Stakeholder engagement is a key factor in business today, driven by a desire for ethical leadership and responsible practices. Stakeholder engagement recognises that a company is responsible to all its stakeholders.
The board of an SME or privately-held company would do well to think about stakeholders in a much broader sense than just for social and environmental issues.
This means not just doing it because of legislation or market pressure but to engage a diversity of perspectives as an opportunity to create value.
A stakeholder is any group or individual who can affect or is affected by an enterprise and the achievement of its objectives.
Internal stakeholder groups include employees, customers, suppliers, creditors, shareholders and the community directly impacted by the business.
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External stakeholders include trade unions, the media, environmental and social interest groups, government and the market.
Consider the following aspects:
Know who your stakeholders are
Start simple. Make a list of your stakeholders. Think broadly about internal and external stakeholders. Who has the most to gain or lose from your success or failure? What would the impact be if you suffer a major setback? Include future stakeholders.
For example, if your strategy includes expansion into foreign countries, who should you begin building a relationship with there now?
This list must clarify who is responsible for managing those relationships. If it does not, it simply will not happen. Therefore, think about each stakeholder group and consciously select someone from your team who is best suited for being responsible for that relationship.
Define a strategy for each group
A board should know the strategy for each key stakeholder group. Use the board to discuss specific strategies and glean insight.
Research in this area indicates a direct link between a strategic approach to stakeholder engagement and the creation of sustainable business value.
This re-emphasises the role of your board in commercial value creation rather than just compliance.
Understand the value you give
Stakeholder relationships are two-way. If the board focuses on what we ‘get’ then you will not ‘get’.
The best stakeholder relationships, including unions, suppliers and employees, create reciprocal value. Focus on what you will contribute to those relationships.
By understanding your stakeholders’ needs you can find new and innovative ways to work together in partnership.
A very simple example of this is a client of ours who engaged their creditors and found that by simply changing a small process they made it easier for the creditor’s processing and got paid faster.
Stakeholders are people
While it might be a company you have a ‘relationship’ with, there will always be people with whom you engage. Focus on the relationship you want to develop and treat them as people with specific needs, drivers and fears.
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If you build those relationships, you will see results. Remember too that if you focus only on one person, you run the risk of loss should that person move on.
You get what you measure. Be clear on what results you expect from each stakeholder and make absolutely sure that you honour your commitments to them in turn.
If you want to deepen value and long-term benefit, be willing to build a culture that values delivering on your promise and then does so.
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