Stakeholder Management 101Jan 09, 2023
By Nathan Havey
Business is about building a system of transactions between all parties in the value chain in a way that leaves each party better off than they would have been otherwise. The better you do this, the stronger the business. At its core, stakeholder management is the process you use to optimize all of those transactions between the stakeholders in your value chain. As you build or refine your respective stakeholder management processes, here are three principles every company should keep in mind.
The first and most basic stakeholder management principle is that you need to actually engage with your stakeholders. As simple as this sounds, it’s not rare to find executives who will rely on statistical data or simply do “thought exercises” to try to divine what their stakeholders want and need (if they give their stakeholders any thought at all).
Engaging with stakeholders means actually getting to know them and building relationships between and among the people who are part of a company’s value chain. As in any relationship, communication must be ongoing and two-way. Getting stakeholders onto an email list or inviting them to a meeting in which they are communicated at is not enough. Engagement truly happens when there is an exchange of information and perspectives.
The best known practice in this area is to actually involve stakeholders in the process of developing and refining the transactions of which they are a part. The goal should be to co-create the agreements you have with each other from the ground up — that’s what engagement really looks like.
In business we often approach stakeholder management as a potentially combative negotiation in which all parties will seek to maximize their own advantage. Operating from that assumption will kill efforts at stakeholder engagement.
Instead, companies must employ the second principle of stakeholder management: mutualism. Rather than positioning the company and the stakeholder on opposite sides of a high-stakes negotiating table, it’s far better to get both parties on the same side of the table, where they can look together at each other's needs and priorities and work to craft agreements that help both parties meet their needs.
A skeptic reading this article might challenge the idea that a company can operate in the ways we are suggesting. After all, what if they were trying to employ these principles, but the stakeholder was playing by more cutthroat principles? Indeed, companies may find themselves in that precise situation.
This is where the third principle of reciprocity comes in. Most people will, in most situations, be pulled to reciprocate what they are given. Give a stakeholder mistrust and secrecy, and they will feel inclined to give your company the same. Give them transparency, trust, and genuine interest in helping them meet their needs, and more often than not, they will respond in kind.
This dynamic may not happen immediately, but over time, you can bet that it will. And if it doesn’t, a company should consider whether it would like to continue to transact with a stakeholder who does not wish to practice stakeholder management.