THE ORGANISATIONAL LEADER AS STAKEHOLDER NEGOTIATOR
Al Dunlap was famously quoted as saying that “The most ridiculous term heard in the boardroom today is ‘stakeholders’. Stakeholders! Every time I hear the word, I ask, ‘How much did they pay for their stake?’”
Thankfully, not everyone holds to Dunlap’s point of view when it comes to stakeholder engagement. More and more companies are acknowledging that stakeholder relations matter, not just because the business imperatives are clear, but also because we now live in an era of what has been described as “relationship age economics.” Beside the recommendations of the King III in terms of corporate governance and the competitive advantage that is associated with improved legitimacy, there is now a growing body of evidence to support the idea that building stakeholder relations through specific engagement actually enhances organisational performance. Not to mention the fact that stakeholder collaboration is now widely regarded as a vital component in managing corporate reputation. Philip Kotler recognized the link between relationship building and organisational performance when he wrote, “If . . . companies are to compete successfully in domestic and global markets, they must engineer stronger bonds with their stakeholders, including customers, distributors, suppliers, employees, unions, governments, and other critical players in the environment. Common practices such as whipsawing suppliers for better prices, dictating terms to distributors, and treating employees as a cost rather than an asset, must end. Companies must move from a short-term transaction orientated goal to a long term relationship building goal.”
The organisational leader who is serious about building stakeholder relationships will soon discover that effective and strategically aligned stakeholder engagement can:
•Lead to more equitable and sustainable social development by giving those who have a right to be heard the opportunity to be considered in decision-making processes.
•Enable better management of risk and reputation.
•Allow for the pooling of resources (knowledge, people, money and technology) to solve problems and reach objectives that cannot be reached by single organisations.
•Enable understanding of the complex business environment, including market developments and identification of new strategic opportunities.
•Enable corporations to learn from stakeholders, resulting in product and process improvements.
•Inform, educate and influence stakeholders and the business environment to improve their decision-making and actions that impact on the company and on society.
•Build trust between a company and its stakeholders.
Modern stakeholder interaction has moved from simply managing perceptions as drivers of corporate reputation to managing relationships as drivers of corporate reputation and resulting business outcomes. The organisational leader of the 21st century must be willing to identify the key drivers of stakeholder relationship collaboration including, but not limited to, (a) the new legal and voluntary obligations in place as a consequence of corporate governance, (b) increased public scrutiny and societal expectations, (c) the opportunities presented by new emerging markets, (d) the challenges created by introducing new technologies, and (e) specific critical events such as the product recall currently being negotiated by some of the world’s largest vehicle manufacturers. The modern organizational leader will need to demonstrate both an ability and a willingness to identify key stakeholders acknowledge their right to be heard. Having given an ear to key stakeholders there will also need to be a willingness to give account for one’s actions. Effective stakeholder negotiation should be built on the premise of acknowledging what is important for both you and your stakeholders, understanding the impact of your actions and how this will impact on corporate reputation, and then demonstrating an adequate and timely response.
Quite clearly there is a need in the field of organisational and leadership development to include more specific work around stakeholder collaboration and the development of a robust set of leadership competencies required to negotiate this very complex path.
Andy Brough is a specialist in stakeholder collaboration and can be contacted at andyb[at]andrewbrough[dot]com