[This is a re-post of a blog I have published elsewhere]
Leading an organisation is much like flying an aircraft. To fly an aircraft successfully, you need a clear understanding of what your destination will be. You need to know the weather conditions along the way so that you can avoid storms and be prepared for turbulence: and you need to know other aircraft movements along the way so that you don’t collide with each other. And of course you need a well maintained aircraft.
The same applies to organisations, regardless of whether it is a government department, an NGO or a private enterprise. Three sets of information are needed in the Executive Cockpit. Firstly, you need your Strategy. This is your flight plan. It explains how you will get from where you are now, to where you want to be. It provides direction, lists resources required and describes the outcomes to be achieved. It is usually articulated within the performance management processes of the organisation, and enjoys significant attention.
Then you need a set of Scenarios to give you some idea of what the future could be like. Scenarios are descriptions of a set of possible futures based on assumptions about those long term futures. The Strategy is tested inside each scenario to assess the likelihood of success or failure of different strategic actions. Will there be sufficient demand for a new service? How will supply chains and procurement be affected? How will competition change? Have new technologies destroyed a product or service? Will political instability affect execution of the strategy?
But there is another important set of considerations to take into account to improve the chances of success. An organisation undertaking a structured approach to Stakeholder Engagement will improve its licence to operate, to be regarded as a trusted, valued participant, in a challenging business environment. This is a frequently neglected area in the Executive Cockpit. Organisations should ideally understand and respond to legitimate stakeholder concerns. In spite of interacting daily with their stakeholders they frequently do not understand them well. This in turn means that they do not encourage their stakeholders’ participation in shaping the future of the organisation.
Let’s expand on this a bit more. We have all seen Integrated Reports for companies listed on the Stock Exchange. Somewhere towards the back is a generic list of stakeholders with a bald statement: “The company creates regular opportunities to meet with stakeholders and to address their concerns.” Companies who pay lip service to stakeholder engagement are missing out of valuable opportunities.
A systematic approach to Stakeholder Engagement allows an organisation to discover what really matters to their key stakeholders.
Stakeholders gain a better understanding of your organisation by providing feedback on corporate strategies and performance and in identifying what and how things can be changed. You in turn have a better understanding of why they react in certain ways, and you can craft your responses accordingly with favourable outcomes. This increases beneficial communication and allows the organisation to monitor and manage stakeholder contributions and satisfaction levels.
Good stakeholder engagement puts value in the Licence to Operate piggy bank. It’s a slow process of accumulation. Little by little, trust is gained. But one day, when you really need it, it could save your organisation from disaster. This is a source of comparative advantage. An organisation with more stakeholder value stored in its license to operate piggy bank will be more resilient than an organisation that has not made this investment.
Poor stakeholder engagement can result in ruined reputations, lost market opportunities, disgruntled employees and customers as well as expensive, drawn out lawsuits.
To get your stakeholders working with you, rather than against you; you need to understand their concerns and priorities; you need to understand what their perception is of your organisation; you need to understand what their level of satisfaction is with your organisation and you need to better understand their strategic intentions and priorities. Stakeholder engagement works particularly well in heavily regulated environments: Mining, pharmaceuticals and financial services. But many more organisations derive great strategic value from a well-planned and executed stakeholder engagement strategy.
South Africa is going through turbulent times. Budgets are being cut, employees are jittery, businesses are struggling, government is cutting back on spending. Now is the time to invest wisely in effective stakeholder engagement. Make an investment in the licence to operate piggy bank.
Forson Consulting helps clients develop and implement effective stakeholder engagement strategies.
James Forson is a former Associate Director of AccountAbility, the international organisation that maintains the AA1000 Stakeholder Engagement Standard.
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