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Proposal: Treat Employees as Stakeholders

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Howard Risher
October 1, 2020

An idea floated years ago is now making headlines. It replaces the decades-old Shareholder Capitalism argument, recognizing that capitalism today is exacerbating income inequality and intensifying the divisions in our society. The new old idea is Stakeholder capitalism. Its proponents argue that corporations should serve the interests of all stakeholders, including customers, employees, suppliers and local communities. It was a hot topic at this year’s World Economic Forum (WEF) at Davos, Switzerland.

It recently became a political issue. In a July speech Joe Biden stated, “. . .it’s way past time we put an end to the era of shareholder capitalism.” He went on to connect the change in philosophy to his argument for rebuilding the middle class.

The heightened emphasis on social values makes the stakeholder argument a sound management philosophy for nonprofits—hospitals, colleges and welfare organizations—as well as public employers at all levels. Their success depends on the capabilities and commitment of their employees. The focus on addressing societal concerns is consistent with the reasons many employees chose careers in government.

The phrase Stakeholder Public Service expresses a new philosophy for managing government agencies. A core issue is acknowledging the value of employees.

A September report from the WEF’s International Business Council provides a core set of Stakeholder Capitalism Metrics to, “Align their mainstream reporting on performance against environmental, social and governance (ESG) indicators.”

Those metrics would be a good starting point for public employers to demonstrate their commitment to fair and equitable employment practices. They fall into three themes (although this is not a complete list):

  • Dignity and equality—employers should provide equitable opportunities for all
    • Pay ratios comparing women and minorities with white males.
    • Percentage of women and minorities by job family and job level.
    • Ratio of standard salaries with local minimum wage.
    • Number of discrimination and harassment claims.
  • Health and wellbeing—employers should care for the health of employees and their families
    • Employee absentee rate.
    • Monetized direct and indirect costs of work‑related incidents.
    • The number of work-related fatalities.
    • Percentage of employees participating in “best practice” health and well-being programs.
  • Skills for the Future—employers must increase investment in training and reskilling workers
    • Percentage of unfilled skilled positions for which the employer plans to hire unskilled candidates and train them.
    • Investment in training as a percentage of payroll.
    • Average hours of training per employee.

The message from Davos is that when employers consciously take into consideration the interests and needs of employees and provide opportunities for them to use their abilities, both organizations and employees win. That message is consistent with what we have learned from the Great Places to Work. Those employers exemplify the stakeholder philosophy. The Great Places website provides a summary of practices identified as, “Pillars of a great workplace culture.”

The merit principles are still relevant but they were articulated in a vastly different era. The policies common to civil service systems have served government for decades. Today, however, agencies across the country have workforce problems that if ignored will contribute to deteriorating performance. It is clear government needs to rethink its management philosophy.

That argument was articulated in the recent report, “Inspired to Serve,” from the National Commission on Military, National and Public Service. The commission developed a list of HR system recommendations that includes: “Develop and implement a new personnel system . . . that will be competitive for current and future workforce needs.” Consistent with the stakeholder philosophy, the goal should be to confirm employees can expect fair and non-discriminatory treatment, have opportunities to grow and enhance their capabilities and recognized for their contributions.

A starting point could be understanding the factors responsible for current workforce problems. Another idea would be to document the performance gains in public agencies that have adopted proven best practices. Dashboards are widely used by public employers. Adding the metrics agreed upon at Davos would send an important message for job seekers and the public.

Government should have an advantage. Research shows employees want more than a good salary. They want work that has a social purpose, is meaningful and contributes to improving other people’s lives. The COVID-19 crisis has once again highlighted the essential role of government. A talent management philosophy that acknowledges the value of productive employees would serve government and the country.

Author: Howard Risher PhD writes from a 40-year career in consulting that includes clients from all sectors including the UN and the OECD. He focuses on creating a work experience where employees are engaged and committed to achieving their employer’s goals. He is the author of several books including Primer on Total Compensation in Government, published by the IPMA-HR.

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