It takes two to speak the truth - one to speak and another to hear.
- Henry David Thoreau
In essence, stakeholder engagement represents an organization actively seeking to engage and listen to those affected by its operations. Ideally, these discussions may have some applied structure or framework by which the groups may prepare, so that they may stay focused on the topic at hand, but should ideally be conducted without precondition. One could think of stakeholder engagement as being the model of frank, open, and honest dialogue.
While in theory, stakeholder engagement sounds quite simple, in practice, it can be difficult for an organization to be willing to pursue discussion with those who may be its most outspoken critics. In some cases, "outspoken critics" may be putting it quite gently, as those stakeholder groups may have been responsible for labor strikes, protests, negative PR, or other damage to the organization. In these cases, persuading management to engage those stakeholders who may have a history of adversarial relationships with your organization could prove even more difficult. Herein lies the importance of stakeholder engagement:
Your organization doesn't have to like it. In fact, it probably shouldn't.
In any organization, it is always easy to survey and talk to those with closer relationships with the organization, perhaps suppliers, industry groups, or lead customers. But, for the sake of both transparency and insight into potential opportunities, stakeholders "further away" from the organization, such as lost or lapsed customers, can represent a wealth of insight. Furthermore, few organizations are willing to go to this extent in research and stakeholder engagement, so the insights gleaned through these efforts may be that much more valuable.
If the organization truly seeks truth from a variety of outside perspectives, comfort is an unlikely result. Not many organizations are willing to make themselves vulnerable in this way, but the insights for both the sustainability program and potential innovations can be significant.
What are stakeholders?
As we go about the operations of our organization, stakeholders are those we affect, even into the outer rings of suppliers and into NGOs and other groups we may have little contact with.
From Krick, Forstater et al. (p.24):
Stakeholders are individuals or groups who affect, or are affected by an organisation and its activities. [(Freeman, 1984)]
There is no generic list of stakeholders for all companies, or even for a single company (these will change over time) – those who affect and are affected depends on the industry, company, geography, and the issue in question. New business strategies and changes in the business environment will often mean a new set of stakeholders. The box below highlights some of the broad groupings typically considered.
There are a number of different dimensions that you can consider when identifying stakeholders;
- By responsibility: people to whom you have, or in the future may have, legal, financial and operational responsibilities enshrined in regulations, contracts, policies or codes of practice.
- By influence: people who are, or in the future may be, able to influence the ability of your organisation to meet its goals – whether their actions are likely to drive or impede your performance. These can include those with informal influence and those with formal decision making power.
- By proximity: the people that your organisation interacts with most, including internal stakeholders, those with longstanding relationships, those you depend on in your day-to-day operations, and those living next to your production sites.
- By dependency: the people that are most dependent on your organisation, for example employees and their families, customers who are dependent on your products for their safety, livelihood, health or welfare or suppliers for whom you are a dominant customer.
- By representation: the people that are through regulatory structures or culture/ tradition entrusted to represent other individuals; e.g. heads of a local community, trade union representatives, councillors, representatives of membership based organisations, etc.. .
The Five Stage Stakeholder Engagement Framework
Krick, Forstater et al. offer many excellent, practical resources in The Stakeholder Engagement Manual, centered around what they call the Five Stage Stakeholder Engagement Framework (p11).
An Overview of the Stakeholder Engagement Tactics and Strategies
The Five Stage Stakeholder Engagement Framework may provide the intent and strategy of stakeholder engagement, but if those strategies aren't executed well in practice, the stakeholder engagement will fall short of its goals. Below, I have excerpted some key pages from Krick, Forstater, et al. to illustrate some of the tactics and checklists you could use to help guide your stakeholder engagement. Overall, it is a well-written instructional document covering a tremendous amount of practical concerns.
Stakeholder Engagement is an Important Concept on Two Fronts
A Core Mechanism of Sustainability
If transparency is a core precept of sustainability, then we can consider stakeholder engagement at the very foundation of it all. If we peel back all of the structures, reports, metrics, and missions in sustainability, what we are left with is an architecture built on stakeholder engagement. Here's why: a sustainability effort can only be as good as the stakeholder engagement upon which it is built.
There is a classic statement that holds true in many facets of both personal and organizational behavior, and that is the idea that 'it's not the original act that will get you in trouble, it's the cover up.' This is equally true of small children, public figures, politicians, and organizations. Honest, frank conversations with stakeholder groups may be extremely difficult, but will likely yield the foundational insights to improve... where ignoring stakeholder groups will only bring deeper scrutiny, more vocal criticism, and increased reputational damage. It would be overly idealistic to imagine that the types of long-term, untenable problems could be solved in the short term, but if nothing else, the organization may gain the perspective of these groups, and show that they are moving forward in best faith to become a more sustainable organization.
Imagine a consultancy is tasked with the background research, stakeholder engagement and recommendations for the creation of a sustainability program for a European tobacco company. This firm undertakes the due diligence of creating a stakeholder list and engagement plan to interview and survey groups of stakeholders. They interview employees worldwide; tobacco co-ops and farmers, customers, retailers, supply chain partners, shareholders, and even the small union present at one of their facilities. By the time they are complete, they have an impressive battery of stakeholder interviews spanning 5 countries, and 120 stakeholders across almost 300 hours of interviews.
The tobacco company goes about prioritizing the concerns raised in the stakeholder engagement interviews, and begins its plans for the next ten years. It will audit working conditions at all of its global operations, assist the co-ops and farmers it works with to transition into water-efficient tobacco hybrids and less intensive farming practices, and begin a slew of other sustainability programs.
One problem: the stakeholder engagement chose to ignore what would be, by far, the most contentious stakeholder group: those who have suffered through a range of physical ailments from long-time tobacco use, and the families of those who have died. While these stakeholders could potentially be very hostile toward the tobacco company, they would likely be at the core of many of the most important sustainability issues facing the company.
By ignoring these groups or otherwise choosing comfort over truth, the tobacco company has essentially made itself even more of a target by publicly ignoring or otherwise minimizing those who have perhaps suffered greatly from the use of their products. Even in the modern era of cigarettes with massive warnings on every package, advertising limitations, and punitive taxes where we could consider customers to be well-apprised of the risks of smoking cigarettes, these are still essential stakeholder groups to include in any engagement effort.
Image: superfantastic via Creative Commons BY 2.0
A Core Mechanism of Insight, Innovation, and Research
In its purest form, stakeholder engagement is a type of ethnographic research (which we will be spending some time on later in the semester). Similarly to any ethnographic or insight research, the first goal of stakeholder engagement is not to argue, divert blame, explain circumstances, or present ideas. It is to listen and provide just enough structure and framework to the interview to keep it on topic. Even more than this, it is to listen enthusiastically, yet without bias. Ethnographic research is both a science and an art in and of itself, and we will devote a significant part of a lesson to it. We place emphasis on this tool because the stakeholder engagement effort we undertake to frame our sustainability program will also act as the foundational research for cognitive mapping and identifying potentially rich areas for innovation.
Deep stakeholder engagement efforts can be especially rich when compared to the information competitors or other organizations in your space may hold. Comparatively speaking, very few organizations have the budget or willpower to devote limited time and resources researching those who will absolutely not purchase their products. By far, the most common case is this: if a new product line is being launched and has only $50,000 for all consumer research, it will be spent researching perhaps three or four consumer segments of interest, perhaps across a few markets, or other constituencies related to selling or purchasing the product. It tends to be a tough sell for someone in an Insight or Research department to tell the Product Manager that they want to spend even a quarter (the shiny type, not the percentage) of the research budget to understand those who are not only unlikely to purchase, but who may be in polar opposition to even the idea of the product.
In essence, part of stakeholder engagement is akin to understanding vegetarians' thoughts and feelings about their local steakhouse. While not the primary focus of the stakeholder engagement (or insight research), understanding those opposed to you can lead to some very interesting synthesis and opportunity for innovation (in the aforementioned example, if you have a group of ten thirtysomethings going out for a celebration dinner, what are the chances that one (or more) of the ten is vegetarian or vegan? And how many times does this instantly eliminate a steakhouse from contention for that celebratory dinner? And what is the average check for a party of ten at a steakhouse? This is what insight and opportunity can look like.)
Examples of Business Benefits of Stakeholder Engagement
From Krick, Forstater et al (p.30):
Strengthened ability to assess and manage risks.
Agricultural company Monsanto admits that in the 1990s the company was arrogant and secretive in its dealings with the outside world over genetically modified crops, which severely damaged its reputation, markets and investor confidence. The firm has now committed to ‘The New Monsanto Pledge’ of dialogue, transparency, technology sharing, and respect for stakeholders.
Learning on products and processes.
The US company IBM considers community needs and benefits alongside the R&D efforts that IBM makes in creating new products. Sometimes IBM will use the community to beta-test new products before going to market. The dual benefits of this approach are that the community gets quicker and cheaper access to products that are useful to them and IBM gets valuable information about its products before going to market.
Greater credibility amongst stakeholders.
Nike established a multi-stakeholder Report Review Committee to consult them during the development of their 2005 CSR report. As an outcome of consultation and negotiation with these stakeholders, Nike disclosed an unprecedented wealth of information about its supply-chain, including labour and human rights abuses. In doing this, they raised the benchmark for corporate transparency and contributed to taking the societal dialogue on corporate responsibility issues to a higher level.
Better recruitment and retention of employees.
The Spanish telecommunications company Telefónica has a history of extensive efforts to provide integrated support to the disabled, access to telecommunications to the disadvantaged, and of a range of other initiatives to contribute to society. It’s employees reward this with a remarkably high satisfaction rate: In a survey undertaken in 2004, 77% of the 174,000 Telefónica employees responded with “Yes, I am happy to be working in this company”. The culture of social responsibility is reinforced by and expresses itself in initiatives like ATAM, a Telefónica association providing care for disabled people. ATAM was founded out of the commitment of employees in partnership with labour unions and the company itself in 1973. Telefónica employees give 1% of their salary to this initiative, Telefónica doubles this amount. Employees, company and unions are present in ATAM governance bodies. See also www.atam.es.
Securing the formal and informal license to operate from government, regulators and communities.
The UK telecommunications company Orange engages with local communities and administrations in order to identify and ideally agree on the best possible location for new mobile phone transmitter masts. As the number of its masts determines its networks capacity and business potential, engaging with these communities to make its networks expansion as smooth as possible is a strategic priority.
Learning and insights from non-traditional sources.
IBM's Community Relations Unit brokered a partnership between IBM's research labs and the non-profit organisation SeniorNet to help them understand the needs of computer users with vision, motor, and memory impairments and to develop and test solutions.
Collaboration to address problems and opportunities, and to change the ‘rules of the game’.
The Norwegian oil and aluminum company Norsk Hydro is continuously discussing common standards for corporate responsibility with industry peers. The key objective here is to take social and environmental issues out of business competition, as competitive pressures can keep companies from adopting more responsible practices. Within the IPIECA (International Petroleum Industry Environmental Conversation Association), the competitors agree on social standards that are promoted by the association in cooperation with governments. The French water company Suez is working with governments, NGOs and citizens to reduce the cost of delivering water and sewage services to poor communities. In Bolivia, Argentina, and the Philippines local communities have been involved in designing, digging, and installing a pipeline that provides affordable water services profitably.