Is It Time for HR to Evolve “Know the Business” to “Stakeholder Value”?

For the last number of years, HR professionals have been encouraged to “know the business.”

• SHRM and CIPD call this business acumen.
• HRCI calls it stakeholder-relevant capabilities and results-oriented outcomes.
• AHRI calls this business strategist with business acumen.
• In our eight rounds of HR competency research with over 120,000 respondents, we have called this domain different things: business knowledge, strategy architect, business ally, strategic positioner, strategic contribution, and accelerates business.

Many HR consulting firms, academics, and others make similar pleas for HR to know the business. This work generally has focused on the first three stages illustrated in figure 1.

While I (and others) continue to plead with HR professionals to know the language of the business (economic literacy), how their organization competes through HR investments (strategic HR, HR analytics), and the changing context (genAI, hybrid), I suggest evolving the work of know the business to stakeholder value. 

What and Who Are Stakeholders

A stakeholder is a group who interacts with and supports an organization. Businesses have many different stakeholders, but let me propose six primary stakeholders who gain value from human capability initiatives (figure 2).

When we meet the needs of these stakeholders through human capability initiatives, HR contributes to the business in specific and more impactful ways. 

Why Stakeholder Value

Evolving know the business to stakeholder value offers a number of contributions for increasing the impact of HR.

1. Stakeholders are people.

I hear and agree with the adage from many HR professionals: “We are in the people business.” What then often follows is a discussion of how HR can focus on helping the employees (called workforce, labor, staff, teammates, or associates) reach their goals by aligning with organization goals, improving sentiment, and becoming more productive. 

When all stakeholders are recognized as “people,” the stakeholder view moves beyond employees to explore how HR can meet the needs of all stakeholders by involving them in human capability related initiatives (thank you to Professor Wayne Brockbank for this insight).

• Customers evolve from buying products or services to forming long-term relationships by being personally engaged in staffing, training, rewards, and other HR practices.
• Investors (debt, equity, or parent company) increase intangible value by participating in leadership development, compensation, and promotion practices.
• Communities where organization reputations are formed see organizations as serving a broader societal need as they engage in socially responsible and philanthropic initiatives.
• Boards of directors can be influenced to better oversee CEO succession and review strategic options when engaged in human capability work.
• Executives become more able to realize strategic intent through active participation in human capability.

By thinking of all stakeholders as people pertinent to the business, individuals in each of these stakeholder groups can be invited to comment, advise, participate, and co-create human capability practices. As these stakeholders participate in human capability practices, they are more able to reach their goals through collaboration with the organization.

2. Stakeholder value can be calculated.

Different action words can be used to describe the work of stakeholder value: create, add, deliver, or sustain. Regardless of the term, as we increase stakeholder value by having stakeholders participate in human capability initiatives, they likely increase their long-term commitment to the organization. This can show up as improved:

• Customer share of targeted customers.
• Investor intangible value (return on intangibles, the ROI of human capability).
• Community reputation.
• Board confidence in culture and leadership.
• Executive capacity for strategic transformation, organization agility, and innovation.
• Employee sentiment and productivity.

These measures can be tracked for each stakeholder and are often lead indicators of long-term and sustainable business financial performance.

3. Stakeholder value encourages navigating paradox.

We easily and commonly lock into one stakeholder at the exclusion of others. Some argue that employee value is the upmost agenda for HR, but if a company does not succeed in the marketplace with customers, the organization has no employees. Others decry abuses of focusing only on shareholder value at the loss of employee value when employees are mistreated. Others argue for organizations to be socially responsible without sufficient attention to the required investments to reinvent strategy to gain that capability.

Navigating the complex ecosystem of stakeholders helps create longer-term success by revealing the relationship among stakeholders. For example, employee engagement is often a lead indicator of customer engagement, which is a lead indicator of investor intangibles. This dialogue of managing stakeholders and paradoxes can lead to innovation. For example, recognizing the trade-off of community social citizenship with the executive role of crafting strategy can show how strategic decisions can influence community social responsibility. We can see this happening in companies whose strategy is about harnessing wind (Siemens), water safety (Ecolab), or using environmentally friendly materials (LEGO). Companies making strategic decisions to engage in philanthropic, socially responsible activities then often influence the employee stakeholder by increasing their talent pool, attracting more qualified candidates (Microsoft).

Implications of the Stakeholder Value Approach

Evolving know the business to stakeholder value does not mean that HR should stop the work of the first three waves of know the business (economic literacy, strategic HR, and contextual awareness). The first three waves have been, are, and will be critical for HR impact. Stakeholder value evolves and increases this impact.

When introducing a human capability initiative (such as leadership development, genAI, hybrid work, agility, culture, etc.) starts by identifying the wants and needs of customers, investors, or communities, the human capability initiative can be framed as a means of creating stakeholder value. This stakeholder-first approach makes human capability even more critical, and the initiative is more likely to be accepted and sustained.

I hope that HR professionals will increasingly focus their work on stakeholder value. I hope that HR analytics will increasingly use stakeholder value metrics as outcomes of human capability initiatives. And I hope that stakeholders will see how participating in human capability initiatives helps them reach their goals.

What has been your experience with stakeholder value?

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Dave Ulrich is the Rensis Likert Professor at the Ross School of Business, University of Michigan, and a partner at The RBL Group, a consulting firm focused on helping organizations and leaders deliver value.