invested in the organization’s purpose. They’re costlier to keep than to cut loose with a check.
From Buyout To Buy-In
So, instead of buying employees out, why not buy them in? Shift employees from workers to stakeholders.
Employees want to do work that matters. They want their contributions to matter and to feel a part of a purpose larger than their paycheck. Give your employees an authentic experience of doing work that matters — work in which they know they matter, too. And if any of your employees genuinely don’t on some level want this, you probably should just pay them to quit.
Creating A Purpose Together
You can’t force people to buy in to company purpose. And a purpose developed without employee input will always be a harder sell. To shift employees from workers to stakeholders, create a purpose together. Or, if your purpose is already established, take a step back, and reexamine that purpose through the lens of your employees. Redefine it together.
After experiencing this firsthand during stints with larger organizations, we intentionally designed our company purpose with our employees. As a result, Local Industries is built around investing in each individual’s personal growth. This drives both the company and the employees to share a commitment to best serve each other’s ambitions. This is even true for team members whose future goals will mean moving on to new roles or becoming entrepreneurs themselves.
Serve Your Employee Stakeholders Well
Transforming from a corporate culture of workers to one centered on employee stakeholders is not easy. Nothing meaningful is. It needs a fundamental shift in priorities all the way from the front lines to the C-suite.
This change won’t happen overnight. It takes more than a memo or an inspiring speech. But the work of investing in employees as stakeholders is worth it. Customers, suppliers, contractors, investors, partners and the community will feel the value of a company with employees who have a true stake in what they’re doing.
To quote comedian and social commentator Rob Delaney, “Make it easier for your citizens to be healthy and smart and they will save you in ways you have yet to imagine.”
Originally published at www.forbes.com on November 5, 2018.