Today’s complex business environment requires companies to build relationships with a wide variety of stakeholders. Each of these stakeholders have their own needs, expectations and positions and companies face stakeholder reputation risk if these needs and expectations are not monitored and faced.
Stakeholders offer organizations both opportunity and threat. For instance if an institution has a good reputation with stakeholders they may give the organization more latitude to operate.
On the other hand a poor reputation with the regulators may result in laws being passed that can make it more difficult for an institution to operate. The Consumer Protection Act is a prime example of what happens when the reasonable expectations of stakeholders are not met.
What international research have shown is that there is a lot that organizations can do to positively influence the process of creating good images in stakeholders minds.
The management of and interaction with stakeholders therefore needs careful attention if an organization wants to maximize its opportunities and minimize threats in dealing with stakeholders.
The King 3 Code on Corporate Governance makes specific mention of this need for 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.
Research shows that when an organization builds relationships with key stakeholders, it saves the organization money by reducing the costs of litigation, regulation, legislation, pressure campaigns, boycotts, or lost revenue that result from bad relationships.
Good relationships with employees also increase the likelihood that they will be satisfied with the organization and their jobs, which makes them more likely to support and less likely to interfere with the mission of the organization.
In the not so distant past much PR efforts were one-way, designed to measure the effects of communication on stakeholders. Measuring relationships, however, assumes a two-way communication process with effects on both parties in the relationship.
The most productive relationships in the long run are those that benefit both parties in the relationship rather that those designed to benefit the organization only, the so-called Win-Win. Public relations theorists have termed these types of relationships symmetrical and asymmetrical, respectively.
It is my advice that relations with stakeholders be conducted in a context of transparency, honesty and professionalism.
A director of public affairs for a county government once summarized the link between symmetrical public relations and organizational effectiveness: “The main strategy is open communication–by being open, in touch with your various stakeholders, determining what their needs and wants are, how they can best be achieved, and how you can all work together toward common goals. And, I think that’s key with any group and organization that you bring together. That’s what you build trust on, that’s what you build relationships on, and that’s what you accomplish goals with.”
Building positive and lasting relationships should be a key organizational function and strategy.
How to do this I will discuss in more in-depth in my next Stakeholder Reputation Management Master Class in June.