Nutshell: Why we live or die by our stakeholder engagement

Written by
Future Talent Learning

Published
01 Dec 2020

01 Dec 2020 • by Future Talent Learning

Stakeholders are the lifeblood of organisations so we need to know who they are, recognise their interests and influence, and create robust and nuanced engagement strategies.

Imagine you are running a megaproject to roll out a major new high-speed rail network. With affected parties ranging from rail users keen to reduce their commute to homeowners along the proposed route – not to mention taxpayers picking up the bill ­– it’s clear that we’ll have our work cut out to keep them all on board and on side. These are the project’s stakeholders, defined as anyone who has a vested interest in an organisation or project or who is affected by its operations or performance.

In the mix in this case will be a host of government agencies, regional planning authorities, station working groups, contractors, sub-contractors and suppliers, engineers, rail workers, unions, ecologists, heritage charities, business groups, activists and journalists, each with a vested interest in the scheme – and discrete (often conflicting) outlooks and expectations.

All these public and private-sector groups and individuals require identification, consultation, engagement and communication; we need to categorise and prioritise them. Failing to recognise their individual needs and influence, and to build and maintain the right relationships with them, risks unhappy employees or customers, supply problems, reputational damage and many other negative outcomes – including complete failure of our project or business.

As complex and intimidating as this sounds, this kind of stakeholder engagement boils down to managing people and relationships. If we want to keep them onside, to influence them, we have to find meaningful ways to connect and communicate with them.

In other words, like so much in business, it requires a strong grasp of human skills – from self-awareness and empathy to communication and adaptability. We live in a connected world, and everything we do impacts on (and is impacted by) a diverse range of groups and individuals inside and outside of our organisations – from the board of directors to our teammates and the gig workers we hire, through to our customers, suppliers, the communities within which we operate, and our commercial or strategic partners.

Knowing who our stakeholders are and who has the most influence – before we begin a project or strategy – is critical to success, particularly in a new era of ‘stakeholder capitalism’, which holds that the purpose of a corporation is not short-term profits but sustained value creation for all. Its principles revolve around delivering value to customers, investing in employees, dealing fairly and ethically with suppliers, supporting communities, protecting the environment, adhering to regular and policy maker guidance, and generating long-term value for shareholders. Pioneers include Unilever, perhaps the world’s most successful purpose-led business.

Never before have organisations faced so much pressure to demonstrate social responsibility, nor experienced such penetrating public scrutiny. We underestimate at our peril the interconnectedness of our world; the influence of social media (and its ability to mobilise opposition to unpopular products or initiatives); the power of our clients to vote with their feet; the overlap between our employees and our customers.

If we fail to win the hearts and minds of all the people we involve and impact (or at least understand them), we, too, may ultimately fail in our project or initiative.

Knowing you, knowing me

Our stakeholders will be many and varied, but they will be made up of:

Internal (primary) stakeholders, who participate in the management and running of an organisation or project, including its employees, managers, board of directors, investors and shareholders.

and

External (secondary) stakeholders – parties or groups who are not part of an organisation or project, but affect or are affected by it, including clients or customers, suppliers, government agencies, the media and the wider community. 

While it’s likely that we’ll know less about external stakeholders than we do about our internal colleagues, all stakeholders have the power to make or break us (to a greater or lesser extent), so we need to understand their specific motivations, interests and the power they wield, and to manage external relationships just as we do those inside our organisations.

Different stakeholders have different interests and levels of influence, and they engage with us in varying ways, so unfortunately there’s no standard approach to managing them. We would not expect to interact with a large new corporate customer in the same way that we liaise with a longstanding supplier; our key shareholders are likely to adopt a different stance to an industry regulator; employees may see things differently to the CFO. A quarterly update email simply cannot be angled to each and every perspective or reach every interested party.

Even small projects involve multiple stakeholders. For example, when redesigning our company website, we will need factor in our project sponsor, the CEO and other senior management, internal and external members of the project team working to create and promote it, and all our other employees (who will need to use or signpost it, field queries about it and understand how and why it’s changing).

We must simultaneously manage relationships with existing clients who are using the overhauled site (but were used to the old one), new clients we wish to attract, shareholders (seeing how it impacts on reputation and profits), industry regulators (monitoring the legal aspects) and potential hires, who will judge us on this modern-day ‘shop window’.

To achieve this, we will have to find out where stakeholders are coming from, how and why their interests might support or conflict with ours and each other’s. We’ll need to set the right priorities and manage expectations while building positive relationships.

The last thing we want is a site that takes clients by surprise because it looks so different and isn’t user friendly; infuriates a competitor because the new branding borders on copyright infringement; frustrates our CEO, who wasn’t kept in the loop about delays to its launch date, and causes employees extra stress because nobody has been trained to use the CMS.

Fortunately, there are tools and techniques to help us identify and analyse stakeholders, where they fall into groups with overlapping interests, and how we can develop a range of strategies and tactics for keeping them informed, engaged and on side.  

Stakeholder mapping

Stakeholder mapping enables us to identify the different groups of stakeholders for our project or organisation, to work out who we need to communicate with (and how often) and how to develop the most effective and persuasive messaging to help our cause – no matter what we want to achieve.

The process can be broken down into the following four key stages:

1.  Identify. We start by brainstorming to identify all the possible internal and external stakeholders affected by our work. This, of course, is likely to produce a long and unwieldy list.

2.  Segment. We will therefore need to segment this, combining categories to reduce our total number of stakeholders. For example, with internal stakeholders, their interests and influence tend to correlate to the groups they belong to – perhaps their team, their employment status, their position in the organisation, their level within the company, or their location – so we can group them in this manner.

External stakeholders can also be grouped in various ways – for example, according to their relationship with the organisation:

  • Market stakeholders have a financial relationship with our organisation and influence the value-creation process. They include suppliers, distributors and competitors.
  • Social/political stakeholders come from a social or political environment that influence the ‘social legitimacy’ of our project or strategy, and are becoming increasingly influential as stakeholder capitalism takes hold. They include government agencies, policymakers, industry regulators, watchdogs, activists, influencers and campaigners.

To help narrow our list to key stakeholders, we should then answer the following five questions, posed by Graham Kenny, an expert in strategy and performance measurement:

  • Does the stakeholder have a fundamental impact on our organisation’s performance? (Required response: yes)
  • Can we clearly identify what we want from the stakeholder?(Required response: yes)
  • Is the relationship dynamic (do we want it to grow?)(Required response: yes)
  • Can we exist with or easily replace the stakeholder?(Required response: yes)
  • Has the stakeholder already been identified through another relationship? (Required response: yes)

3.  Establish. Now that we have our list, our next step will be to plot all our stakeholders using a visual power-mapping tool such as the Power Interest Grid, published by Colin Eden and Fran Ackerman in their book Making Strategy. This assumes that stakeholders:

  • take a low or high interest in our organisation or initiative

and

  • have low or high power (for example, an ability to influence key decisions).

Using the grid involves plotting stakeholders vertically – based on how powerful they are – and horizontally – based on their interest in our project.

4.  Engage: Our final step is to analyse the grid to decide how best to engage each of the four groups:

  • High influence/Low interest: Keep satisfied. Our aim with these stakeholders will be to communicate and engage with them sufficiently so that they feel their voices are being heard on key issues but are not overwhelmed. We should avoid repetitive low-value contact or they may lose interest in the project. Short, targeted presentations and updates during existing meetings are likely to work better.

For example, with our website project, a key investor in the company wants to know about our plans and see that we are using resources effectively. However, while she’s interested in the general scope, costs and benefits of the plan, she does not need details. Bombarding her with updates will undermine her enthusiasm.

  • High influence/High interest: Keep engaged. The stakeholders in this group are valuable advocates and need to be fully engaged. We must work proactively to address their concerns and requirements for information and to keep them onside throughout our initiative. This may involve personal briefings and workshops.

For example, our CEO is strongly invested in the website project, even though she is juggling a range of organisational priorities. We will need to ensure that our initiative remains front of mind and well-resourced, involving her in core decision-making and highlighting positive progress, choosing methods that fit into her busy schedule.

  • Low influence/Low interest: Keep informed. It’s good to keep these stakeholders informed, but with minimal effort. Overloading them with excessive communication will cause them to zone out of our messaging, and is not an effective use of our time. Incidental updates via third parties are often sufficient for this group.

For example, a longstanding supplier should be aware that we are overhauling our website and branding, but won’t be directly affected by the changes. We can keep them updated on an ad-hoc basis and include them in the official communications that announce the website’s launch.

  • Low influence/high interest: Keep interested. We should keep these stakeholders informed to maintain their interest, monitoring and responding to any issues that arise. While they lack influence, their interest means that they are scrutinising our activities and they could become low-level supporters or detractors. Using newsletters, flyers, posters and press releases might be helpful here.

For example, a journalist who writes for a trade media publication often covers company developments such as our website project. He’s interested in case-studying our initiative, so it’s worth keeping him and other members of the press informed about our progress in order to garner positive publicity.

Creating shared value

Having decided how best to work with our stakeholders, we can move on to designing our communication and engagement around a clear methodology (which aligns to our organisation’s targets), reaching out to core players and taking the time to understand their perspectives and concerns.

Our map provides a foundation for deciding which stakeholders must be reached – and how frequently – plus the level of messaging we should use, and how best to reach different groups and individuals. We should define at this point whether our approach is simply consultative or co-operative (where the company is prepared to take joint action).

Since the point of our work is to influence our stakeholders, Petra Kuenkel, founder and director of the Collective Leadership Institute, suggests that our approach must be proactive, issue-based and learning-orientated.

For example, developing ongoing dialogues – perhaps with local officials – keeps us apprised of fluctuations in policy or public feeling; gaining a better understanding of relationships between stakeholders may help us to avoid conflict. Opportunities may arise to develop partnerships that drive sustainable development. Anticipating the potential in stakeholder dialogues at an early stage can lead to the shared-value creation that underpins stakeholder capitalism.

While we can’t please all of the people all of the time, taking a broader consideration of who our stakeholders are, and factoring that into our strategy and choices, has both societal and commercial benefits.

“We know that companies that do that are more resilient and also perform better,” said McKinsey senior partner Dame Vivian Hunt in a 2020 episode of The McKinsey Podcast. “They also have more success in building trust, which is important for their long-term success.”

To thrive in our increasingly interconnected and dynamic world where we face shared problems – from pandemics to climate change – we will need to put stakeholder engagement front of centre, creating and implementing strategies that add value, are sustainable – and bring all of our stakeholders along with us.

 

Test your understanding

  • Explain what we mean by stakeholder capitalism.
  • Outline the four stages of identifying and prioritising stakeholders.

What does it mean for you?

  • Consider a small project you are currently involved in and list your key stakeholders. Narrow your list to key stakeholders by answering the five questions set out by Graham Kenny.

 

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