Crucial Questions to ask about Stakeholder Management

995748_91898411An organization derives its reputation from its stakeholders. Therefore the perceptions that is created through the things stakeholders see, read, hear about or experience first-hand.

This implies that there exist a web of relationships with a diverse range of stakeholders that needs to be monitored and managed.

But what is a stakeholder? The word stakeholder means anyone that has a legal, moral or economic stake in an activity. Some stakeholders have more clout than others, but that is also changing.

For example – Ghandi was an activist. Today with the right tools, any one person can become an activist or a journalist, hence the rising of the citizen reporter phenomenon. I can have a block of shares in a company, worry about ROI irrespective of the number of people who are retrenched. Alternatively I can be a member of the media. I will have an interest in what your organization does…because the public has a right to know.

The term ‘stakeholder management’ refers to the development and implementation of organisational policies and practices that take into account the goals and concerns of all relevant stakeholders.

The term Stakeholder Management also involves the dialogue, relationship building and process generation that take place between an organisation and its various stakeholders. Each of these stakeholders can affect an organisation’s reputation positively or negatively and necessitate different strategies to leverage the situation.

In the King 3 Code of Corporate Governance specific mention is made of the importance of stakeholder inclusivity (,i.e. that the legitimate interests and expectations of stakeholders are considered when deciding in the best interests of the company), stakeholder identification and determination of expectations and needs, the proactive management of stakeholder relationships, and that management should develop a strategy and formulate policies for the management of relationships with each stakeholder grouping.

The King Code also makes mention that the Code is on an ‘apply or explain’ basis and that the board of directors, in its collective decision-making, could conclude that to follow a recommendation would not, in the particular circumstances, be in the best interests of the company. ‘’The board could decide to apply the recommendation differently or apply another practice and still achieve the objective of the overarching corporate governance principles of fairness, accountability, responsibility and transparency. Explaining how the principles and recommendations were applied, or if not applied, the reasons, results in compliance. In reality, the ultimate compliance officer is not the company’s compliance officer or a bureaucrat ensuring compliance with statutory provisions, but the stakeholders”

In particular, the one danger that everyone is missing is Section 8.1 of the King Code 3 i.e. The Governing of Stakeholders states that the Board should appreciate that stakeholders’ perceptions affect a company’s reputation.

How can managers do this if they do not fully understand stakeholder management and its impact on governance and reputation?

Here is a quick test for you. Can your management team answer the following strategic questions:

  • Who are our stakeholders?
  • What are our stakeholders’ stakes?
  • What opportunities and challenges do stakeholders present?
  • What economic, legal, ethical, and social responsibilities does our organisation have towards our various stakeholders?
  • What strategies or actions should we take to best manage stakeholder challenges and opportunities?
  • Do you have a system for managing relationships with stakeholders?
  • How do you measure results? What metrics do you use to assess and gauge stakeholder relationships?
  • In a crisis how quickly can you communicate with your relevant stakeholders?
  • Do you know the various methods to engage with stakeholders and when not to use it?
  • Can you state how much you are spending on each stakeholder group and what your ROI is?
  • Have you developed a set of rules and practices on how best to manage the process of building stakeholder reputation with each stakeholder group?

Once you have answered the above questions, then you should attempt these:

– What strategies or actions should our firm take to best manage stakeholder challenges and opportunities?

– Should we deal directly or indirectly with stakeholders?

– Should we take the offense or the defence in dealing with stakeholders?

– Should we accommodate, negotiate, manipulate or resist stakeholder overtures?

– Should we employ a combination of the above strategies or pursue a singular course of action?

All of these are vital strategic questions to ask for any project, incident or issue. Reputation Risk emerges when the reasonable expectations of stakeholders are not met.

What is reasonable? Let me use an example. The recent amount of product recalls and scandals examples illustrates this very clearly. As a consumer safety is a basic right. I therefore would expect an organization to communicate with me, and warn me of the advantages and drawbacks of a product including tips on how to use it. (I wrote a short article on this in of my Powerlines newsletters )

But do companies do this? Only those who are enlightened do so, and not all are. It is only when a body like the FDA or the Consumer Protection Act forces some companies to comply, that they will come to the party.

Take a look at the Supersize Me saga, where through a class action law suit, McDonalds were forced to start to use more ethical labelling and change their menus. Why did it happen in the first place?

They were out of touch with current thinking. It is the same with collaboration methods. There are companies who try and stop staff from accessing Facebook, write blogs and use other forms of social media, thinking they can control messages. Yet, we deal with people in companies. Real, live people – not spokespeople, not Corporate Heads, but normal day to day people.

People want to connect with other real people.

How ready is your organization to engage with its stakeholders? Is there an integrated or a fragmented approach to managing stakeholders in the organization? Would you like to learn more about this interesting and holistic field of management?

Why don’t you attend the next Stakeholder Reputation workshop in March in Johannesburg, South Africa. For more information visit