Organizational benefits

Many groups claim organizational benefits. I believe they should flow to the intended beneficiaries.

Many groups such as customers, employees and others may ‘benefit’ by association with an organization. This should not be at the expense of the intended beneficiaries. Some groups who may believe they are entitled to benefits from an organization include the following -

  • Consumers of the organization’s outputs in the form of services or products
  • Employees, contractors, or volunteer workers
  • Government, in the form of taxes collected, or costs saved when a NPO undertakes work that the government might otherwise have to fund
  • Investors and lenders, and
  • Suppliers and strategic partners.

These groups are stakeholders. They often expect benefits from the organization.

It is unclear how to decide how to distribute benefits among the various apparent claimants. This is because it is not possible other than by some political process. This means benefits flow to whoever is more powerful or persuasive.

Think of beneficiaries and interest groups,
not stakeholder groups

I reject the stakeholder view. We should concentrate on intended beneficiaries rather than stakeholder groups.

Every significant organization has groups associated with it who have an interest in the organization. These groups are of two types; the intended beneficiaries and interest groups.

The Intended Beneficiaries are those for whose benefit the organization exists. For businesses, these are the owners, or shareholders. Organizational benefits for these people would be things like investor returns.

It is often hard to state the intended beneficiaries of non-profit bodies.

Interest Groups are people who have an interest, because the activities of the organization may affect them. Therefore, interest groups can help or hinder in the achievement of the purpose of the organization. This depends on whether they see it as helpful or harmful to them. It is desirable for the organization to engage with these groups to improve returns to the intended beneficiaries.

Let us look at some examples to show the difference between Intended Beneficiaries and Interest Groups.

Organizational benefits go to intended beneficiaries

The managers should deliver a benefit to the intended beneficiaries. This may be returns to owners, or returns on cost and effort for vocational students. However, the governing directors will require the executives to achieve this basic purpose within the policies that guide conduct. The way the organization treats both the beneficiaries and the other groups is its corporate conduct. This is the area of business ethics, or proper corporate conduct.

Before getting too far into the strategic planning process, the CEO should know whom to take into account in their planning efforts.

The stakeholder theory is popular partly because it seems to treat all groups in a fairly. Supporters of the theory act as if their case is a moral one. They see it as immoral to give shareholders priority for receiving any benefits. This confuses the way to treat people with the purpose of the organization. In nearly all cases, the purpose is to provide a benefit to one clearly identified group of Intended Beneficiaries. Organizational benefits are intended to go to these people. While the organization is doing this, it is right that it treats other groups with respect, dignity and in conformity with any relevant laws. The organization should not cause harm or damage. If it does, it makes proper restitution.

There is no necessary link between singling out one group to be the recipients of benefits and any presumed mistreatment of other groups. It is not a matter of either intended beneficiaries or all groups. It is Intended Beneficiaries receiving the benefit and treating all involved decently.

What usually results from viewing intended beneficiaries as just another stakeholder is the politicisation of decision-making. As well, the elevation of a strategic objective related to some other group by default becomes the governing objective. Many so called strategic visions that put customers on top are of this sort.

Strategic objectives are not the governing objective

Pursue strategy for increasing market share when it will increase shareholder value. However, if the opposite is true, that a strategy for reducing market share will create more value; this is the right decision for management to make. The same can be said of relative cost position or any other product market objective. Thus, these product-market objectives should not be given the status of a company's governing objective.

Organizational benefits may flow to many people involved with an organization. However, I believe that the strategies should aim to deliver organizational benefits to satisfy the reasonable expectations of its Intended Beneficiaries.

Return from Organizational Benefits to Organizational Effectiveness.

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Business ethics has to do with organizational policies and processes to do with possibly contentious matters, such as fiduciary and social responsibilities, as well as the distribution of the economic benefits associated with being involved with the organization. The ethical conduct of those involved in an organization is often constrained by law; and also many will go beyond the minimum requirements to engage more constructively with various communities of interest, and building reputational capital for the enterprise.

The following are useful resources in helping to form such policies.