THOUGHT leaders from government, civil society, and the private sector play an important role in creating and maintaining business value. As their influence evolves, companies must take a strategic and structured approach to stakeholder relations.
People management issues with Robert Mandeya
Engaging with stakeholders need not be tricky for those willing to take a practical, issues-based approach. Discovering the needs and benefits of collaboration with stakeholders can be a daunting experience for companies.
Anticipating the potential in stakeholder dialogues at an early stage and following a step-by-step guide can lead to successful shared value creation.
The trend towards cross-sector collaboration and stakeholder dialogues is clear. Management strategists around the world are wondering whether we are moving towards a convergence of values and asking whether shared value creation (expanding the total pool of social and economic value) will become the norm?
To make corporate social responsibility (CSR) meaningful, the underlying idea is that partnerships between businesses and other sectors can drive sustainable development.
Most progressive companies are tapping into these trends and are beginning to understand the interdependence between societal and company performance on the global and local scale. Those that have recently become alive to this new trend have noticed that stakeholder cooperation can improve business performance. Even the late adapters of this innovation have also come to realise that not keeping good relationships with stakeholders can have a damaging effect, not just on reputation but also on actual project results.
Fruitful stakeholder engagement
However, for many companies the most troubling question which remains is to come up with the most appropriate formula which makes stakeholder dialogues a fruitful experience, rather than creating a situation for controversy or one which opens a Pandora’s box. There can be misunderstandings and pitfalls in stakeholder engagement and the need to diligently come out with the best formula or method of engagement can not be over emphasised.
In my experience, there is a set of common shortcomings in both the private and public sector when it comes to external and internal stakeholder engagement. Firstly, there is a lack of skills. Stakeholder engagement requires a new set of skills within companies to engage with the world within and beyond.
Understanding the perspective of both the external and internal stakeholders is not something taught in leadership development programmes. Companies tend to lack strategy. They do not consider stakeholder engagement as part of day-to-day operations in their core business. They subsequently delegate it to CSR or communications department, under-utilising its tremendous potential or even risking damages to their reputation.
Many organisations also suffer from a lack of focus when engaging stakeholders, failing to define when and why and what for.
CSR departments of many companies do not know where to start. They are often inundated with so many stakeholders and do not know how to stratify them so as to come up with appropriate strategy for engagement for each of them. Stakeholders are often involved inappropriately, without focus and without the adequate processes. Organisations should consider the following steps:
Set their vision and level of ambition of future engagement and review their past actions;
Define criteria for identifying and prioritising stakeholders and select an engagement mechanism;
Focus on short and long-term goals, determine logistics for the engagement and set the rules;
Conduct the engagement itself, ensuring equitable stakeholder contribution and mitigating tension while remaining focussed on the issues; and
Identify opportunities from feedback and determine actions, revisit goals and plan next steps for follow-up and future engagement.
Defining a practical approach
As the Leadership Institute we have found that, apart from understanding the stakeholder landscape in general, companies’ stakeholder engagement needs to be: issue-based; pro-active instead of reactive; learning orientated in order to get to tangible issue-based results; measurable in terms of a company’s internal targets; and based on a thorough methodology.
Depending on the issue, a company needs to define whether stakeholder engagement is consultative (where the final decision on how to move on lies with the company) or co-operative (where the company is prepared to take joint action). An issue can also start with a consultation and then become a cooperation project.
Companies need to distinguish company-specific stakeholder engagement (“we engage with ‘our’ stakeholder”) from sector-wide stakeholder.
Companies need to understand why they are engaging. Good reasons include:
Risk management: “If we do not do it, we cannot operate”. For an example of this consider Shell in Nigeria or BP in Indonesia.
Sustainability compliance management: “If we don’t do it, we will not be successful”. This could be applied to sustainable business endeavours by many organisations whose efforts are driven by the need to upholding sustainable business practices.
Market development: “If we do it, we can access new markets.”
Innovation: “If we do it, we will be up to speed with our products”, although in practice there are few examples of this.
Strategy: “If we want to grow, we have to do it and it will not only save us money, but make us better.” Again, there are very few companies engaging for strategic purposes.
I am convinced that high quality stakeholder engagement can serve the world and business.
Mandeya is an executive coach, trainer in human capital development and corporate education, a certified leadership and professional development practitioner and founder of the Leadership Institute for Research and Development (LiRD). — firstname.lastname@example.org, email@example.com or +263 772 466 925.