Tag Archives: Stakeholder Engagement

Effective Stakeholder Engagement is Multifaceted

An organisation’s success, reputation and long term sustainability depends on its stakeholders and how they perceive the organisation.  The way the organisation interacts (or is perceived to interact) with its stakeholders builds its reputation and its customer base.  But customers belong to communities and it’s the broader community that grants the ‘social licence’ needed for the organisation to operate long-term. And, because no one and nothing is ever perfect, things will go wrong from time to time requiring action to protect the organisation’s reputation and its social licence.

The objective of this post is to:

  • Put all (or most) of the different mechanisms used by organisations to engage with stakeholders into perspective; and
  • Emphasise the message that authentic and effective stakeholder/community engagement needs an organisation-wide coordinated approach that is governed from the very top levels of management.

The Stakeholder Engagement Spectrum

The Organisational Core

The characteristics of the organisation are always at the centre of every stakeholder relationship[1]. The way your organisation is structured, its ethics, characteristics, systems, and services, underpin how its stakeholder community will ultimately perceive the business. The key to successful stakeholder engagement is in part the way the organisation is structured and operated, and in part being authentic and realistic in the way various aspects of stakeholder communication and engagement are used. If your business is a low-cost, low service, bulk supplier don’t pretend to be an upmarket high service organisation. Many people are more than happy to shop at retail outlets such as Walmart and Aldi, attracted by price and simplicity; others prefer the higher levels of service and higher prices from more upmarket department stores. The art of stakeholder engagement is to maximise the appeal and perceptions of the organisation as it is – not to mask reality with a pretence of being something else.

However, poorly governed unethical organisations will always ultimately fail regardless of their stakeholder engagement effort; you can’t build an effective long-term relationship on unsound foundations.

Similarly, any organisation can implement these eight practices and still ignore their stakeholder community – engagement is a two-way communication process that includes listening to and understanding stakeholder’s wants, needs, issues and concerns (particularly related to the perceived or actual impact of organisational activities) allow the development of effective stakeholder relationships. Effective engagement is only possible if the organisation’s overall culture and ethical-frame is a stakeholder-centric one. This is one of the reason’s why creating the ethics and culture feature prominently in my ‘Six functions of governance‘ model.

 

The 8 Aspects of the Stakeholder Engagement Spectrum

The eight aspects of stakeholder engagement highlighted above are all well defined in various publications; the way they are used in this post is briefly set out below:

PR: Public Relations – The actions taken by an organisation to develop and maintain a favourable public image. PR is a strategic communication process that builds mutually beneficial relationships between the organisation and its stakeholders. The core element of PR is push communication; it is a proactive process controlled by the organisation, broadcasting information to a wide community to influence attitudes.

Advertising – The activity production and placing of advertisements for products or services. The purpose of each advertisement is to announce or praise a product (goods, service, concept, etc.) in some public medium of communication in order to induce people to buy, use it, or take some other action desired by the advertiser. The difference between PR and Advertising is that PR largely focuses on creating or influencing attitudes and perceptions whereas advertising focuses on some form of ‘call to action’.

CRM: Customer Relationship Management – Refers to the practices, strategies and technologies that organisations use to manage and analyse customer interactions and customer data throughout the customer lifecycle. The goal of CSR is to improve the organisation’s relationship with each customer, assisting in customer retention, and driving sales growth. Good CRM systems make it easy for people to do business with you.

Issues Management[2] – The process of identifying and resolving issues. Effective issues management needs a pre-planned process for dealing with unexpected occurrences that will negatively impact the organisation if they are not resolved. The scope of this concept ranges from ‘crisis management’ where the magnitude of the issue could destroy the organisation (and the most senior management take an active role) through to empowering staff to deal with relatively minor customer complaints. The key to effective issue management is resolving the issue to the satisfaction of the affected stakeholders. This requires effective systems and preplanning – you don’t know what the next issue will be, but you can be sure there will be one.

Stakeholder Management Initiatives[3] – this is the area where most of my work is focused; managing the expectations of, and relationships with, the stakeholder community surrounding an organisational activity, initiative, or project. Most business initiatives and projects have a high potential to affect a range of stakeholders both positively and negatively (and frequently both at different times). How these relationships are managed affects not only the ability of the organisation to deliver its initiative or project successfully but also the overall perception of the organisation in the minds of the wider stakeholder community.

Business Intelligence & Environment Scanning – BI and other forms of environmental scanning looking at attitudes, trends, behaviours, and other factors in the wider stakeholder community. They are a key emerging element in the overall approach to stakeholder engagement used by proactive organisations. This is very much the space of ‘big data’ and data mining. Much of the collection of data can be automated and ‘hidden’ from view. The challenge is making sure the information collected is legal (privacy legislation is an important consideration), accurate, relevant, and complete; then asking the ‘right questions’ using various data mining tools. As with any intelligence gathering process, obtaining the data is the easy part of the equation; the real skill lies in developing, validating and interpreting the data to create information that can be used to produce valuable insights.

Social Networks – The ubiquitous, widespread, and diverse nature of social networks ranging from Facebook to personal interaction down the pub can easily outweigh all of the organisation’s efforts to create a positive image using PR, advertising and the other ‘controlled’ functions discussed above.  The organisation’s staff and its immediate stakeholders literally have millions of connections and interconnections to other stakeholders. Most of these connections are unseen, and the environment cannot be controlled. The best any organisation can hope to achieve in this relatively new communication environment is to plant seeds and seek to have some influence. Seeding ideas and concepts into the ‘Twittersphere’ may result in a concept being taken up and ‘going viral’, more commonly the seed simply fails to germinate. Conversely identifying negative trends and issues early, particularly if they are false, is critically important and where possible these negative influences should be countered but given the nature of the environment this is a very difficult feat to achieve.  Smart organisations recognise that their staff, customers, contractors, and suppliers all engage in this space and through other effective communication channels can influence how these people respond to opportunities and issues affecting the organisation.

CSR: Corporate Social Responsibility[4] – CSR completes the circle and brings it back towards the concept of PR.  CSR contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders. ISO 26000  Guidance Standard on Social Responsibility, defines social responsibility (ie, CSR) as follows:

Social responsibility is the responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that:
–  Contributes to sustainable development, including the health and the welfare of society
–  Takes into account the expectations of stakeholders
–  Is in compliance with applicable law and consistent with international norms of behaviour, and
–  Is integrated throughout the organization and practised in its relationships.

The key difference between CSR and PR is that CSR actually involves doing things both within the organisation and within the wider community, whereas PR focuses on telling people things.

 

Applying the Stakeholder Engagement Spectrum

The various aspects of stakeholder engagement spectrum combined together to create the organisation’s reputation, engage communities, build customers, and when necessary protect the organisation’s reputation. The key combinations are set out below:

Reputation Creation: The key components needed to create and maintain a desirable reputation start with CSR and work clockwise through the spectrum to CRM.

Community Engagement: The key components needed to effectively engage the wider community are focused on CSR but includes the elements moving anti-clockwise from CSR through to Issues Management.

Building Customers: The elements needed to build and retain customers start with PR and work clockwise through the spectrum to Issues Management.

Protecting Your Reputation: Finally, when something goes wrong, protecting or restoring the organisation’s reputation is focused around Issues Management, but includes elements of CRM and continues clockwise through to Environment Scanning. In addition, many of the ‘push’ elements in the spectrum may be used as tools to help manage issues and protect the reputation of the organisation including PR and advertising.

 

Conclusion

The ‘stakeholder engagement spectrum’ above is deliberately drawn in a circle surrounding the organisational core, because all of the different aspects interrelate, many overlap, and they all build on each other.  The governance challenge facing many organisations is breaking down the traditional barriers between functional areas such as advertising, PR and CRM/sales, so that the entire organisation’s approach to its stakeholders is coordinated, authentic and effective.

_______________________

[1] See more on Ed Freeman’ stakeholder theory at: https://mosaicprojects.wordpress.com/2014/07/11/understanding-stakeholder-theory/

[2] For more on issues management see: https://mosaicprojects.com.au/WhitePapers/WP1089_Issues_Management.pdf

[3] For more on stakeholder management see: https://mosaicprojects.com.au/Stakeholder_Circle.html

[4] For more on CSR see: https://mosaicprojects.wordpress.com/tag/corporate-social-responsibility/

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New Articles posted to the Web #47

BeaverWe have been busy beavers updating the PM Knowledge Index on our website with White Papers and Articles.   Some of the more interesting uploaded during the last couple of weeks include:

And we continue to tweet a free PMI style of exam question every day for PMP, CAPM and PMI-SP candidates: See today’s question and then click through for the answer and the Q&As from last week. You are welcome to download and use the information under our Creative Commons licence

Stakeholders and Reputational Risk

trust-valueYour reputation and your organisation’s reputation are valuable assets. The willingness of others to trust you, their desire to work with you and virtually every other aspect of the relationship between you and your stakeholders is influenced by their perception of your reputation (see more on The value of trust).  But reputations are fragile: they can take a lifetime to build and seconds to lose. Some of the factors influencing them are:

  1. Reputation cannot be controlled: it exists in the minds of others so it can only be influenced, not managed directly.
  2. Reputation is earned: trust is based on consistent behaviour and performance.
  3. Reputation is not consistent: it depends on each stakeholder’s view. One organisation can have many different reputations, varying with each stakeholder.
  4. Reputation will vary: each stakeholder brings a different expectation of behaviour or performance and so will have a distinct perception of reputation.
  5. Reputation is relational: you have a reputation with someone for something. The key question is therefore: ‘with whom, for what?’
  6. Reputation is comparative: it is valued in comparison to what a particular stakeholder experiences or believes in relation to peers, performance and prejudice.
  7. Reputation is valuable: but the true value of reputation can only be appreciated once it is lost or damaged.

Estimating the ‘true value’ of your reputation is difficult and as a consequence decisions on how much to invest in enhancing and protecting your reputation becomes a value judgment rather than a calculation. Your reputation is created and threatened by both your actions and their consequences (intended or not).  Some actions and their effects on your reputation are predictable, others are less so and their consequences, good or bad are even less certain. This is true regardless of your intention; unexpected outcomes can easily cause unintended benefit or damage to your reputation.

Building a reputation requires hard work and consistency; the challenge is protecting your hard earned reputation against risks that can cause damage; and you never know for sure what will cause reputational damage until it is too late – many reputational risks are emergent.

Managing Reputational Risk in Organisations

Because an organisation’s reputation is not easy to value or protect, managing reputational risk is difficult! This is particularly true for larger organisations where thousands of different interactions between staff and stakeholders are occurring daily.

The first step in managing an organisation’s reputational risk is to understand the scope of possible damage, as well as potential sources and the degree of possible disruption. The consequence of a loss of reputation is always the withdrawing of stakeholder support:

  • In the private sector this is usually investor flight and share value decline; these can spiral out of control if confidence cannot be restored.
  • In the public sector this is typically withdrawal of government support to reflect declining confidence.
  • In the professional sector client confidence is vital for business sustainability; a loss of reputation means a loss of clients.

Each sector can point to scenarios where the impact of reputation damage can vary from mild to catastrophic; and whilst the consequences can be measured after the effect they are not always predictable in advance.  To overcome this problem, managing reputation risk for an organisation requires three steps:

  • Predict: All risk is future uncertainty, and an appropriate risk forecasting system to identify reputation risk is required – creative thinking is needed here! The outcomes from a reputational risk workshop will be specific to the organisation and the information must feed directly into the governance process if reputation risk is to be taken seriously (see more on The Functions of Governance).
  • Prepare: Reputation risk is a collective responsibility, not just the governing body’s. All management and operational staff must recognise the organisation’s reputation is important and take responsibility for protecting it in their interaction with stakeholders. The protection of reputation should also be a key element in the organisation’s disaster recovery plans.
  • Protect: A regular vulnerability review will reveal where reputation risk is greatest, and guide actions to prevent possible damage. Each vulnerability must be assessed objectively and actions taken to minimise exposure. Significant risks will need a ‘protection plan’ developed and then implemented and monitored.

Dealing with a Reputational Risk Event

When a risk event occurs, some standard elements needs to be part of the response for individuals and organisations alike. For reputation enhancing risk events, make sure you acknowledge the ‘good luck’ in an appropriately and take advantage of the opportunity in a suitably authentic way. Over-hyping an event will be seen as unauthentic and have a negative effect on reputation; but good news and good outcomes should be celebrated. Reputation threatening risk events need a more proactive approach

  • Step 1: Deal with the event itself. You will not protect your reputation by trying to hide the bad news or ignoring the issue.  Proactively work to solve the problem in a way that genuinely minimise harm for as many stakeholders as possible minimises the damage that has to be managed.
  • Step 2: Communicate. And keep communicating – organisations need to have a sufficiently senior person available quickly as the contact point and keep the ‘news’ coming. Rumours and creative reporting will always be worse then the fact and will grow to fill the void. All communication needs to be open, honest and as complete as possible at the time.  Where you ‘don’t know’ tell people what you are doing to find out. (see Integrity is the key to delivering bad news successfully).
  • Keep your promises and commitments. If this becomes impossible because of changing circumstances tell people as soon as you know, don’t wait for them to find out.
  • Follow up afterwards. Actions that show you really care after the event can go a long way towards repairing the damage to your reputation.

Summary

Reputation is ephemeral and a good reputation is difficult to create and maintain. Warren Buffet in his 2015 memo to his top management team in Berkshire Hathaway emphasised that their top priority must be to ‘zealously guard Berkshire’s reputation’. He also reminded his leadership team that ‘we can afford to lose money–even a lot of money. But we can’t afford to lose reputation–even a shred of reputation’ (discussed in Ethics, Culture, Rules and Governance). In the long run I would suggest this is true for every organisation and individual – your reputation is always in the minds of other people!

New Articles posted to the Web #46

BeaverWe have been busy beavers updating the PM Knowledge Index on our website with White Papers and Articles.   Some of the more interesting uploaded during the last couple of weeks include:

And we continue to tweet a free PMI style of exam question every day for PMP, CAPM and PMI-SP candidates: See today’s question and then click through for the answer and the Q&As from last week. You are welcome to download and use the information under our Creative Commons licence

New Articles posted to the Web #45

BeaverWe have been busy beavers updating the PM Knowledge Index on our website with White Papers and Articles.   Some of the more interesting uploaded during the last couple of weeks include:

And we continue to tweet a free PMI style of exam question every day for PMP, CAPM and PMI-SP candidates: See today’s question and then click through for the answer and the Q&As from last week. You are welcome to download and use the information under our Creative Commons licence

New Articles posted to the Web #44

BeaverWe have been busy beavers updating the PM Knowledge Index on our website with White Papers and Articles.   Some of the more interesting uploaded during the last couple of weeks include:

And we continue to tweet a free PMI style of exam question every day for PMP, CAPM and PMI-SP candidates: See today’s question and then click through for the answer and the Q&As from last week. You are welcome to download and use the information under our Creative Commons licence

New Articles posted to the Web #43

BeaverWe have been busy beavers updating the PM Knowledge Index on our website with White Papers and Articles.   Some of the more interesting uploaded during the last couple of weeks include:

And we continue to tweet a free PMI style of exam question every day for PMP, CAPM and PMI-SP candidates: See today’s question and then click through for the answer and the Q&As from last week. You are welcome to download and use the information under our Creative Commons licence