In the past, companies have predominantly been managed with an eye to the financial returns for shareholders. This approach is still common, but an exclusive focus on maximising shareholder returns has come under increasing criticism for business as well as social reasons.
1. Gather information
Involve as many relevant people as practicable to ensure that you get a full picture of all stakeholders at the present time. Relevant information can be gathered through brainstorming sessions, interviews and literature or also internet searches.
2. Identify stakeholder groups
Various sets of stakeholders have been suggested by different writers. Stakeholders can be internal – employees, managers, trade union members or departments, for example, or external such as customers or suppliers. A distinction can also be drawn between primary and secondary stakeholders. Primary stakeholders define the business and are vital to its continued existence.
For example, the following are normally considered primary stakeholder groups:
• shareholders and/or investors
Secondary stakeholders are those who may affect relationships with primary stakeholders. For example, an environmental pressure group may influence customers by suggesting that your products fail to meet eco-standards.
Secondary stakeholders could include:
• government – central or local government bodies
• legal authorities – inspectors and regulators
• the media – press, broadcasters, online media
• social groups – consumer groups, pressure groups, community groups
• commercial organisations – landlords, business partners, competitors.
Stakeholder groups will vary enormously according to the nature of the business. A public sector contractor, for example, might list central or local government as a primary, rather than a secondary stakeholder. A train company or media company may list its industry regulator as a primary stakeholder.
3. Map your stakeholders
One way to map stakeholders is to construct a diagram with the organisation at the centre, show primary stakeholders around it, and secondary stakeholders in a second tier.
4. Be specific
At this stage, it’s important to think about exactly who the stakeholders are and to name specific groups and individuals. As a result, segment the groups where necessary. For example list specific customer segments or divide your customers into retailers, distributors and end-users.
5. Prioritise your stakeholders
A power/interest grid can be used to map the level of interest different stakeholders have in the operations of your organisation and their power to affect or be affected by it. This will help you to decide where you need to invest your stakeholder management efforts. Clearly, you will need to engage fully with those who have both a high level of interest and a high level of power and take great care over relationships with these groups. You will want to keep those who have power but less interest satisfied, but not overwhelm them with too much information. Those with high interest but little power should be kept informed, but you won’t need to pay so much attention to those with little interest and little influence.
6. Understand your stakeholders
Put yourself in the place of each stakeholder and ask yourself what their perspective of your business may be. What: Are their needs and concerns? Affects or influences them? Do they believe? Do they value? Motivates them? Potential threats or opportunities do they represent? Consider what you know about their actual and previous behaviour and also what underlies it. It can be helpful to draw up a table listing each stakeholder and showing the level of priority you have assigned to them, the relationship you have with them and also how they are impacted by your organisation.
7. Develop strategies for action
Once you have decided which stakeholders you most need to influence and have begun to understand what motivates them, you will be in a position to consider the way forward.
Here are a few questions to consider:
• How can you improve the products and services you offer to customers?
• Do you need to tailor your offering to different customer segments?
• How can you cooperate more effectively with suppliers?
• Will anything enhance the morale of your employees?
• Any internal issues need to be resolved?
• What might encourage external stakeholders to be more cooperative?
• Any opportunities are there to communicate and engage with different groups of stakeholders?
• How can you change public perceptions of your organisation?
• Which policies or actions might run the risk of alienating them or increasing the threat they pose to your business?
• Which areas should you focus on?
Evaluate the impact of any proposals, considering how easy they will be to implement, taking any costs or cost savings into account and bearing the impact on other stakeholders in mind. The authors of ‘Managing for Stakeholders’, suggest that trading-off the interests of one group of stakeholders against those of another is a risky strategy. Over time the interests of stakeholders go together, so it is important to find creative solutions that satisfy the interests of multiple stakeholders.
8. Communicate and develop relationships with stakeholders
A ‘public relations’ approach to stakeholders – that is, one way communication – can be used to put the company viewpoint across, but will only be effective if the assumptions on which it is based are accurate. Two-way communication, involving dialogue and negotiation with stakeholders may be more difficult, but can lead to a better understanding of stakeholder perspectives. It can also foster your credibility with stakeholders and contribute to the development of relationships based on trust and respect, the resolution of conflicts and the evolution of winwin scenarios. Monitor the feedback you get from stakeholders and use it as a basis for further discussion and action. Generally speaking, stakeholder management is a two stage process; the second step is to develop a proactive communication plan aimed at supporting business strategy and also moving stakeholders away from positions that threaten business success and towards more supportive positions.
9. Monitor and review
The environment within which a company operates generally speaking is not static. The power and interests of stakeholder groups will change over time, so a regular review of stakeholder relationships is essential.