What Stakeholder Public Service Would Look Like

In July, a column I posted, “It’s Time for Stakeholder Public Service,” had an unusually high number of readers. It was a response to a new business management philosophy, Stakeholder Capitalism, that has gained support among the country’s corporate leaders. It opened with a statement from Jamie Dimon, Chairman and CEO of JPMorgan Chase and Chairman of Business Roundtable, who summarized the argument: 

“The American dream is alive, but fraying. Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”

Their statements and the stakeholder capital idea followed from discussions starting last year at the World Economic Forum in Davos, Switzerland. Those discussions continue. The impetus for the change in philosophy is reflected in the Davos Manifesto 2020, along with a growing list of reports, and is summarized in the opening statement of a new white paper, “Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation”:

“We are in the midst of the most severe series of challenges the world has experienced since World War Two. The COVID-19 pandemic has exposed the fragility of our global systems. It has exacerbated underlying economic and social inequalities and is unfolding at the same time as a mounting climate crisis. Leaders in every sector – government, business, civil society – find themselves at a defining crossroads. We must mobilize all constituencies of our global society to work together and seize this historic opportunity to rebalance our world for the benefit of all. The private sector has a critical role to play.”

It's also of course clear that government has a vital role to play. The purpose here is to advocate for stakeholder public service and outline an approach that public employers could adopt to report progress in addressing societal problems. The measures include statements and common metrics that could be included on dashboards accessible by the public.

The members of the Business Roundtable have committed to the stakeholder principles. A year ago the members restated the “Purpose of a Corporation,” declaring that “companies should serve not only their shareholders, but also deliver value to their customers, invest in employees, deal fairly with suppliers and support the communities in which they operate.” Prominent on the website is a statement spelling out “our commitment to our employees and communities.” It would serve agencies and the country if government made a similar commitment.

Metrics Provide Measures of Progress

The need to respond to the COVID-19 crisis has been an ongoing focus. However, the reasons for advocating the stakeholder philosophy are broader and, in the long run, more threatening. This country and others have well documented societal problems — income inequality, poverty, climate change, gender and race discrimination — the list is long and not everyone agrees on priorities.

When the next administration takes office in January, the problems are likely to be even worse. It may be an ideal time to reconfirm government’s commitment to stakeholders. The World Economic Forum white paper provides a framework of “universal, material [environmental, social and governance] metrics that could be reflected in the mainstream annual reports of companies on a consistent basis across industry sectors and countries.” Starting with those metrics as a model, government leaders, along with experts on government, could readily define a similar set of metrics for reporting the progress of public employers at all levels in addressing societal problems. 

The white paper provides a set of 21 core metrics, many of which are already reported by many companies, organized under four “pillars” aligned with societal concerns: principles of governance, planet, people and prosperity. Additionally, there are 34 expanded metrics focused on less well established issues that “represent a more advanced way of measuring and communicating sustainable value creation.”

The governance section starts with a corporate statement of purpose, followed by descriptive statements related to the principles of accountability, agency and stewardship. The core planet metrics focus on climate change, land use, and the availability of clean water. The prosperity metrics demonstrate an employer’s contribution to a prosperous society and are relevant to several societal concerns — wealth inequality, racial injustice, affordable access to services, etc. 

The pillar that I know best, people, includes metrics grouped in three themes that demonstrate an employer’s commitment to fair and equitable employment practices.

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
• Number of discrimination and harassment claims

Health and well-being — employers should care for the health of employees and their families:

• Employee absentee rate
• Monetized direct and indirect costs of work‑related accidents 
• 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:

• Goal to hire unskilled candidates with plans to train them 
• Investment in training as a percentage of payroll.
• Average hours of training per employee

The people metrics should be planned to highlight government’s commitment to providing attractive career opportunities.

What’s missing are metrics related to uniquely government responsibilities, like national security and law enforcement. It would make sense for public employers to add (or replace) a pillar with a set of metrics relevant to an agency missions. It’s clear that, for example, the Forest Service would report on a different set of metrics than the Bureau of Prisons. A new set of agency-specific metrics would focus on progress in meeting strategic goals and addressing societal concerns.

A “Good-Comes-First Culture”

There is evidence the stakeholder argument is gaining acceptance in the management of organizations. A recent column carried the title, “What if Your Company Puts Good First?” The article did not mention Davos,  but the message is similar:  

“Today’s attuned employees see themselves, their communities, and their climate as casualties in a war for profits. This in direct contrast to the personal values of especially newer generations of workers. 

At this moment, we have the most outspoken workforce the world has ever seen. Employees expect their employer to make morally just decisions. They expect respect. They expect to have a voice … today’s employees expect companies and their leaders to be a force for good in the world.”

More importantly, the authors cite evidence that in “good comes first” companies, employee engagement goes up by 40% or more. “Employees who feel respected and valued bring fresh ideas, improve processes, and cooperate with trusted peers daily. Inspired employees are directly responsible for improving customer service rankings . . .” That leads to improved productivity and higher profits “by 35% or more.”

Rebuild Public Perception of Government

Government has a trust problem. A new Pew survey shows, “Just 20% of U.S. adults say they trust the government in Washington to ‘do the right thing’ just about always or most of the time.” Only 8% trust government “a lot.” In contrast, 56% trust the military a lot. The news media and business leaders both score higher than government.

The Organization for Economic Cooperation and Development conducts a similar survey, asking “In this country, do you have confidence in … national government?” The U.S. scored 33.3. Canada scored 62.7, Russia 53.3, Germany 58.7. Mexico scored lower at 27.7.

Declining trust in government makes it harder to solve critical problems. Before the pandemic, Pew surveys found 58% of respondents were dissatisfied with government performance. The comparable number in Canada was 39%. We can only speculate how the COVID-19 crisis will affect survey responses in the future.

With government confronted by the “most severe series of challenges,” government’s tarnished brand adds to the problems. Working in government is seen as “stodgy, bureaucratic, and not innovative.” Vacancies continue to be high for essential jobs. The workforce is aging, reskilling is needed. Government has reformed hiring but when the economy fully recovers, recent hires could leave for more attractive opportunities.

While metrics are important, communicating agency achievements would contribute to improved trust. It would also help to give recognition to employee contributions. Workers want to work for highly regarded employers.

More important are the changes in workforce management to incorporate the stakeholder philosophy. Trust, respect and valued are key words in the discussion of the “good comes first” companies. Those words are also associated with organizations deemed great places to work. 

We know how to create a great place to work. Consistent with the people pillar of the World Economic Forum white paper, agencies should provide “equitable opportunities to all employees … in a workplace where [they] feel valued and respected and receive fair treatment.” That is the key to high performance. Government should be a model for other employers. It’s far from that today.