The S.W.I.T.C.H. Diamond Areas (1) – Stakeholder Readiness
The need for an interlinked stakeholder dialog approach
Over the last 15 years I’ve been involved in many multi stakeholder dialog sessions, including the GRI Guidelines development processes from G1 up to G3.1 and have been going through quite a metamorphosis myself. Being used to present a certain pre-cooked opinion deriving from a primarily hierarchy-based approach from my corporate employer (call it more lobbying for a certain outcome and being more involved to control the dynamics of early collaborative approaches than to really advance them), to learning how to open up in safe space environments under Chatham House rules (in which the person becomes more important than the function and title) up to being involved in the tremendously enlightening movement to create ‘the new’ in co-creative spaces, I developed into the personality I am today, independent in my vision, mission-driven towards our common sustainable future and further developing specific expertise while keeping an open periferal 360 degree view. What happened to me happened to millions of others as well; we took advantage of new technological developments to communicate and are able to let our voice heard everywhere around the world through the internet, using smartphones and laptops, and are curious about the feedback we get. We write blogs, make films and post them, tweet with the speed of light, and connect ourselves to even bigger networks of like-minded. Often we agree (and build relationships) or agree to disagree (and will continue to find new common ground). I am employee, father, husband, neighbour, activist, customer, consultant, blogger, book author, and a fan of several people or groups. We all have been empowered to define ourselves as multi-connected networking people and hear the echo of ourselves through the relationships we have.
For companies this new fluidity is often still difficult to understand. Whatever happens in the world caused by a company – positively or negatively – will sooner or later be aired and could be spread as news all over the world within seconds. Whatever happens within a company is not completely secure if anyone feels a moral or ethical uneasiness with the matter and either uses whistleblowing procedures or dives into the protected sphere of e.g. Wikileaks or Openleaks. As Daniel Goleman recently said we need to get used to live in an era of ‘radical transparency’.
More and more innovative solutions or products are not developed by one company alone (either because of a lack of innovative capacity, a lack of knowledge of the real needs of customers or simply because it’s too expensive), but in networks, partially within an industry, partially cross-industry, sometimes using co-creation or open innovation processes. We also know of examples where new ideas were also designed completely out of an expected industry scope due to the non-willingness to open up. It is indeed a challenge to understand that the whole set of stakeholders could be seen as the best R&D and sales potential any company has – if the company wants to connect.
Looking at how stakeholder dialog has emerged over the last 15 years it can be concluded that there is a visible development from scattered, patchwork-like, single-focus dialog (issue-specific) towards a more holistic, inclusive and multi-focus dialog (mission-specific). This is partially caused by the growing level of responsibility that is attributed to the increasing amount of multinational corporations (app. 70.000 worldwide) and the notion that these have way more exit option (=scenarios for decision making) than governments. The latter are often limited in their decision making power due to the lack of such exit options, e.g. a corporation can move its production from country A to B, leaving country A with more unemployed people, less national income and increased social security expense carried by the existing social system and paid by those that do have work. Also, as value chains are way more globalized and outsourcing is common practice, corporations are expected to internalise ‘shared value creation’ thinking into their business case deliberations, overcoming the perception that capitalism is antisocial and destroying out planet. There is a public expectation that corporations need to safeguard that there is ‘no loser in the value chain’. Proactive companies try to use this through exploring adaptations to their business models through ‘cradle-to-cradle’ and ‘bottom-of-the-pyramid’ strategies that even go one step further and try to enhance business opportunities and to win new market shares in regions of unmatched needs.
I have witnessed how the GRI-based stakeholder dialog process undertaken to come to a material issues based sustainability report has – at least with someproactive companies – developed into a community-building, research and target-oriented joint visioning process that supports reporting. This includes developments to co-create and test new product ideas, developing communities of ambassadors/advocats for certain products, shifts in business models that embrace stakeholders as essential part of the business model, up to new dashboards (internal) that define success not only on financial KPIs, and ongoing reporting (external) that sees dialog as on ongoing process, not focused on that one survey or workshop per year for the report. There are companies that know that the shareholders will not be happy if the stakeholders are not happy, as those are the ones that create the revenues, either directly by buying goods or indirectly by influencing the reputation of a company. The performance of an organisation is defined by a reputational mix in which success of products and/or services are the most visual part, but other parts play a massively important role as well as we know from many examples (including e.g. social investments, governance and authentic leadership). Let’s boil it down to one essential fact: without its stakeholders a corporation is – guess- nothing.
The maturity of a stakeholder dialog process
A lot has been published on how to perform a good and holistic stakeholder dialog process, take for example UNEP’s and Accountability’s ‘From word to action: the stakeholder engagement manual’ (2005) or Jeff Senge’s latest book ‘The necessary revolution – how individuals and organizations work together to create a sustainable world’ (2008), or recently the publication of the Accountability AA1000 Stakeholder Engagement Standard (Exposure Draft). Several maturity models are available, some have three stages, e.g. the Accountabililty1000SES Exposure Draft mentions three – an emergent organisation, a strategic organisation and a civil organisation; they mirror the quality of those three stages with the three principles of the AA 1000AS (namely materiality, responsiveness and completeness), others have four, like the one developed by Deloitte (see below)
Image 1: Stakeholder dialog maturity levels (Source: Deloitte: Minding your stakeholders’ business – A strategic approach to stakeholder engagement)
The GRI G3 Guidelines mention ‘Stakeholder Inclusiveness’ as one of the four guiding principles to define material issues to be included in the report and the forthcoming G3.1. edition of the Guidelines will present a more plan-do-check-act-oriented reporting cycle in which stakeholder inclusiveness becomes even more prominent.
The link to the other 5 S.W.I.T.C.H. Diamond areas of readiness
Let’s come back to the need to align stakeholder readiness to the other 5 areas of readiness in order to make an organization as brilliant, shiny and hard as a diamond. How will the atoms of this part of the diamond link to the others and make it unique? My comments will definitely not offer a 100% complete atomic grid and I will mainly focus on system readiness and behavioral readiness for this blog, but I think I can capture the most important ones – you get the idea!
System readiness: Any organisation consists of people, but their effectiveness as a group is dependent on the way they are organized to work together. In the last couple of years I got inspiration from both the environmental science (esp. the systems thinking work of Donella Meadows and Janine Benyus’ work on biomimicry are leading in my view) as well as the integrated management design (the work of Fredmund Malik of University St. Gallen and his kybernetic thinking are very enlightening). One important way to stabilize an organisation’s systems is by closing feedback loops, so I applied this as the glue that keeps the diamond’s atoms together. With regard to the aspect of stakeholder readiness and the most important systems and subsystems one can think for example of:
- Governance: does the organization have processes in place to allow stakeholders to offer their views to the right level of people, at the right moment in time (to drive effectiveness and change) and in the right format, e.g. is there a stakeholder expert panel that can directly report to the decision-makers (like e.g. at Shell)? Is there a process in place to define stakeholders, map their material issues and mirror it with the company’s interests? Is there a screening in place that supports finding the right stakeholders (their level of influence, sort of representation, skills to engage)?
- Management system: Are processes defined to infuse stakeholder feedback beyond the usual cutomer-product centricity of an ISO 9001/9004 approach? How do the ISO 14000 series standards and the new ISO 26000 play into a larger scope of stakeholder interests and how is information fed back in the organzation’s knowledge system? How deeply are stakeholder interests really interwoven in EFQM or Malcolm Baldridge enabler and results parts, are the necessary feedback loops in place?
- Risk management: is there a risk mapping process in place that puts all stakeholder interest into a risk and organisation’s specific context and do these also absorb feedback from stakeholder dialog? How do the issues impact legal, financial and reputational risks and do stakeholders have the same view? Are any of the company risks discussed with stakeholders at all?
- Strategy development: is there a strategy in place how to increase the level of maturity of the stakeholder engagement process? Will different stakeholder groups be approached differently? In how far will stakeholders be instrumental in the deliberations on business models?
- Innovation: how will the results of the stakeholder engagement be communicated to product/service development? Will stakeholder be included in the development process? Is there a view how far the organizations wants to move in what part level of maturity?
- Data management: Good stakeholder engagement will be underscored by factual data coming from surveys, questionnaires and independent studies. Has the organization systems in place to have this information collected, aggregated and anlyzed as a basis for further informed stakeholder engagement?
- Management information system: Are there dashboards that take into account overall stakeholder satisfaction? Is there a balanced scorecard approach, is there integration in customer satisfaction, employee satisfaction or an overall reputational assessment in place that feeds back into the scorecard?
- Other system readiness indications that merit laying the right links to stakeholder readiness: internal auditing, investor relations, finance and investments, knowledge management and communication
Behavioral readiness: A major threshold that organisations need to overcome is to understand the value of stakeholder readiness and that the organisation’s advocates actively be involved in stakeholder engagement need to understand the value of transparency and the awareness of the context (understanding and being ale to respond to changes in the external environment), complexity (having the skills to survive and thrive in situations of low certainty and low agreement) and connectedness (ability to understand actors in the wider political landscape and to engage and build relationships with new kinds of external partners). EABIS and Ashridge College already pointed this out in their study ‘Developing the global leaders of tomorrow’ in 2009. The stakeholder readiness therefore needs to find its echo in:
- The paradigm under which Human Resources need to continue to build future readiness: Elaine Cohen’s mentions in her book ‘CSR and HR’ that Human Resources need to move away from focussing activities ON the impact on employees towards the impact OF employees (in the workplace, marketplace, community and the environment)’, with consequences for
- Employee training and development to be stakeholder-ready, e.g. through widening the concept to ‘employability’ (broadening the scope to help build value-adding members of society and by that already implicitely build so-called ‘shared value’), implementation in personal development plans, talent management processes, career counselling, mentoring, etc.) and implementation in transition management. Each employee is also a stakeholder and needs to be trained on the variety of stakeholder views and techniques how to react to them. These people may remain ambassadors for the compay even after they left!
- Employee communications: learning to use the power of social media for CR 2.0 stakeholder dialog (blogs/vlogs etc.), accepting the benefits of co-creation, crowdsourcing (e.g. take a look at the PepsiCo Refresh Program), train people on stakeholder dialog skills, convergence of internal and external communications. Each employee is both loyal and activistic and is a potential change catalyst.
- Ethical business: employees need to be very well trained and ‘live’ the organisation’s Code of Ethics and underlying correspnding systems, structures and staffing for remedy activities in case of non-compliance.
- Leadership Development: If leaders don’t actively take part and claim responsibility in stakeholder dialog the authenticity is at stake. I have personally seen approaches where top management thought they could delegate this to staff. These approaches will create a disconnect as top management responsibility for stakeholder dialog cannot be delegated. If the board members of a corporate are not the most authentic protagonists in their stakeholder dialog process, something is wrong with their approach!
Product and service readiness: Closing feedback loops from stakeholder dialog carries an enormous potential for the development of products and services. A lot of specific research is done to assess clients needs and new strategies are tried out, including cradle-to-cradle strategies, bottom-of-the-pyramid strategies (to also expand into new markets) and strategies that put functional perspectives upfront (e.g. product lease). In normal situations life cycle analysis takes into account the full product-specific footprints including suppliers, product use and takeback. New and in combination with these approaches are open innovation platforms, co-creation networks, cross-industry learning and exchanges that allow enlarged and new perspectives. Stakeholder dialog can be linked to these approaches as well, some of them may want and should be involvd in these new appoaches. There is no one size fits all to closing that gap, but it would be a mistake not to lay the link.
Infrastructure readiness: A company’s assets are essential for the delivery of products and services. They are a visible and factual representation of parts of an organisation’s environmental and social footprint. Many stakeholder relations, but also issues, are caused by local or regional infrastructural assets, think of soil contamination, noise reduction needs, social dependencies of worker’s families, worker’s rights issues, local supply chain dependencies, community investment, philanthropic asks, etc. It is amazing to see how much corporate officers often fully neglect these infrastructures and the signals these assets send on local level. How many people from corporate procurement, marketing & sales, investor relations, PR and even strategists have never seen one of their company’s sites from near or inside – I can tell you that you will be astonished. But stakeholder dialog happens there as much as on corporate level, so stakeholder readiness needs to take that into account and think about the different sorts of dialogs on various levels.
A systemic, worldwide, integrative, transparent, collective and holistic approach needs to be designed, taking into account all stakeholder needs. Well-designed stakeholder dialog on various levels of the organisation and using the best feasible means per stakeholder group are both a safeguard of the needed responsiveness to be a trusted societal partner as well as exploring completely new business ideas in times of growing disruption on energy, resources and food. The common stakeholder dialog processes normally do not connect all the dots and often fail to increase the value of a corporate knowledge management approach. Stakeholder readiness however will go that one step further. At minimum there will be a close connection to reporting and communication, lobbying and other networking. The S.W.I.T.C.H. Diamond recommends a deeper layer of connections, glueing the many other atoms together and let the diamond shine.
My next blog will focus on the S.W.I.T.C.H. Diamond from the behavioral readiness side.
As always I appreciate responses to this blog, as well as additions and concerns. Have I missed anything, do you have examples to support or disagree with my views? Simply let us all know!
Stay tuned !
See earlier posts on the S.W.I.T.C.H. paradigm and diamond: