While Service-Based Leadership stresses that the leader must serve the needs of his or her constituencies, not all constituent needs have equal weight or importance.
Owners or shareholders are usually the smallest constituent group in numbers, but their needs are paramount.Â Why?Â Because it is their capital that has been invested in the enterprise and their need for return on investment that permits the continuation of the business.Â If it is not making a profit, if it cannot gain credit based on a potential for future profit, if it cannot meet its cash needs for payroll or to pay vendors, it will quickly go out of business and the needs of all other constituencies will become irrelevant.
Obviously, a return on investment is important.Â Consider why an owner would want to earn 2% in a business when he could invest his money in a less risky investment and earn a better return.Â While there may be other reasons for continuing to own a businessâ€”such as prestige; a sense of obligation to family, community, or employees; or the expectation of improved future performanceâ€”over the long haul owners will not be willing to risk their capital on a poor-performing venture.
Next in order of importance are the needs of customers.Â Without sufficient customersÂ patronizing the business, it will not be profitable or viable.Â If not viable, it will not last long-and all constituencies lose.
Ultimately, customers are attracted by price and the quality of products and services.Â Taken together, quality and price create a sense of valueâ€”the value perceived by customers.Â If enough customers perceive value, they will frequent the enterprise to spend their money and will make it successful.Â If not, the business will ultimately fail.
This statement brings us to our third constituencyâ€”the employees.Â They are the ones who execute the owners’ vision for quality of product and service.Â They are the ones whose daily interaction with customers creates the value customers seek.Â Properly led, valued, and supported, employees will enthusiastically commit to serving the business’ customers thereby fostering levels of business that enable it to thrive.
The basis for the traditional hierarchical organizational model is the military concept of “chain of command.”Â In this model, management is represented as the sequence of authority in executing the will of the ownersâ€”and certainly management plays that essential role.Â But in addition to not representing the importance of customers, it also places the employees at the bottom of the chainâ€”thereby visually relegating them to the position of least consequence.
The Service-Based Organizational model depicts the importance of satisfying customers, as well as the important role of employees.Â The organization’s leaders are placed at the bottom, clearly emphasizing their role in serving the needs of all constituencies.
Excerpted from Leadership on the Line – The Workbook.
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This weekly blog comments on and discusses the club industry and its challenges. From time to time, we will feature guest bloggers – those managers and industry experts who have something of interest to say to all of us. We also welcome feedback and comment upon the blog, hoping that it will become a useful sounding board for what’s on the minds of hardworking club managers throughout the country and around the world.
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