Is the Customer Really King? A Closer Look at Key Stakeholders for SMEs

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Shareholders of large companies employ CEOs in order to run corporations on their behalf. In this world, the shareholder remains the primary corporate stakeholder. However, for most organizations, small- and medium-sized enterprises among them, shareholders are unlikely to have a dominant hold over the organization.

So who is the most important stakeholder for the small- and medium-sized enterprise (SME)? At first glance, the old adage “the customer is king” would seem to resonate. Surely smaller businesses are most reliant on their customers, and need to serve and protect their relationships with them above all others?

While this may ring true on an intuitive level, research on social responsibility for SMEs suggests the story isn’t that simple. Perhaps one of the more surprising findings is the important role of competitors for the SME. That is, for the SME, competitors can play the role of colleagues to whom business might be subcontracted or from whom equipment might be loaned, rather than enemies to be overcome.

The most consistently identified key stakeholder for the SME is its workforce. In the words of one owner-manager: “Customers come and go, but employees you need to hang on to.” The cost of replacing an employee who moves on, and the loss of experience and knowledge that walks out the door if a large proportion of the workforce leaves in the form of one person, are substantial problems for the SME. In addition, in a traditional small firm – though less so in a virtual organization – the simple proximity of the owner-manager to employees means that the relationship has both social and professional dimensions. Concrete areas of social responsibility for an employee-focused SME are fair wages, comfortable working conditions, family-friendly policies and good occupational health and safety initiatives. It is employees rather than customers who are “king or queen” for the SME.

Small- and medium-sized enterprises are such a heterogeneous group that we should take care not to generalize: we should understand each organization’s stakeholders individually. More research will help. There are no doubt sectoral, cultural or sized-based differences even within the SME group. Indeed, social enterprises may have a quite different emphasis, focusing on the beneficiaries of their enterprise activity. Family firms may also vary due to the additional influence of family relations. Nevertheless, a refocusing of sustainability and corporate social responsibility issues on the often-overlooked employee would be useful and valuable for organizations of all sizes and types.