Thursday, August 17, 2006

PRIORITIZING STAKEHOLDERS FOR PUBLIC RELATIONS

The following article by Institute for Public Relations president and CEO Frank Ovaitt appeared in the July 24 2006 issue of PR News.

PRIORITIZING STAKEHOLDERS FOR PUBLIC RELATIONS

The squeaky wheel gets greased. But what if a different wheel is about to fall off the car?

"How much attention does each stakeholder group deserve or require?" is a central question being raised by Dr. Brad Rawlins of Brigham Young University. His newest research paper, published online by the Institute for Public Relations, reviews several approaches for identifying stakeholders and synthesizes a new model.

The new approach begins by identifying stakeholders according to their connection to the organization. It then proceeds to prioritize stakeholders by their attributes, their relationship to the issue, and ultimately their place in the communication strategy.

The Linkages Model, which dates to 1984, is used to identify stakeholders by their relationship to the organization: functional linkages (e.g., suppliers provide raw materials while customers receive a company's output), enabling linkages (investors and a favorable regulatory climate make business possible), normative linkages (industry groups and competitors influence the business environment), and diffused linkages (non-governmental organizations and media also can have a strong influence, even without a well-defined connection).

The Stakeholder Typology model developed in the late '90s offered a new approach to prioritizing based on the attributes of power, legitimacy and urgency. Parties with only one of these attributes are latent stakeholders . For example, an activist group may have an urgent issue, but with neither power nor legitimacy, it can make demands without necessarily deserving much management attention. Two attributes characterize expectant stakeholders - such as employees and investors, who always have a degree of power and a legitimate claim on the resources of the company. Parties with all three attributes are definitive stakeholders and always take top priority.

What's tricky here is that the real world is a fluid place. Investors or employees are always important to the company, but a suddenly urgent issue can catapult them from expectant to definitive stakeholder status.

To deal with such constant change, Situational Theory prioritizes stakeholders by the relationship to the situation. Latent publics don't recognize that an issue affects them or don't consider it much of a problem. Aware publics are more knowledgeable but don't see much need to get involved. Active publics recognize a significant problem and feel they can do something about it, and so their level of involvement is much higher.

Putting all of this together, Rawlins synthesizes a new model that offers the prospect of prioritizing stakeholders in a way that is especially relevant for communications managers - by communication strategy.

For the full article please go to PR News.

Monday, August 14, 2006

The Stakeholder Paradox - extract from Sir John Sunderland's keynote at Henley this year



Extract from the

HENLEY PARTNERSHIP

KEYNOTE LECTURE SERIES 2006

The Stakeholder Paradox


Sir John Sunderland

13 July 2006



In the twentieth century government became a player in business life: sometimes as owner or customer but more often in the form of taxer and regulator. All these new relationships were challenging but at least they were defined and recognized. Today business is expected to engage with a vast crowd of poorly defined newcomers – its so-called stakeholders. And in the UK, for the first time, these newcomers are set to acquire formal rights over businesses if the Company Law Reform Bill becomes law. It will oblige directors not only to safeguard the financial interests of the companies they serve but also to have regard to their employees, customers and suppliers – and to nurture communities and the environment – in every decision they make.

It is a curious term – stakeholder – which has come to mean almost totally the opposite to its original sense. A stakeholder was someone who held money on behalf of two or more other people pending the resolution of an issue between them – usually the outcome of a wager. He was bound to hand over the money to the successful party. In other words, the stakeholder had a formal responsibility towards his principals. Even in jurisdictions where wagering contracts are unenforceable (including England to this day) the stakeholder still had to pay up. In the American Wild West, if the stakeholder ran off with the stakes the aggrieved parties could hunt him down and shoot him. A system with attractions today when I think of some of our stakeholders.

Almost anyone can be a stakeholder: it is as easy as posting an entry on the Internet. I did a Google search recently on GM Foods and it produced 6.4 million hits. The entries ranged from governments and scientific bodies to NGOs, pressure groups and individuals. 6.4 million self-appointed stakeholders, and, through Google democracy, each gets the same weight. Even interests which cannot use the Internet – like endangered species – can become stakeholders if the media and pressure groups appoint themselves on their behalf. Through environmental pressure groups, the planet itself has been turned into a stakeholder.

Essentially, these new stakeholders are claimants, who take no account of how their demands on business will be met. They are mostly unelected and unaccountable and think only of their own constituency. Some years ago natterjack toads – previously an unpopular species associated with poison and witchcraft – acquired a British pressure group dedicated to their preservation. As a result, British business now grinds to a halt – often literally in the case of traffic – the moment it threatens a natterjack toad. The cost of preserving that toad falls on business and in turn on its employees and shareholders and all the other beneficiaries of its activities. None falls on the toad-lovers.

Management of new stakeholders has added costs to business whether it chooses to do this itself or outsources it to specialists. If the proposed UK Company Law Reform Bill is enacted, British businesses could face substantial new costs in routine administration and record-keeping to defend themselves from the prospect of litigation. It opens up new possibilities for directors to be sued for decisions which adversely affect stakeholders. Directors will have to prove that they acted in good faith towards those stakeholders and to demonstrate that they took their interests into account.

These still remain the prime stakeholders in our business. Let’s examine each of them in more detail. They still have great power to signal their discontent if their demands are not met by withdrawing their custom or their capital. But even consumers and owners have become highly disparate groups of people with conflicting interests which modern business is often hard to put to identify, let alone reconcile.

The complexities of consumer relationships are matched by those of investor relationships. One is the sheer number of investors in any public company and the disparity in their power, status and interests. Every shareholder, across the world, is entitled to reports and communication – in itself a significant cost to business. Investors range in size from individuals with a few shares to massive institutions. Some of these investors want income, some are in it for capital growth. Some are active, some are passive. In short, there is no community of interest among investors. The only thing they all have in common is that there are thousands of alternative places where they can invest their money.

Adding to the complexity, we now have the twin phenomena of the ethical consumer and the ethical investor. These people select from the myriad of available goods and services and investments those which give them the greatest moral satisfaction. Some get professional advice, from ethical investment funds but many more take their information from pressure groups, through the Internet and from each other. The Company Law Reform Bill would give such investors new power without giving them any additional responsibility towards other investors or towards other stakeholders in business. There is nothing to stop such investors taking instructions from pressure groups even those who actually want to undermine the company in which they have bought shares.

Increasingly, companies survive or prosper because of the talent they command in their workforces, their accumulated knowledge and experience allied to their capacity to create new ideas and with them to conquer new markets. Increasingly, talented people of all kinds are becoming scarcer for business – partly for demographic reasons, partly because of persistent failure at all levels of the education system and partly because talented people have more and more career and lifestyle options open to them. Joining ethical consumers and ethical investors are ethical employees – people able to choose an employer who gives them a sense of worth. In Cadbury Schweppes we survey employee opinions annually and achieve a 90%+ rating as “a company I am proud to work for”. This is not just satisfying, but extremely important as a measure of how well we are using our most important asset – our human capital.

Consumers, shareholders, employees, suppliers: all of these present challenges as stakeholders even though they have formal and defined links with business. But how much more complex is it to manage stakeholders without formal links who define their relationship with business in their own terms?

The first is government. People still talk about “the government” – but government is not singular but multi-layered. If you do business in London you deal with no fewer than five layers: your local council, the Mayor and Assembly, the shadowy Government Office for London, central government, and the EU. None of these bodies have the same agenda and they are elected or appointed by different methods and on different timetables. And as well there is the plethora of quangos and other publicly-funded busybodies who have relationships with business.

The law, especially in the United States, has become an independent stakeholder as a direct beneficiary of any stakeholder activity which results in legislation or litigation. Moreover, lawyers can now define their own relationship with business and other stakeholders. They can choose to defend business from the claims of other stakeholders or to offer them a means of pursuing those claims through the courts – a phenomenon vastly expanded by the arrival of contingency fees.

The media, particularly the new flourishing Internet media, are more ready to circulate hostile stories about business – many originated by pressure groups and NGOs – if they make news and play on popular fears and they take no responsibility for the consequences. The almost invariable response of the media to any bad story about business is to demand government action to prevent it happening again. (Needless to say, the media take no responsibility for scandals which they helped to create: no financial journalist ever got sacked for tipping Enron).

Through their relationships with government, media and the law pressure groups and NGOs have become powerful in their own right. Their claims to represent local communities and other interests are often unverified: all that matters is that government (or media or the law) accept them. From that moment on, the pressure group becomes automatically a stakeholder. To give one example, Transport for London, a publicly-funded body, has included the Tamil Action Group and the University of the Third Age in consultations on London transport policy – effectively giving a free platform for their demands.

Pressure groups and NGOs also benefit from an asymmetry between their reputations and that of business. If a pressure group plants an inaccurate story or launches a frivolous lawsuit the worst that can happen to it is to be thought misguided or misinformed. (It may even enjoy the halo of martyrdom if it goes down in court). For business, the inaccurate story or the frivolous lawsuit can damage a company or brand reputation which may have taken decades of investment and effort to establish.



Business should always believe that its core activities are worthwhile and represent a contribution to society. It is easy to mock mission statements (in our case “working better together to create brands people love”) but they help businesses define the ground on which they expect to be judged by other stakeholders. Any business that feels guilty about its activities should either diversify or quit altogether. Otherwise it will be just a pushover for other stakeholders with no doubts about their mission.

Even at their most interfering and self-righteous other stakeholders can have a genuine interest in the decisions it makes and very often genuine new insights. I mentioned earlier that talent is vital for business survival and it would be foolish of business to ostracize the talent and ideas on offer from other stakeholders. Moreover, business needs to be pro-active – not waiting for stakeholders to hit them with demands but putting forward its own agenda for advancing common goals. (That will not prevent other stakeholders, especially government, from doing foolish things but at least it will force them to consider better choices).

Indeed, I believe that business itself should behave like a responsible stakeholder – a legitimate and necessary interest group in all the societies in which it operates. Business should display the same persistence and clarity in expressing its views – if not the same self-righteousness – as the pressure groups and NGOs with whom it has to contend. Indeed I believe that business is the natural defender of values which are deeply cherished in world society including the rule of law, protection against arbitrary power, freedom of thought and expression and social mobility. Let us act as stakeholders for those values wherever we operate.

I will paraphrase Abraham Lincoln: you cannot be loved by all of the people all of the time and business needs to recognize this. One effect of the proliferation of stakeholders and their demands is a constant search for win-win solutions which produce benefits for everybody concerned. A corollary of this search is the idea that such solutions are always possible and that “responsible” behaviour by companies towards other stakeholders will always bring its own reward. Unfortunately, this does not always happen. Some rational and indeed essential decisions by business produce pain for stakeholders – and not just temporary but permanent.

If a company is in trouble it may have to shed jobs and devastate local economies. When that happens the business concerned should avoid any false hopes or promises and explain its decision clearly and honestly …… and without fatuous euphemisms which generate cynicism of the (“we have decided to refocus our business”) kind. Above all, it should ensure that the decision was taken without favouritism – that the same motives for the decision are being applied, with the same force and logic, to other parts of the company, and indeed at all levels within it.

Business must keep uppermost the vital importance of its and its brands reputation. There is so much value locked up in these assets, and so much to lose by a false move that they should be factored into every decision where stakeholder interests are involved. Thinking about reputation will not always produce the right decision but it should block off a number of stupid ones – such as passing off tap water as a new mineral water in a savvy consumer and media market such as the UK.

Finally, we have to recognize that stakeholder proliferation and its management paradox is a permanent reality.

There is no point grumbling about it.

As a business grows its markets and activities, it inevitably engages with more interests in local, national and global society. The complexities this causes should be counted as part of the price of our success.

Friday, June 09, 2006

Stakeholder mapping - Clarity made simple


I have just been working on how I can make The Clarity Concept, which Jon White Peter Prowse Dejan Verčič and I have been working at for longer than I care to remember, more accesible to practitioners.

It is a way that Public Relations practitioners can develop a 360 degree view of the publics that are key to organisations.

Using Gliffy, the free counterpart to Visio and it was not too difficult at all.

Friday, June 02, 2006

Mapping stakeholders by communication channel

I have been thinking about a new way of mapping stakeholders.This methodology starts by looking at all the channels for communication available to an organisation and identifying them by existing levels of importance and influence. The next phase being to identify which stakeholders are influenced by each of these channels. Finally one would map a go-forward approach to use and application of channels for each stakeholder groups.

Here is an example map of such channels:
















Inevitably this will show that many stakeholders will need a multi-touch range of channels for communication.

The range of channels is pretty extensive.



Telephone

Mobile voice

Mail

RSS & RSS optimisation

Search engine optimisation

Own site

SMS

Email

Search engines

Press Radio and TV advertising

Media relations

Brochures

VoIP

Blogs

Bloggers

Chat

Other web sites/portals

Instant Messenger

Usenet

Direct Mail

Exhibitions

Conferences

Point of sale

Tele-sales

Discussion lists




Monday, May 29, 2006

For most people, their understanding of an organisation is heavily mediated by the impression they have taken from the Internet.


One way of identifying the information people seek about an organisation is to see what they search for online.


One might seek to identify the extent to which a public may seek information about a generic interest and a specific company. Using new tools like Google Trends access to such interest is now relatively easy.  For example:


astra zeneca    astrazeneca    pharmaceutical   



In this case there is a correlation showing that people associated the company with its industry sector (pharmaceuticals).


The extent to which the company is searched for by the public and mentioned in the press is less clear (and is a comparison of coverage for a relatively small media sample).


This means that in identifying stakeholders, establishing their relative significance, identifying the extent to which stakeholder issues are significant can be examined for to gain broad understanding at an early stage in analysis.


There is a further application that aids efforts in developing capability for valuing relationships which has commercial financial significance as well.


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Friday, May 26, 2006

A new paper on stakeholedr management

I am grateful to Keith Jackson for reminding me about the Brad Rawlins paper at The Institute for Public Relations web site.


This paper is a good round up of the current debate about Stakeholder management. It attempts to differentiate between Stakeholder theory and the PR theory.


The interesting part for me is his issue about how to identify stakeholders. This is what Jon White and I have been doing with The Clarity Concept for some time.


I have some issues with the suggestion that all stakeholders should be included in stakeholder mapping.


Our experience is that a typical board of directors will identify dozens of stakeholders which is well beyond the management capabilities of most organisation to manage.


It is only in prioritising the relative significance of stakeholders that resources can be reasonably be deployed.


I like the arguments about priorities. But that is for another post


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Friday, May 05, 2006

Bankruptcies up 50% in the UK - Brown: "we have got to show in the next few days that we have sorted these problems out"

The British government slipped out devastating news for many companies today.

Hidden in the news of re-shuffle and local election results government spin doctors slipped out more bad news today.

Company bankruptcies of 1,428 compulsory liquidations, an increase of 11.0% on the previous quarter and an increase of 29.5% over the same period last year will have dashed the hopes of many business people this year and 15,389 personal bankruptcies, an increase of 12.5% on the previous quarter and an increase of 51.2% on the corresponding quarter of the previous year are announced on the same day that the chancellor of the exchequer said: "We have got to (resolve our problems) competently, efficiently, and we have got to show in the next few days -- not just the next few weeks -- that we have sorted these problems out," he told BBC radio.

National Health Service 'burying bad news'

UK Stakeholders affected by the Department of Health are not working well together.

With "seven out of ten GPs not providing their own out of hours services and standards slipping", a new stakeholder has been added to the patients, GP's, primary care trusts (PCTs) mix.

Enter the National Audit Office (NAO) to improve the efficiency of evening and weekend GP cover.

Health Minister Lord Warner, slipped the news that the NHS is failing in Jo More Style (a good day to bury bad news) announcement on the Government's News Network site today.

While media attention is focused on local elections and the government re-shuffle, the announcement came at a time when The Secretary of Health Patricia Hewitt slipped out from under the Bliar 'day of the long knives' to be spared the same dismissal as her cabinet colleagues.