3.2.3 Stakeholder management

The Enterneers® I 09:40
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Elements of Enterneering®/People/Stakeholder

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The topic of stakeholder management is frequently discussed in relation to project management. The term 'stakeholder' is also used in quality management. When it comes to entrepreneurship, the topic should be viewed less methodologically or conceptually and more from a holistic, interpersonal and communication perspective.

Unlike a shareholder, a stakeholder is not necessarily an economic or legal participant in the company’s affairs. Stakeholders are individuals or entities whose thinking, actions or both are either influenced by certain processes, changes, results or structures of a company, or who are dependent on a specific progress or result in their own activity or contribute to it with their work results. It follows that certain persons, groups of persons or institutions can be regarded as stakeholders from a company's point of view, even if they do not perceive themselves in this role. On the other hand, stakeholders who are not recognised by the company in this role repeatedly appear in companies as significant actors.
 

IMPORTANCE

Why is the issue of stakeholders so important? This question can be answered most clearly with a few practical examples.

The group of stakeholders that companies intrinsically rely on the most is their customers. Customers are not active in the company, and in most cases, are not connected with or involved in the company’s affairs. Nevertheless, their thoughts and actions have a significant impact on the success of the business. No company would consider leaving its customer stakeholder management to chance.

Stakeholders in a company also include all employees who are involved in processes, projects or activities through their work. For example, the progress and quality of a product often depend on several people. Unreliable delivery, or poor quality in the preliminary stage of the product, affects customer experience. A project can be realised on time and according to requirements only if the people involved work in the required manner. The stakeholder called employee must be actively managed by every company, and not just within products or projects. Even in the case of organisational change measures or in people management, actions that are inadequately considered and not actively supported can sometimes lead to fierce resistance and loss of motivation – or even active rejection – by the workforce.

Stakeholders also include authorities such as tax offices and customs. Here the intrinsic attention is reversed. Often, these types of stakeholders have a greater interest in and more active demands on a company than the company would prefer. Interacting with such stakeholders should not be left to chance.

Finally, suppliers, investors and banks should be mentioned. It is clear that approaching these groups of stakeholders only when there is a specific need or occasion is probably not the most successful approach. Banks that communicate only when absolutely necessary will generally find it difficult to provide their products in a particularly pragmatic manner and at the best conditions. 
 

WHAT COUNTS

Successful stakeholder management is centred around two Enterneering® elements: Transparency and Communication. To align these two elements of a company appropriately, it is first necessary for the top management to realise that this topic is not just a bureaucratic core element of an ISO standard. For many entrepreneurs, appropriate stakeholder management with customers is not difficult. Satisfaction surveys, customer care centres or CRM systems can be easily implemented. When communicating with customers, they also act very consciously and often, with considerable marketing budgets. However, top management tends to quickly lose awareness and attention when it comes to the other stakeholders in the company. Entrepreneurs are well advised to ask themselves regularly, and not just on the days when the company’s tax returns have to be signed, whether everything is going well with all the relevant stakeholders.
 


HOW IT WORKS

Stakeholder management is therefore a fundamental and ongoing task for companies. As with most elements of Enterneering®, stakeholder management for entrepreneurs depends first and foremost on a basic understanding of and paying appropriate attention to the topic and its importance. The question of concrete tools, concepts or guidelines plays a subordinate role and is in most cases sensibly delegated within the company organisation. Regardless of which method or tool a company decides on, successful stakeholder management always consists of identification, assessment and action towards stakeholders.

IDENTIFICATION
​As the size and complexity of the company increase, identifying all the truly relevant stakeholders of a company becomes a multi-level group task. This is because, unlike in a 5-person company, in larger organisations, the management alone may not be able to identify all relevant stakeholders and assess them equally well. The first step is therefore to determine which persons or institutions have a relevant influence on the company's success. During this step of the survey, it is important to record what (WHAT) the respective stakeholder has an influence on, and in what form (HOW).

ASSESSMENT
A thorough assessment always requires a sufficient information base and proper analysis. After the WHAT and HOW are available in the identification process, the next step is to determine the extent of the dependencies and the relevance of each stakeholder. Based on these three pieces of information, a so-called impact analysis can be created. The aim is to rank all stakeholders in terms of their influence. A useful extension of this analysis is achieved by defining the estimate of the probability of occurrence or behaviour for each stakeholder. This allows the assessment to be better weighted. Stakeholders with a high impact potential and a low probability of occurrence, or a high threshold of irritation, receive a muted assessment. The last assessment step, and thus the transition to the definition of measures, is the assessment of the ability of the company to influence the stakeholders. The question is whether the stakeholder can be influenced at all and by what means. The question of 'whether' can be assessed by simple grades (low, medium, high), while the answers to 'by what' already represent the first key points for the subsequent definition of measures.

Finally, the above assessment criteria can be presented in a stakeholder matrix with four dimensions, which forms the basis for the measures.



MEASURES
​The possible measures that can be considered for the different constellations of a stakeholder matrix are manifold and range from the core elements of Enterneering® – Transparency and Communication – to the areas of responsibility in marketing or investor relations. For our matrix presented here, so-called norm strategies can be defined, which can be used to derive suitable measures. For example, the approach for all stakeholders falling under Area A of the matrix could be that information is provided only when necessary. For stakeholders in Area B, a structured dialogue should be established and active relationship management should be pursued, paying particular attention to the stakeholder with the highest probability of occurrence. For all stakeholders in Area C, an individual approach to support may be effective. Similarly, for those in Area D, it is important to provide comprehensive information and support. When determining suitable measures, it is essential to consider the insights gained from the first step of identification, of how stakeholders can be influenced.


Note on practical application
Active stakeholder management should be implemented with the necessary sensitivity. It is not uncommon for some stakeholders to perceive in a negative way well-intentioned measures aimed at influencing them. This can potentially change their attitude towards the company or its products. It is not advisable to avoid contact with sensitive yet relevant stakeholders. Even if it can be stated that the expectations and perceived benefits of stakeholder measures differ between the company and the stakeholders, and are perceived subjectively, this should not lead to an avoidance strategy.

In some cases, it is only during recurrent stakeholder management that companies realise that they have been doing stakeholder management but have been setting the wrong priorities or being inconsistent in setting priorities. Investing in intensive stakeholder management with the less relevant but more manageable stakeholders is not particularly promising.



Stakeholder management is not a project that is to be carried out just once to achieve sustainable success. It is an ongoing process that must be carried out at sensible but regular intervals. Only in this way, changes in the stakeholder landscape, as well as the progress of previous measures can be adequately controlled, updated, and corrected if necessary.