Welcome to the stakeholder economy
Not long ago, heads of corporate communications thought that their most challenging task was managing a difficult journalist. This was closely followed by having to explain to the CEO that despite investing time in explaining his or her point of view, freedom of the press can still lead to unfavorable coverage.
Today, this might seem like the good old days to some. Journalists tend to be well-educated individuals whose ambition is to uncover the truth. They have a name and a face. You can talk to them and try to influence their views. On the contrary, the new frontier in corporate communications is not managing the media. The new frontier in communications is understanding the unknown, invisible stakeholder groups around the globe with the potential to kick-off a firestorm within minutes with a simple tap of their fingertips. But also the known ones like politicians who increasingly intervene in what used to be the business of business.
Be it Disney’s conflict with Florida’s governor DeSantis over LGBTQ rights, the debate on German companies heavily invested in China or corporations having to defend their strategy in Russia or the various lawsuits by climate activists against big corporates, there is a common thread. Business can be seriously impacted if stakeholder relations are not managed proactively. This will become as important and strategically relevant to big corporates as shareholder management.
But many corporates are struggling to rise to the challenge. Managing shareholder relationships has become a familiar task, where the rules are much more straightforward and better understood. Stakeholder relations, on the other hand, are far less institutionalized and more complex. Many of the groups are new and unknown to the corporate world. They can be young, digitally savvy, global – and they have a license to communicate.
Understanding the stakeholder universe is a strategic imperative
Corporations are well advised to face up to this new reality, because the world around us has changed fundamentally and irrevocably:
The new geopolitical reality is dominated by national interests. The big government is back, in combination with its regulatory bodies enforcing global industrial policy.
At the same, trust in elites is at an all-time low and the political landscape is more fragmented and polarized than ever.
Thanks to social media, extremist voices enjoy a global audience and amplification, potentially resulting in serious pressure on politicians, companies or individual managers.
Demographic changes give future talent a significant voice in the market, impacting management decisions.
Despite current setbacks, environmental, social, and governance (ESG) issues are well-established and will continue to strengthen the relevance of environmentally conscious younger generations as well as activists.
Business leaders must understand that everything they do will be judged in the court of public opinion. Managing the various stakeholder groups to support a favorable sentiment or at least better understanding of a company’s objectives and strategies is mission critical for their success. This is nothing they can buy. The currency of the stakeholder economy is not money, but dialogue and trust. Getting your stakeholder dialogue right is worth the effort as reputation or stakeholder sentiment has a direct correlation with company valuation and, thus, shareholder value.
Stakeholder relations are manageable – if you can measure them.
The good news: stakeholder value can be addressed with the same strategic and analytical rigor as shareholder value. And therefore, the same logic is applicable: you can only manage what can also be measured.
Let’s start with understanding the corporate stakeholder universe. Even for companies operating in the same geography, their partners, customers and contacts will differ according to sector and strategy. As a first step, each company must identify which stakeholders are mission-critical to the success of their strategy. Workforce, customers, suppliers, shareholders and other groups come to mind immediately. But are there more specific groups that are particularly powerful? Are there small groups that are very well connected? Interviewing experts helps to map out the stakeholder universe. Algorithms can then help rank the most important stakeholders by influence and importance.
The next step is measurement. In the past, continuous reputation measurement across all stakeholders was only feasible with a large investment of resources. However, modern survey tools are far more powerful. They provide granular and comparable data for precisely defined stakeholder groups on demand. And they do so along reputation dimensions such as the future viability of companies or their responsibility to society.
Once measured, the results can then be combined with further insights from employee surveys, media data or analyst reports. This way, the roots of reputation gaps can be better understood and concrete recommendations for action can be derived.
Influencing reputation requires an integrated business and communications strategy
Improving reputation then requires both: the necessary changes on the company side and a tailored communications strategy to reach the respective target group. Neither works alone. There is no communication without real facts and business content. But it is equally true that perception is reality. You will not convince your audiences if you do not hit the right messaging, speak their language, use their channels and convince the multipliers they trust.
Companies that master reputation measurement can truly start managing their corporate stakeholder universe. To do this effectively, the key corporate functions strategy, communications, marketing and public affairs will have to change the way they collaborate.
To identify the relevant stakeholder groups, all disciplines of corporate affairs have to join forces – a process that is news and needs to be practiced.
Next comes reviewing the current strategy. Does the specific stakeholder sentiment support the strategy and thus the company’s success? If not, where are the gaps? And how can the company respond to them – through operational or communication measures? This is precisely where communications and strategy meet – in strategy development and not just at the end of it.
The measures decided upon must then be implemented in an integrated project. Each measure includes a proper communications strategy, messaging and language to reach the various audiences across channels.
Afterwards, the cycle starts again. Measuring reputation sentiment in a continuous process to see whether corporate actions and communications translate into a change in perception.
Ultimately this exercise is about winning hearts and minds of people you do not pay. Communications is core to any stakeholder management effort. Over time, this will fundamentally change the role of corporate communications. Communicators will have to include far broader audiences and align more closely with strategy and investor relations to provide management with actionable information on how to manage their stakeholder relationships. In order to be successful in the stakeholder economy, it is ultimately a question of addressing both the market environment and the socio-political environment of a company.
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Welcome to the stakeholder economy - When strategy meets communications: managing reputation in the stakeholder economy
