Top risks identified by boards in 2018. Risk 3: Stakeholder Engagement

The Governance Evaluator 2018 Governance Capability Benchmark Report analysed board evaluation responses from over 70 boards comprising almost 700 members across multiple industries. Remarkably, the number one governance risk identified across every industry is Stakeholder Engagement.

This month we explore Stakeholder Engagement in greater depth and provide tips and resources for improving your communication with your stakeholders, and the subsequent influence of your stakeholders in the direction of your organisation.

What is Stakeholder Engagement?

The critical nexus between decision making and accountability functions is informed, meaningful, and effective engagement between stakeholders and the organisation’s board. Engaging with stakeholders involves providing the opportunity for both sides to ‘hear each other’ and to receive information about other points of view.

A board should have clearly established and promoted stakeholder engagement channels that are developed by the board and implemented at any interaction between the board and stakeholders.

Governance Evaluator assesses stakeholder engagement in terms of two key themes; (i) stakeholder communication and (ii) stakeholder influence. Each theme is explored in greater depth throughout this resource.

Within the Governance Evaluator, each theme is explored via a series of targeted questions, each with four possible responses:

  • No: Represents an early capability assessment of the board in that area. Any responses in this category highlight the need for board capability improvement and education.
  • Yes, but qualified: Indicates that board capability is developing and not yet at a mature governance level. Again, these point to opportunities for focus and education.
  • Yes: Represents a mature governance capability within the board and the criteria wholly satisfied, as judged by the participants.
  • Unsure: Measures a construct other than overall board capability as it reflects individual members of the board or leadership team that are unsure of the board’s level of functioning.

Stakeholder Communication

Communication with stakeholders is a responsibility of the board and the CEO (or equivalent). The board, particularly the chair, bears primary responsibility for this. Communication occurs formally through the annual report and annual general meeting, and informally throughout the year.

A well-planned approach for stakeholder communication will help maintain good relationships between the organisation and its various internal and external stakeholders. Any stakeholder communication plan must be aligned to, and encompass, the organisation’s vision, mission, core values, and strategic direction. This ensures that key stakeholders are aware of, and are engaged in, supporting the shared implementation, revision and success of strategy.

There are, at a minimum, seven steps towards a winning stakeholder communications plan:

  1. Know what you are communicating
  2. Know the message you want to communicate
  3. Know who you are communicating with
  4. Establish the best method of communicating with your target audience
  5. Identify who is responsible for speaking with whom
  6. Keep track of your plan
  7. Review the effectiveness of your plan

Cross-Sector 2018 Benchmark Data key finding:

Q: Does the board actively influence and communicate with a wide range of stakeholders on key initiatives and plans?

Fig 1: 2018 cross-sector evaluation findings for Stakeholder Communication

Top tips for improving stakeholder communication

  • Include directors in the Stakeholder Communication Strategy implementation. To do this, it is important to know the strengths of each director, in particular, their connections, skills and experiences, in order to understand their potential areas of influence. Mapping this information, and actively engaging directors to lead or participate in their area of expertise and influence, is essential for key stakeholder communication success as well as each director’s fulfilment and sense of achievement or worth. The Governance Evaluator Development & Skills Matrix is a great tool for identifying director skills and areas for growth.
  • Ensure the Stakeholder Communication Plan activities are well measured in outcomes, not activity, and reported on within the organisation and to the board. It is not enough to merely count the number of stakeholders communicated with or activities being undertaken. Reports need to measure outcomes of activity which allows investment to be truly measured and plans to be revised in a timely fashion.  A good report should include an outline of the activity and its cost, as well as who was involved and what was the long-term outcome. For example; there may be a meeting with the local Aboriginal Cooperative Community Elders, board chair and CEO. The report should outline who attended the meeting, what were the strategic items on the agenda, what is the future project scoped and how the outcomes of that project will be measured and reported.

Links to Resources

Governance Evaluator has sourced some resources which we think you might find useful to build any board’s capabilities in this area:

  • Chapter 9 of the DHHS Directors Toolkit can be accessed here.
  • The International Association for Public Participation contains a wealth of resources (case studies, engagement policies and conference presentations) with the aim of promoting and improving public participation in community and stakeholder engagement
  • Governance Evaluator customers can access the following, and other useful resources via the platform here.
    • Governance Manual – 8.1 Stakeholder Communication Plan Template
    • Governance Manual – 8.2 Stakeholder Communication Policy

Stakeholder Influence

An underlying principle of stakeholder engagement is that the stakeholders have the chance to influence, inform and have their voices heard for the strategic decision-making process. Stakeholder engagement is a key part of assessing performance and informing future strategic planning.

Involving stakeholders in decision-making processes is a tool used by organisations, especially when they want to develop understanding and agree to solutions on complex issues or issues of concern. This differentiates stakeholder engagement from stakeholder-informing processes that seek to issue a message or influence groups to agree with a decision that is already made.

Key to being able to do this well is to have in place many ways for the voice of the key stakeholder to be heard at the board room table by directors, CEOs and executives and to ensure this is formally documented and does inform strategy. Understanding who the key stakeholders are and how best to hear their voice and needs at planning time is imperative.

Stakeholders are often made up of two or three groups – those to whom the organisation provides services, and those who support these services to be provided. Another  group of stakeholders can also be those whom the organisation is required to advocate for and/or influence.

Cross-Sector 2018 Benchmark Data key finding:

Q: Does information acquired through stakeholder engagement inform strategic planning and review processes?

Fig 2: 2018 cross-sector evaluation findings for Stakeholder Influence

Top tips for improving stakeholder influence

  • Develop Board Committees to bring the voice of the stakeholder to the board room table. Develop board committees such as Community Advisory Committees who have representatives from all segments of the community (including the most vulnerable) to represent their needs for future planning.
  • Develop strategic planning and reviewing processes to include:
    a. Stakeholder forums – Convene stakeholder forums prior to strategic planning to hear their issues and areas for opportunities
    b. Present a draft strategy to key stakeholders to check on validity for their needs
    c. Strategic insight sessions- schedule a board strategic insight session to annually check that the present strategy matches the latest key stakeholder needs or focus. Do this through having an annual agenda-ed board session with guest speakers who present the latest issues either politically, socio demographically or environmentally, for the board to then review their present strategy for relevance
  • Ensure board meeting agendas support stakeholder influence, eg:
    a. Start every board meeting with a consumer/stakeholder story
    b. Quarterly Reports to the board
    i. Sociodemographic data and local business/institution requirements report
    ii. Service quality reports highlighting consumer needs and satisfaction to guide future service planning

Links to Resources

Governance Evaluator has sourced some resources which we think you might find useful to build any board’s capabilities in this area:

  • Governance Evaluator customers can access the following, and other useful resources via the platform here.
    • Governance Manual – 8.3 Terms of Reference for a Consumer Advisory Committee
    • Governance TV – Effective Stakeholder Engagement – how to plan, measure and assess