Organizations have come a long way in their knowledge and perception of stakeholder management. In fact, some decades ago, stakeholders were often seen as inconvenient and cumbersome outsiders. And even today many mistakenly view the influence of the stakeholder or how to deal with them as public relations or communications exercise. Nevertheless, the influence of the stakeholder continues to grow and is an important part of decision-making by organizations.
So what are stakeholders and their importance for businesses and organizations? Wikipedia state that the concept developed well over the last decades. So they describe it as “everyone with an interest (or “stake”) in what the entity does”. This includes those within the organization who need to set the company’s direction, investment plans and operational approach. We call these parties herein Internal Stakeholders. Likewise, those outside the company are External Stakeholders. The stakeholder can therefore be company management, the individual outsider, the worker’s counsel, the NGO, members of your company’s local community, financiers and so forth. You may get up to twenty or more entities.
Reasons for Stakeholder Management
Whereas the environment in which companies operate is changing, the influence and importance of stakeholders are definitely on the rise. For example, take today’s CoVid-19-’s situation. A rapid decrease or even total loss of turnover may force companies to turn their business offerings around. Financial deterioration of the business or the need for a more efficient organization, or innovation of product or business may call for “Chance and Change”. This versus the traditional “Command and Control”.
Virtually every company is more than ever dependent on stakeholders to successfully achieve a change in business. Stakeholder management then becomes a vital part of the strategy and decision-making. The group of non-traditional general stakeholders is growing fast. Therefore communication has to change as well. Whereas in the past important stakeholders would understand and support arguments based on profit, employment or security of supply, the abundance of information through the internet throws way more arguments on the table. For example, arguments range from climate change caused by the energy industry as a whole to literally an individual’s specific case. Anyway, most if not all projects in the energy sector attract a lot of external attention and stakeholder management needs to step up.
An understanding of stakeholders
In order to engage with your stakeholders and include engagement as part of your strategy, further analysis is necessary. This does not mean that we have to know the potentially twenty or so stakeholders in detail. However, basic mapping at the start of the change process or venture can already provide a head-start. So consider all your relevant stakeholders in terms of their power and their interest in the success of your new venture.
Some parties can mean a lot for your success, yet may have low involvement in your venture. Think here about external financing. However, with your plans for a new production plant being dependent on environmental permitting external pressure groups will have power through legislation. they would show an active interest in your company. Likewise, general stakeholders such as the general public are likely to have a much lower interest in your activity. They have no power to influence directly. They may watch and have an opinion though.
With internet access and increased connectivity in the last decade, even such a group of stakeholders becomes important for your reputation. One other area would be the functional stakeholders. This group are the people having a high interest in the success of your venture or product. Yet, they have little formal power in the company. Think here of individuals that support your company through crowdfunding, or co-making and partnerships. Figure I shows the four stakeholders’ groups.
With our four main stakeholder groups known, we need a strategic plan. The strategy for stakeholder management should align with the company’s general strategy. However, before addressing the external stakeholders, the internal organizations require attention. Maybe there are past experiences with stakeholder management.
Have a clear objective on the goals for the actions planned. Have you considered a particular format or change model to engage with the stakeholders? Are there any experiences from past projects? Also, are there financial constraints? Would you consider a stakeholder board as well? Given an outside event or crisis, stakeholder management can be a once-off action. Likewise, it may be part of the business you are in and thus more of a daily routine.
A particular aspect we would like to highlight is an external mandate. It is of no use in your project just ahead of the start of construction to exchange arguments with an NGO. In highly political cases the way forward is to mutually agree on an applicable procedure at an early project stage. It would provide you with a mandate.
Now, with a strategy for stakeholder management in place, we can move into action. You may have a broad outline for your external stakeholders. You can think about formats like working conferences, partnerships, social media and marketing campaigns.
Especially for complex projects requiring a significant financial and manpower effort in the design phase, timing becomes of the essence. Obviously, it will be difficult to change the scope of a project due to stakeholder influence at a later stage. Two examples come to mind. One is the Brent Spar abandonment by Shell and another is a CO2 storage project in the Netherlands (Barendrecht). In both cases, the principal organized its technical and environmental case but stopped its planned project due to public pressure. Imagine the considerable costs that this decision caused.
Whereas your involvement with one or more stakeholders can be project-specific, a once-off event or an ongoing effort on how to cope with change is more likely. For example, run the once-off intervention in a project format on the basis of how, what, who and when. More formal methods for longer-term change management are presented in Reference . The key, in the end, is to build trust with and get credibility from your stakeholders in an early stage of your venture.
It is best practice to develop a Stakeholder Engagement Plan early in the project life cycle. This needs to outline a strategy on how to positively influence the status of the respective stakeholders. Whatever method you prefer, the common elements in your action plan should be:
- agree on confidential aspects, e.g. amongst partners
- start early, anticipate and listen well and plan as good as you can
- have sufficient mandate internally
- target areas for the external mandate
- communicate transparently
- stay focused and effective
- do what you say
- manage expectations
Your rewards can be, for example, more successful projects, with better working and decision-making processes in your organization. ValVestris staff has a lot of experience in stakeholder management. We can help organizations in the development of an effective stakeholder management plan. Such a plan can be part of our Review and facilitate your Decision Making.