Tuesday, November 9, 2010

Corporate-Stakeholder Alignment; CEOs Create Win Win Scenarios

I've done a number of projects for CEOs who go to their heads of communications and say "We're tripping over our messages." In doing these projects, I've discovered most organizations are tripping over their policies as well.

The Challenge of Division of Labor

This happens because as organizations grow, no one person can do all the work required to maintain good working relationships with all the different stakeholder groups that become critical to the success of the organization.

These groups include:

  • Shareholders
  • Customers
  • Employees
  • Communities
  • Regulatory and legislative organizations
  • Vendors
  • Others

So, organizations have people in charge of:

  • Finance and investor relations
  • Marketing and customers
  • HR and employees
  • Community affairs
  • Regulatory and legislative affairs
  • Purchasing departments
  • Others

This makes great sense, because then these executives can devote their full attention to understanding and satisfying the needs of the group for which they are responsible.

Conflict Between Stakeholder Goals

But this is where the problem arises. In some ways, the needs and desires of each group conflict with those of the others. For example, shareholders want a solid return on their investment and employees want good pay and benefits. So revenue the organization generates must be allocated in a way that makes investors feel they are getting a good return and employees are getting their due for their work and engagement.

Example 1

I worked with a publicly held organization that did environmentally sensitive work. They asked us to develop an environmental positioning statement the company could use to communicate with all its stakeholder groups. When we did internal management interviews, the operating managers were unanimous in wanting to be as environmentally positive as possible. But the finance and accounting staff said "but it's not [the operating managers’] money." Their point was that investors might see being “environmentally friendly” as capital intensive and thus taking away from either their earnings per share or capital that could be reinvested to increase the value of their equity.

Responsive Communications Become Policy

The natural inclination of many executives would be to try to get the best return or benefit for the stakeholder group that executive represents. Each of these senior executives probably is responsible for communicating with his or her stakeholder group and may well embellish the communication to respond to what that group wants to hear. Before long, the communications going to one stakeholder group can openly conflict with those going to another. And once communications go out, staff, quite fairly, see them as representing what the organization believes, and what is in the communications becomes de facto policy.

Employees may well be shareholders. So they will get communications intended for employees and those intended for shareholders. In addition, investors and investment analysts make it a practice to read communications to as many stakeholder groups as they can in an effort to better understand the viability of the organization as an investment. Customers might be investors as well. And with the Internet and social media, it is getting easier and easier to examine what an organization communicates through different channels.

The CEO’s Role

In this context, the CEO's job is to balance the needs of all these stakeholders against each other and create a winning proposition for all. This is why it generally is the CEO who gets concerned when she or he sees conflicting communications to different stakeholder groups. This also is why it is critical to the success of many organizations to have a central communications platform and consistent policies.

Return to Example 1

In the example I related above, the CEO told me that he wanted the organization to be as environmentally positive as possible, but that he also wanted to be able to demonstrate to investors that this path was best for their investment.


It also is important that these policies and communications be in line with the expectations of stakeholders. The CEO and management team need to know what stakeholders do expect (through interaction or research), and this should be one of the stars against which the CEO and management team steer the organization.

The other star should be the vision for the organization. In the best of all worlds, management’s vision of what the organization does matches what stakeholders want.

If this is the case, alignment usually is a matter of defining management’s vision by stakeholder group, determining how the stakeholder group thinks about its expectations of the organization and developing a set of consistent messages that state management’s intentions in language that is persuasive and accessible to the stakeholders. This also is the time to make sure the messages to each stakeholder group are consistent with each other.

This sounds simple, but in practice it may not be. Executives frequently interpret the organization's vision in a way that favors the stakeholder group for which they are responsible. (This is not necessarily a bad thing, because these executives become advocates for their stakeholder group within the organization.) However, coming to a set of messages and policies that are consistent across stakeholder groups often requires facilitation.

Lack of Alignment

If management vision and stakeholder expectations are not aligned, the organization needs to rethink its vision or find stakeholders that do align with their vision.

Example 2

An example of this situation might be an organization, for which I did an audit, that wanted to communicate to its customers that it was very customer-oriented. The research they themselves had done with their customers indicated customers did not believe this to be the case, and research we did with the organization’s employees indicated employees did not believe this to be the case. We suggested the organization change the communication to being aspirational. They could say they knew they had a problem with customer responsiveness and were working to improve it. They could even do reports on their progress. But to say they were customer-oriented, when their customers and employees knew otherwise, most likely would have damaged what credibility this organization had with these two stakeholder groups.

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