Stakeholder Engagement: A bright new future for Corporate Governance

A Surefire Way to Fail!

There are a million articles on the web espousing the importance of Stakeholder Engagement. Here’s the truth about Stakeholder Engagement – it’s not important. It’s essential.

You can have the best product, the most polished program, the most innovative project, if you have not taken the time to ensure the people impacted by your initiative are fully on board, you will fail. It’s about as certain as death and taxes!

I remember early on in my career, failing to manage stakeholder engagement on a project. I clearly remember Jeff the CEO of the company, calling me to say, “I’ve got some good news and some bad news – what do you want first?”. I always want the bad news first, so he says to me, “Well, you’re fired.”

Jeff had hired me to deliver a team-building initiative, and I had pressed the team members into taking on an “impossible project” and completing it within a week. I had no appreciation for how confronting an exercise like this is for people, and although I got numerous calls, I kept brushing them off, saying, “don’t worry, we’ll cover it in our session next week.” There I am on the phone, and Jeff is giving me the details of how upset everyone is and am I burning with embarrassment. I’m about to hang up when I suddenly remember, “Jeff, you said there was some good news” “Jeff says “The reason we had you come in is that this team never agrees on anything. I’ve never seen them come together like this – not having you back was a unanimous team decision!”

When is Stakeholder Engagement Appropriate?

Through this experience, I gained an appreciation for how we, as human beings, are wired up. While most of us like the idea of change, almost no-one likes actual change. It’s disruptive, uncomfortable and uncertain, and tends to bring up anxiety and resistance. In the world of corporate social responsibility, this presents a challenge as most CSR initiatives are large, complex and require a high degree of organizational commitment and employee buy-in.

Given this challenge, stakeholder engagement is becoming recognized as essential to implementing a successful CSR culture and achieving the triple bottom line. Stakeholder engagement is the practice of involving people in the design and implementation of any initiative that impacts them. Those people may support or oppose the initiative, but in either case, they have influence and a voice in both the process and decisions arising from the initiative. Stakeholder engagement is entirely distinct from the traditional approach of managing the communication of decisions the company has already made to the affected stakeholders, as shown below in Figure 1.

Stakeholder engagement in the context of CSR looks like creating a venue for dialogue to find out what social and environmental issues matter most to the people in your company and involving those people in the decision-making process. It is an essential approach if you want to develop consensus on solutions at the level of involvement, complexity and scale that CSR initiatives demand.

What are the Fundamentals of Stakeholder Engagement?

Neil Jeffery, in his publication “Stakeholder Engagement: A Road Map to Meaningful Engagement,” identifies seven foundations to create a meaningful process of engagement, the most important of which are that:

1. Stakeholders have a say in decisions about actions that could affect their lives or their environment
2. Stakeholder participation includes the promise that their contribution will influence the final decisions.
3. Stakeholder participation promotes sustainable decisions by considering the needs and interests of all participants, including the decision-makers.
4. Stakeholder participation seeks input from participants in designing how they participate.

Stakeholder engagement is confronting. It is not a management process over which you have control, but rather is a less certain process of collaboration and consensus. However, there are defined success factors you can implement to guide and nurture your stakeholder engagement program.

How do you Ensure an Effective Stakeholder Engagement Program

First of all, the program must be sponsored by the CEO to provide the requisite leadership to steady the natural reactions people have to a process that collaborative rather than directive. The CEO needs to ensure that the business units exercise flexibility in bending to the organizational changes that will arise in honoring the promise to stakeholders that their contribution will influence the final decisions. It’s also important that the CEO and senior executive team are clear on the purpose of the initiative and set realistic objectives. Those objectives create healthy boundary conditions and promote sustainable decisions by ensuring stakeholders consider the needs and interests of all participants, including the decision-makers.

While the CEO sets the tone and direction, it’s critical to involve the stakeholders in the planning of the process to establish the credibility of the program by having the participants design how they participate. The selection of participants is also an essential part of establishing credibility. You will want representation from people at each level of the organization that are respected by their colleagues. People who are expected to challenge the process and the thinking are also vital to consider; however, they must agree to participate in a way that is productive and moves the action forward constructively.

The process also can’t be rushed. Building consensus and creating an environment of open dialogue can only happen on a foundation of trust, and trust takes time to build and demonstrate. 

An Exciting New Paradigm

By definition, possibility can only live in uncertainty. In a stunning reimagining of what a corporation exists for, the CEOs of nearly 200 companies announced in August of this year that shareholder value is no longer their main objective. Investing in employees, delivering value to customers, dealing ethically with suppliers and supporting outside communities are now at the forefront of American business goals. In this new era, CSR offers an exciting new possibility for how organizations can fulfill this promise. As a means of solving the complex issue we face, stakeholder engagement provides a definitive opportunity to harness the collective expertise inside companies to deliver both the innovation and will to bring about meaningful change. This, more than anything else, will provide the solutions we need to the challenges that lie ahead.

This article is written by Hugh Molyneux, President, Refined Data