Companies do not operate in a vacuum. They face a variety of individuals, groups, and organizations that are affected by or can affect the achievement of the company's strategic objectives. The number and interrelations of these stakeholder groups are becoming increasingly complex in today’s connected, globalized world. Yet, still very few companies pursue an active, long-term approach to stakeholder management.
By taking into account the key stakeholder groups with their differing interests and perspectives in strategic decision-making processes, companies gain valuable insights that can help them to develop more relevant corporate strategies, identify and mitigate risks in the business environment early on, and trigger new ways of thinking that may result in new product and process innovations.
But how to go about strategic stakeholder management? Here are some tips for you:
Step 1: Putting a Team Together
Put together a dedicated team that regularly reports to senior management and the strategy department and provide it with sufficient resources. This includes not only financial resources, but particularly the access to information and the support by appropriate information management systems.
Step 2: Identifying Stakeholders
The job of the team is now to compile a detailed list of all internal and external stakeholders that are most likely affected by or can affect the company's strategy – positively or negatively, directly or indirectly.
Which stakeholder groups are affected may differ depending on the industry, company, and chosen strategy. The internal stakeholders generally include the business owners, shareholders, management, and employees. External stakeholders may include debit investors, customers, suppliers, partner companies, trade unions, governmental and non-governmental agencies, citizens' groups, media, academic organizations, and interest groups of all kinds.
Identifying stakeholder groups usually starts with brainstorming, followed by systematic research in internal and external sources containing structured data (e.g., CRM systems, address books, subject indices) and unstructured data (e.g., scientific publications, presentations, internal reports, Internet). Identified stakeholders can then be invited to join the team to identify further stakeholders that may be affected.
Step 3: Identifying and Understanding Stakeholder Interests
The next step is to identify and understand the interests, needs, perspectives, and concerns of the different stakeholder groups as they relate to the corporate strategy. Stakeholders may be affected in many different ways–economically, politically, culturally, ethically, emotionally, or healthwise. Useful methods for determining stakeholder interests are surveys (online, telephone, email), focus groups, and personal interviews. While certainly most efficient, the latter are rather costly and time consuming though.
Step 4: Categorizing and Prioritizing Stakeholders
Once you have compiled a thorough list of stakeholders and know what makes them tick, the next task is to categorize and prioritize them according to their level of importance. Who are the biggest supporters of your strategy? Who are the biggest opponents? Who has the greatest power and influence to enforce his/her interests? Who can influence others in his/her favor?
There is a number of useful stakeholder mapping tools to help you with this:
The stakeholder typology developed by Mitchell, Agle, and Wood (1997) classifies the behavior of stakeholders into seven types based on the combination of three attributes:
"Definitive" stakeholders that possess all three attributes require the most attention by the company and need to be carefully considered in strategic decision-making.
The power/interests matrix classifies and prioritizes stakeholders in relation to their power and the extent to which they are likely to show interest in the organization and its strategy. It helps companies to figure out what kind of relationship should be adopted with each stakeholder group. Stakeholders with high power and interest (upper right quadrant) need to be closely managed, while those with low power and interest (lower left quadrant) require only minimal attention and monitoring.
The power/dynamism matrix developed by Gardner, Rachlin, and Sweeny (1986) visualizes the power a stakeholder has in relation to how dynamic the stakeholder is in changing his/her view about the company’s strategy.
Stakeholders that are both powerful and likely to change their views (quadrant D) are most difficult to predict and manage for the company. They pose the greatest danger or opportunity and need to be paid close attention to.
Step 5: Identifying and Managing Conflicts and Coalitions
Once the levels of interests and influence are determined, conflicts and coalitions between the company and its stakeholders as well as between the different stakeholder groups need to be identified and balanced as best as possible. The goal should be to develop strategies that deliver the most value to the most stakeholders. However, this is easier said than done. Creating such multi-win situations in which the company and all of the key stakeholder groups benefit alike is very challenging and may not always be possible. There will always be situations which rather call for spreading risks and disadvantages equally on all stakeholders. In the long-term, however, the interests of the stakeholders should to be managed into the same direction.
Step 6: Building and Maintaining Sustainable Relationships with Key Stakeholders
Strategic stakeholder management is all about building and maintaining long-term, trusting relationships with key stakeholders. Therefore, make sure to craft a communication strategy for each stakeholder group which lays out the communication goals and objectives, the communication channels and tools to be used, responsibilities, and timelines. Depending on their importance, stakeholders should be informed, consulted, or directly involved in strategic decision-making processes.
Strategic stakeholder management is a never-ending process. New stakeholders arise while old ones lose importance. Interests change over time. Therefore, always pay attention to the power and interest dynamics.
Balancing the interests and needs of different stakeholder groups and integrating them into strategic planning is very time consuming and resource intensive. Nevertheless, it is certainly worth it. After all, stakeholder management is essential for strategic opportunities and risks management. The closer companies are to the stakeholders, the better and earlier they can spot potential conflicts and opportunities and take strategic action. Effective stakeholder management, therefore, is an important competitive advantage.