Over the past 5 weeks I have made the case that in today’s interconnected world of well-informed individuals not engaging with stakeholders is costing companies money and can potentially even threaten their existence. In this last post of the series, I want to discuss some practical reasons why stakeholder engagement, despite all the best intentions, still often fails. These reasons can be traced back to ill-defined strategies, underestimated organisational barriers or external developments.
The strategic barriers listed here are all variations of the lack of understanding of either the potential value stakeholder engagement can bring to a company or what is required from the organisation to capture this value.
• Wrong objectives. A company should spend ample time on setting the right objectives for specific stakeholder engagement. In the third blog of this series I have outlined five potential areas in which engagement can create value for the company. However it is not enough just to pick one or more of these areas. It is still paramount to establish specific objectives for the actual program.
• Lack of insight into which stakeholders are really relevant for the company. The ability to do business is directly impacted by actions of a broad range of stakeholders. Unfortunately, most companies still focus on a very narrow set of stakeholders. And typically these are defined in very broad terms: shareholders, customers, employees and government. Much more definition and differentiation is needed if engagement is to be successful. In order to build relations and have discussions about topics that have value for various stakeholder groups it is important to carefully define them with the potential value in mind. The larger the group the harder this will be. For example the general public is NOT a workable stakeholder group as it is too diverse to be engaged in a meaningful conversation around a topic. It never ceases to amaze me that on the marketing side companies can slice their audiences very well but corporate communications does often not apply the same discipline.
Interestingly companies, which have come under pressure from specific stakeholders, often do extend the list with stakeholders who oppose them and make the most noise. But still forget to assess whether the loudest opponents are also the most influential and materially relevant stakeholders for them.
• Lack of a real insights in the members and convictions of the stakeholders. Compounding the barrier above, stakeholder engagement is still too much driven by the mistaken believe that managers in companies understand what is concerning their various stakeholders and by second-guessing them. A very rewarding and valuable first step in building relations with stakeholders is simply asking them what their concerns are.
• Treating regaining trust and maintaining a societal license to operate only as a PR issue. The Public Relations department can play a key role in coordinating stakeholder engagement and organising the regular flow of communications, but it is an assessment of all activities of an organisation that ultimately influence the trust stakeholders place in the organisation. Words and actions need to be seen to line up. Afterall, in homage to Michael Iapoce famous quote: reputation is brand minus what you have been caught doing.
• Disconnects in the organisation not addressed. Companies are naturally siloed. After all only by divvying up the work can things get done. The down side of this reality is that each organisation suffers, by definition, from connection problems. Since engagement entails a commitment to follow up, it is important to ensure that the internal stakeholders are aligned on the objectives and understand what is expected from them.
• Lack of coordination and no clear ownership of the engagement process. The coordination of stakeholder engagement can be delegated to Public Affairs, corporate planning or another staff function but its ownership needs to reside at the highest level of the company in order to ensure the participation and commitments from all parts of the organisation. Furthermore, this public high-level commitment is also a factor in building the trust among the stakeholders that their engagement is valued. • Reluctance to collaborate. Quite a large group of employees and functions maintain, as part of their job responsibilities, relations with stakeholders. For example, Marketing feels that the own the customer relation, Government Affairs ‘owns’ the relations with regulators, local or regional public affairs typically ‘owns’ community relations, Investor relations ‘owns’ the relation with the financial stakeholders, etc. From first hand experience I can tell that this fragmentation sometimes leads to a reluctance by certain leaders/departments to participate and even can trigger unwanted internal political plays. As a result companies do not capture the benefits from effective stakeholder engagement.
• Bad timing. The success of stakeholder engagement is directly related to the ability to engage with the right stakeholders at the right time on the right topic. The right timing is determined by one of two variables or both. Neither of these has precedence over the other. I. The company’s timing is dictated by the company strategy and business cycle. II. The Stakeholder timing is driven by their (perceived) sense of urgency.
• Lack of trust in companies. Over the past decade the trust in companies has constantly declined, fuelled in part by the economic down turn, scandals and a constant flow of negative media. Companies need to realise that it is against this background that they are engaging with stakeholders.
• Conflicting objectives might make engagement difficult. Good intentions on the part of the company alone are not enough to ensure successful engagement. Unless a company and the stakeholder group are willing to at least consider compromising or agreeing to disagree then there is no base for engagement. Companies which made their fortune and satisfied their shareholders with a confrontational approach (fx, Exxon’s approach to climate change) and NGOs which have build their reputation and following (funding) on strict, unwavering believe in their causes, will NOT be natural partners for an engagement process.
• The volume of potential stakeholders can be daunting. Companies need to clearly define, based on measurable criteria, which stakeholders are material to them, which they care about and want to engage with.
None of these barriers are insurmountable and should never be a reason for not engaging. When stakeholders are used as a natural extension of the knowledgebase of a company a whole world of new opportunities opens. Have a look at Jane Hiscocks’ and the Farland Group’s work on customer advisory boards or the BBMG, GlobeScan study on the Aspirational customers, or at the growth of jams as a tool to develop new products and ideas; all evidence that treating stakeholder engagement as merely a PR tool is missing the point.