When you’re making big decisions in your organization, whose needs come first? Is it your shareholders’? After all, they own the company. But aren’t your customers “always right”? And don’t forget your employees. You’d be nowhere without their hard work. It’s actually a trick question. All stakeholders play an important role in creating value. Although it may look like their interests are at odds, in one sense they’re all connected: They all benefit from a more valuable company. And finding those connections among stakeholders is one of the keys to unlocking more value for your firm. 
Source: “Adopting the Value Habit (And Unleashing More Value for Your Stakeholders,’ Copyright© 2006 Deloitte Development LLC, in association with the Economist Intelligence Unit.) According to a recent study by Deloitte* and the Economist Intelligence Unit, most respondents consider customers to be “more important” than other stakeholders. Nearly two-thirds of respondents gave customers the top ranking. Shareholders came in second place with 44 percent. The lowest marks went to the local community (12 percent) and to suppliers (10 percent). There’s nothing wrong with focusing on the customer. But unhappy employees may not provide exemplary customer service. Employees often drive the key “moments of truth” with customers and have a huge impact on their satisfaction. Ignoring suppliers or the local community can have similar value-destroying effects. Case Study: Panera Bread
“The best way for us to take care of our shareholders is to not focus on them in each and every instance,” says Ron Shaich, founder and chief executive of Panera Bread1. “We’ve had great shareholder return, but we haven’t had it because we focus on it in the short term. It’s because we’ve had a continual vision of how to delight the customer.” In Panera’s case, delighting the customer involves offering things such as freshly baked artisan bread, all-natural antibiotic-free chicken, and free wi-fi access in its 900 bakery-cafes throughout the United States. All of these things cost money which isn’t always the most effective way to impress Wall Street analysts and some aggressive investors. Take chicken, for example. “We buy the most expensive kind of all-natural chicken available,” Shaich says. “That’s something we could easily save money on. But if we provide a more expensive product that’s better for people, that’s ultimately taking care of our shareholders. I could do a lot of things to save a couple of bucks, but that isn’t any way to run a company.” Shaich sees the connection between customers and employees as vital to delivering value. “To take care of your customers, you need to take care of your employees,” Shaich says. “We give our team members a working environment they can respect. That all comes across to the customer.” Instead of focusing solely on the P&L, Shaich evaluates the company’s performance using a more comprehensive set of metrics. Categories include the sales growth of individual product categories, accuracy and speed of service, hygiene, employee morale and turnover, variances in food and labor costs, and growth in transactions per customer. “Profit is a by-product of getting a whole bunch of other things right,” says Shaich. An example of serving multiple stakeholders is in the company’s provision of free wi-fi at over 900 of its stores. The wi-fi is free because, as Panera President Neil Yanovsky told to The New York Times, “We want our customers to stay and linger.”2 Wi-fi helps generate business before and after lunch, when the chain takes in 15-20 percent of its revenue. The longer customers stay, the more time they have to succumb to the odor of freshly baked bread. And Panera has plenty of seats to fill an average of 120 per location. By offering wi-fi, Panera is able to serve three groups of stakeholders: shareholders, who get higher revenues; customers, who can work and surf the internet while they linger over muffins; and the local community, which gets a meeting place for small groups like Starbucks, but roomier and often with a fireplace in a casual, unhurried location.3 Shaich also believes that it pays to give something back to the community. The benefits of corporate philanthropy can be hard to measure in precise terms, but he sees the community as the source of his customers. Panera gives away leftover bread to homeless shelters and collects money for other causes in its stores. Shaich believes that all stakeholder connections are naturally related. “Anyone can create a transaction that generates a profit,” he says. “We want to provide something so that people will come back. That’s how you build something of sustaining value.” Taking care of everyone
When managers talk about value, they’re often focused entirely on boosting the stock price. But taking care of other stakeholders can have tangible benefits for shareholders as well. Understanding and acting on the relationships between customers, suppliers, employees and other stakeholders can help to build value for everyone. Footnotes
1The material in this case study was drawn from the Panera Bread case study in "Adopting the Value Habit (And Unleashing More Value for Your Stakeholders," Copyright © 2006 Deloitte Development LLC, in association with the Economist Intelligence Unit.)
2“What Starbucks Can Learn From the Movie Palace,” The New York Times, May 4, 2007.
3Ibid. *As used in this document, “Deloitte” refers to Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP. This publication contains general information only and Deloitte Consulting LLP is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte Consulting LLP, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication. Related Content: Subscribe to The Value Habit
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