No organization can state that they have no stakeholders!


Last week I sent out my Powerlines newsletter Number 90 – a newsletter for Reputation Managers and those involved in stakeholder management.

Like any newsletter it always gets its own fair amount of subscriptions and unsubscriptions. However what got me this time was an e-mail from someone that stated the following:’’Your newsletter would be inappropriate for us as our business is not affected by your content”.

Now I don’t mind unsubscriptions and would rather have a targeted list of readers, but if ever I needed to take an exception over a statement it was that one.

The statement that any business would not be affected by the content is wrong. Knowledge, awareness and understanding of stakeholders and the reputation management process can only be beneficial for any organisation, no matter its size or stature.

No organization can state that they have no stakeholders. In fact it is useful to revisit the definition. Stakeholders are anyone, group or individual that can affect or is affected by an organisation’s behaviour, actions and performance. There is thus a fine interplay of factors to manage if an organisation wants an excellent reputation.

An organisation derives its reputation from the way it is perceived by its stakeholders. They will evaluate your actions, performance and behavior, and will in turn act reciprocally by either buying your products, recommending you, using your services or acting towards you in a favourable manner.

It is these actions that are important. You want stakeholders to say good things about you and your organisation, you want them to work for you and be loyal if they are an internal stakeholder, you want to be able to source funding when you need it because you have a good image and reputation in the eyes and minds of the shareholders and financial institutions.

In the world of the interconnected economy, the reputation of an organisation has become its biggest asset and risk. Research clearly shows that these days that reputation is a function of the communication with stakeholders, the understanding and perceptions they have about your business and the levels of relationships that have been fostered.

It makes the management of the stakeholder interface a strategic and vital one for any organisation. In fact, it has become so important that the new King Code 3 of Corporate Governance makes specific reference to it in Section 8. Although the Code is not enforceable it sets forth standards of good practice and provides guidance that will shape dealings with stakeholders in years to come.

Section 8: The Governing of Stakeholder Relationships spells out certain practices, as follows and I quote:

  • Section 8.2. 1 Management should develop a strategy and formulate policies for the management of relationships with each stakeholder grouping. This implies that an organisation has a formalised stakeholder management model or system in place and that due thought has been given to dealing with each relevant stakeholder. A Good example of this is the difference between working with the Government stakeholder versus the Media Stakeholder. Deadlines for these two stakeholders differ. The Media stakeholder is always on deadline, whilst in Government, decisions go through a consultative process that includes strict use of protocol. Thus you cannot manage these different stakeholders appropriately unless you understand the different rules and nuances of the stakeholder game. It is these types of issues that I also address in my Stakeholder Reputation courses.
  • Section 8..2.2. The board should consider whether it is appropriate to publish its stakeholder policies. Some companies like BHP Billiton have this information in their HSE reports and on their websites. They thus demonstrate their commitment to positive relationships based on trust, openness and transparency.
  • Section 8.2.3. The board should oversee the establishment of mechanisms and processes that support stakeholders in constructive engagement with the company. There are many ways to engage. These methods are influenced by timing, decisionmaking resources and other issues. Again, due thought needs to go into deciding which engagement tools are appropriate and under what circumstances. The use of Facebook and other social media technologies are not by the way just a communication or an IT bandwidth or security issue, but falls right into the domain of engagement.
  • Section 8.2.4. The board should encourage shareholders to attend AGM’s and Section 8.2.5. The board should consider not only formal, but also informal, processes for interaction with the company’s stakeholders are dealt with above.
  • 8.2.6. The board should disclose in its integrated report the nature of the company’s dealings with stakeholders and the outcomes of these dealings.

All these specifications implies that a company will need a formalised stakeholder management system*** in place, in order to comply and adhere to these recommended practices. The Code also goes on to say that the board should take account of the legitimate interests and expectations of its stakeholders in its decision-making in the best interests of the company.

This means having a different set of criteria when making decisions – see my blog post called Which Decision-making Model are you using?.

However adhering to these recommended practices will be far from easy. Traditional company models rely on functional layering, whilst the skills and approach needed to manage a Stakeholder system will necessitate a systemic model, one in which a person will be required to work across departmental boundaries.

Company processes and practices will also offer their own set of restrictions. In my blog posting of 26 March 2008 I asked the question: ‘‘How much are you spending on Stakeholder Relations?.

I had few responses, and those who did, could not tell me how much they were spending on each stakeholder group, nor what the ROI was. This will be a problem in the future, because what we try and do in stakeholder reputation work is to influence perceptions and ultimately affect stakeholder behaviour. Spending money on these relationships are not wasted. Spending money on learning how to maximise these relationships will not be a not a waste.

Planning and managing the Stakeholder function will need to be done systematically and with great strategic insight.

So to conclude to the reader who unsubscribed. In my newsletter I try and raise awareness of these type of issues and topics. Whether you like it or not you will affect your stakeholders and they will in turn affect your reputation.

*** Here is a quick test for you. Can your management team answer the following strategic questions:

  • Who are our stakeholders?
  • What are our stakeholders’ stakes?
  • What opportunities and challenges do stakeholders present?
  • What economic, legal, ethical, and social responsibilities does our organisation have towards our various stakeholders?
  • What strategies or actions should we take to best manage stakeholder challenges and opportunities?
  • Do you have a system for managing relationships with stakeholders?
  • How do you measure results? What metrics do you use to assess and gauge stakeholder relationships?
  • In a crisis how quickly can you communicate with your relevant stakeholders?
  • Do you know the various methods to engage with stakeholders and when not to use it?
  • Can you state how much you are spending on each stakeholder group and what your ROI is?
  • Have you developed a set of rules and practices on how best to manage the process of building stakeholder reputation with each stakeholder group?

If you need more help to understand this, take a look at this site: http://stakeholderreputation.invite43.com

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