We seem to have numbers for just about everything. So surely then we should be able to measure everything that needs to be measured and end up with a positive outcome, right? Unfortunately, things are rarely ever that simple in business. Numbers are useful to help explain trends and performance, but when it comes to describing human behavior, numbers can only tell us part of the story. Recognizing your separate stakeholder groups enables you to identify different priorities and goals that are likely to emerge. At times, it's possible that the objectives of your stakeholders will be in direct or indirect conflict. This means that your organization will have to make decisions to carefully balance an appropriate level of performance that will be satisfactory to all those stakeholders, depending on their relative importance to the long-term sustainability of the organization itself. One stakeholder group in particular has dominated the focus of theoretical literature in accounting and corporate governance being the owners or shareholders of the firm. The centrality of shareholders to these focal areas stems from the fact that without shareholders are private or public corporation simply would not exist. Therefore, satisfying the owners being the principle risk bearers in the ongoing running of a firm will inevitably be an important goal for you as a manager. Of arguably more important to affirm that its owners are its customers. If the firm did not have a customer base to begin with, then its owners would have nobody to sell and therefore, no opportunity gain revenue from. From that perspective, it's relatively easy to see that customers are incredibly important stakeholder group in their own right, and as such the organization should have very clear objectives as to how to satisfy and retain them in the long run. While we can delve further into specific metrics that help us delineate organizational goals, we have to also be cognizant of the objectives of individuals who work for the organization. That is, individual employees have their own motivating factors, such as the opportunity to earn a salary, or a commission, or some kind of bonus potential that follows as a reward for outstanding performance. One problem facing any organization stems from a situation where the goals or objectives of an individual employee are not in alignment with the organization that they work for. This stems from a concept known as the agency problem, where essentially a conflict of interest arises in the performance of an employees work. Particularly noting that the achievement of individual objectives will not necessarily correlate to improve performance for the organization overall. At times, it's possible that the organization suffers as a result of the individual achieving inflated or synthetic levels of performance that don't contribute to the value of the organization. In the long run, value can actually be destroyed through actual financial loss, reputational damage, or poor customer perceptions where an organization has been deemed to fail its customers. In order to prevent this issue from destroying value within the organization, it's critical for managers to clearly understand the objectives of their firm at a strategic, tactical and operational level such there clear goals and KPI's for the organization can be set. From there, it's possible to consider metrics and individual performance targets that align with organizational objective. If crafted carefully, the collective achievement of individual objectives which ought to be motivated through performance ratings and remuneration where appropriate, will ultimately lead to the improvement of performance for the organization as a whole. This is easier said than done, and it's likely that the objectives of the organization will be dynamic overtime, which necessitates a commensurate approach to be taken by you as a manager with respect to individual employees in your team. [MUSIC]
