What’s a stakeholder?
The term, “stakeholder,” was first used in a 1963 internal memo at the Stanford Research Institute. It defined stakeholders as “those groups without whose support the organization would cease to exist.” This definition has evolved over the years to mean “someone, a group, or entity that has an interest in a deliverable or outcome.” This can be expanded to state: “A person, group, or organization that has a direct or indirect stake in an organization because it can affect or be affected by the organization’s actions, objectives, and policies.” Stakeholders in a business include, for example, customers, directors, employees, agencies, owners (shareholders), suppliers, unions, creditors, and the community from which the business draws its resources.
Stakeholder power is increasing
Stakeholders today have more influence over an organization than in the past. Stakeholders also have a higher degree of sophistication, education, and expectation that, if left unmanaged, might lead to unfortunate consequences.
If you want to be a successful executive and/or leader it’s absolutely essential that you: 1) identify your stakeholders, 2) understand stakeholder needs, expectations, and current perceptions, and 3) proactively manage these stakeholders’ perceptions. If you don’t, yours may be the next CXO obituary in The Wall Street Journal.
How to identify and manage the stakeholder landscape
All stakeholders are not equal and different stakeholders or stakeholder groups require different levels of consideration. In this light I have devised a very simple, straightforward method to ensure that stakeholders are identified and managed and that related actions are incorporated into the plan. There are no hard and fast rules here. What is important is that time is invested in identifying, evaluating, and determining those actions needed to gain endorsement and support from key stakeholder entities.
I advise executives and leaders to examine stakeholders on two levels: 1) Impact: what influence does this stakeholder have on my ability to get things done and achieve success? and, 2) Perceived Status: is the stakeholder supportive of my plan and progress to date?
Stakeholder Impact is separated into three categories: 1) A sponsor or someone or some group that needs to endorse my agenda (rated “A”). Without it I can’t proceed. Sponsors might have final approval of budgets and/or headcount and hire/fire power over the leader performing the stakeholder analysis. There should be only a few stakeholders with an “A” rating, 2) Individuals or groups that need to buy in, commit to, or, at a minimum, support the agenda (rated “B”). Without their help on some level, it will be difficult to achieve success, and 3) Individuals or groups with whom it’s politically correct and important to include in the information loop and keep up to date (rated “C”). These stakeholders exert indirect influence that may or may not have immediate consequences. What is important here is to recognize that these stakeholders do exist and may have underestimated power over a leader’s agenda and related actions. Including them in this process helps eliminate surprises and facilitate the agenda; exclusion can undermine it.
The Perceived Status rating is your best guess (or the leadership team’s, if performing this activity as a group) as to whether or not the stakeholder is in fact supporting your agenda (i.e., positive), indifferent or unsure about your agenda (neutral), or directly or indirectly hindering the achievement of the agenda (negative).
In rating each stakeholder individual or entity on Impact and Perceived Status, you have the making of a working document that can be managed over time. I tell all clients that a stakeholder with an Impact rating of “A” or “B” coupled with a Perceived Status rating of “neutral” to “negative” is a red flag. Many such ratings on the stakeholder slate are an indication that it will be extremely difficult to implement intended actions. After having clients perform the Stakeholder Analysis, I’ve had many of them recognize that it may be impossible to be successful in the environment and/or that the path forward will require too many compromises—leading to an undesirable result. Don Smith (named changed to mask identity), the fifth head of sales for Acme Networks in seven years, left the company after six months on the job. Acme Networks had been purchased by a large European telecommunications company. His reason for leaving? After identifying and meeting with key stakeholders, he didn’t believe that he could implement the necessary sales agenda to achieve success. The Acme stakeholder landscape was too complex and had conflicting expectations about what constituted a successful sales agenda. After resigning, Don went back to Cisco Systems where he knew the stakeholder environment would be supportive of his ideas and methods. Don said he left Acme because the environment there had too many powerful stakeholders with very different ideologies and views about the sales/product road map. “I didn’t think I could be successful there—and it wouldn’t have been fun trying.” To me, this was a sign of an astute executive. He was able to read the stakeholder environment and make proactive choices.
What if I dislike a stakeholder, disagree with a stakeholder’s agenda, and/or the stakeholder won’t work with me? These are common concerns. You don’t need to like the people you work with. It certainly helps, but it’s not a prerequisite. In this case it’s important to figure out how to be compatible and reach alignment on expectations. This is usually doable. It is possible for one to inherit a situation in which alignment is not possible among key stakeholders. In such a case I would argue that it is better to make this determination quickly upfront, as opposed to waiting until a tipping point or event occurs that causes a crisis. Sometimes the best that can be done is to escalate the issue up through the management hierarchy—even to the board level, if necessary. And if resolution isn’t possible, it may be better to cut your losses and move to a new opportunity as Don Smith, mentioned earlier, did.
A few final parting thoughts: 1) involve your management team, 2) know your stakeholders and proactively manage these relationships, and 3) include this activity in your normal planning algorithm. If you don’t manage stakeholders then stakeholder perception will surely manage you. As John Kenneth Galbraith said, “In any great organization it is far, far safer to be wrong with the majority than to be right alone.” Investing appropriately in stakeholder management will allow you to take the right path with supportive stakeholders who are endorsing and pulling for your continued success.