Employees as Stakeholders

Employees are often mistaken for assets of a company - "human resources" to be bought and sold as chattel of the corporation with only a modicum of regard for their personal interests.   However, it would be more accurate to consider them as stakeholders in the organization, whose continued involvement with the firm is contingent on the satisfaction of their interests.

The bilateral obligations of the employment contract are easily set aside by firms that consider themselves to be in the advantaged position in negotiation for human capital - when  the labor market has a surplus of exactly the kind of workers that are needed,  companies can show callus indifference to keeping their part of the bargain - and find themselves in a precarious position when the market shifts and their best people leave for other firms.   Such a perception is inadvisable, but likely inevitable.

This begs the question: what are the employees' interest.  Traditionally it was assumed that the only interests employees have in a firm is the income they will derive from doing so.   However, income isn't at the top of their list of interests.   In particular consider the following:

• Employees enjoy practicing their trade to the best of their ability
• Employees seek challenges that enable them to learn and grow
• Employees value the social interaction they have with colleagues
• Employees gain a sense of purpose in contributing to a mission
• Employees wish to belong to something greater than themselves

Each of these items is listed as being more important than compensation in various surveys of employee satisfaction and job-seeker interests, so there can be little argument that people work only for pay.

That's not to say that pay is not a critical factor - take away the paycheck and most employees would need to find work elsewhere.   But that is to say that they would "need" to do so, not that they would "want" to do so.   It is not merely fear that keeps them in their places, but the desire to have and retain these benefits.

In this sense, organizations and mangers are held responsible by their employees to ensure that these needs are fulfilled, and if it is their desire to retain their staff, rather than constantly hire and retrain more individuals whose interests will inevitable lead them elsewhere, firms would do well to give greater attention to holding up their end of the (implicit) contract.

This is especially important when a change takes place that impacts the interests of the employees.  When there is a reorganization or a merge, or even a dramatic change, the employment contract will be re-evaluated.  And while companies may assure employees their jobs, hence their income, are safe they must recognize that the change will impact the other factors that employees value more than money.

Any change to the status quo threatens the interests of employees.  Even in the best of cases, at least some of the workforce will consider the change to be unacceptable (in terms of the work they will do, the people they will work with, the mission they serve, etc.) and will therefore consider the firm to be in breach of contract, or at least reevaluate the terms of the agreement and determine whether the changes are acceptable to them.   Should they expect to be dissatisfied, they will begin the process of changing to another firm.

And again, firms who are callously indifferent (or carelessly ignorant) will adopt an attitude of "let them go, they are easily replaced" - but will soon find that hiring and training new employees is both a financial burden and a negative impact on performance, and that a great deal of institutional knowledge leaves along with the people, going to a competitor who values it more and will promise, at least for a time, to be better servants of the employees' interests.