Need better financial results? Put stakeholders first

Bangalore: Making the bottom line your top priority may not be the best way to improve profitability. Recent research shows that CEOs who put stakeholders' interests ahead of profits generate greater workforce engagement, and thus deliver the superior financial results, which they have made a secondary goal.

This finding is based on survey data gathered from 520 business organizations in 17 countries, many of them emerging markets. If a CEO's primary focus is on profit maximization, employees develop negative feelings toward the organization. They tend to perceive the CEO as autocratic and focused on the short term, and they report being somewhat less willing to sacrifice for the company. Corporate performance is poorer as a result, reports Harvard Business Review.

But when the CEO makes it a priority to balance the concerns of customers, employees, and the community while also taking environmental impact into account, employees perceive him or her as visionary and participatory. They report being more willing to exert extra effort, and thus corporate results improve. This research, which was conducted with Mary Sully de Luque, of Thunderbird School of Global Management; David A. Waldman, of Arizona State University West; and Robert J. House, of the University of Pennsylvania, underscores the risk of single-mindedly pursuing profit.