Your Stakeholder Engagement Strategy will identify issues and opportunities that need to be analysed and prioritised. What kind of measurable benefit could they have on different stakeholders and the company's bottom line?
The objective of a structured stakeholder engagement process is only achieved when the feedback that you gather is translated into impactful actions. Serving all stakeholders is an ethical good, and companies should seek to maximise stakeholder impact.
There are five major dimensions of stakeholder impact (1).
For each type of impact, you should consider the priority stakeholder needs, and which of the ideas generated by the Stakeholder Engagement Strategy could meet those needs. When possible, identify and use metrics to measure where the company is now and what benefits the improvements could bring.
Financial and operational impact refers to improving the stakeholder's long-term financial well-being. Financial impact could come in the form of increasing employee wages or providing scholarships for local students. Employee wages, in particular, have become a focus. In recent years, a number of major retailers and other companies have raised entry-level wages well above local mandates; they report seeing more employee engagement and less turnover (2).
Environmental impact considers a company's waste, pollution, emissions, land use, consumption of natural resources, and other ways its operations affect environmental health.
Investing in positive environmental impact can;
boost revenue growth by helping companies tap new markets and expand into existing ones,
decrease costs by increasing resource efficiency,
reduce the risk of regulatory interventions by getting ahead of the environmental curve.
All of these can translate into shareholder value.
Health and well-being have two dimensions:
the organisational health of a company, and
the personal well-being of the individual.
Organisational health is the ability of companies to create common goals, execute them, and adapt in response to market trends. The stakeholder engagement process boosts organisational health by strengthening external orientation toward customers, competitors, business partners, regulators, and the community.
Human health and personal well-being are affected by a range of social and economic conditions. Approximately 40% of an individual's health status can be attributed to underlying factors such as income, employment, education, food, housing, transportation, social support, and safety. Other factors that can influence include race, ethnicity, gender and sexual orientation, disability, and age.
Addressing both individual and systemic barriers to health is critical to meeting the healthcare needs of stakeholders. This can mean investing in employee healthcare, creating inclusive work environments, or contributing to the development of healthy communities.
Capacity building means improving stakeholders' abilities and skills. An example could be working with suppliers to share expertise that increases productivity, cuts waste, and reduces costs.
By working together with different links in the supply chain, outcomes can be achieved that might not otherwise be accomplished by working separately.
Satisfaction impact refers to improving stakeholders' experience of interacting with a company or its products and services. The idea of customer satisfaction is well known, but the concept can be extended to other stakeholders too.
For communities- being part of an effort to improve traffic around the company's buildings or subsidising a local service.
For employees- asking them about what they do and don't like about their jobs and seeking ways to improve.
For suppliers- helping them through a rough patch by extending credit or payment terms.
Studies show employee engagement is directly linked to customer satisfaction and business results (3). In companies with a high level of employee satisfaction, research shows there is lower turnover and that workers are more productive (4). They are also more likely to raise issues when things don't go well, leading to problems being fixed faster.
Working across these five dimensions, start by using three attributes to rank the identified ideas:
The extent to which the idea matches the company's strengths- an idea matches well if it is aligned with a company's purpose and is a source of competitive advantage.
How well the idea addresses a specific stakeholder need- the value of the idea to the stakeholder.
How it captures long-term shareholder value- the financial value of the idea to the company, taking into account the cost, the returns, and the implementation risks.
Once ideas are measured according to these three attributes, they should be listed and ranked relative to one another. From this ranked list, cluster the ideas into themes, such as community health or financial well-being.
Finally, build credibility around the process by making commitments with timelines and communicating these to all relevant stakeholders.
References:
1 Vivian Hunt, Robin Nuttall, and Yuito Yamada, "From principle to practice: Making stakeholder capitalism work," April, 2021, McKinsey.com.
2 Kate Taylor, "Retail giants like Walmart, Amazon, and Kroger are firing shots over rivals' minimum wages. Here's who actually pays $15 an hour," Business Insider, February 20, 2021, businessinsider.com; Courtney Connley, "Amazon, Facebook and 8 other companies that have committed to raising their minimum wage," CNBC, May 25, 2019, cnbc.com.
3 Tera Allas and Bill Schaninger, "The boss factor: Making the world a better place through workplace relationships," McKinsey Quarterly, September 22, 2020, McKinsey.com.
4 Christian Krekel, Jan-Emmanuel De Neve, and George Ward, Employee wellbeing, productivity, and firm performance, Centre for Economic Performance, CEP discussion paper number 1605, March 2019, cep.lse.ac.uk.