What Is a Stakeholder Analysis and Where Do You Start?Jan 19, 2023
3 Key Steps To Create An Effective Stakeholder Analysis
By Nathan Havey
In order to make the transition from shareholder capitalism to stakeholder business, companies need to expand their intentions from maximizing profit for shareholders (often at the expense of other stakeholders) to maximizing value for all stakeholders — creating a robust and resilient value chain that, done well, dramatically outperforms shareholder capitalism’s social, environmental, and even financial results. For most companies, one of the first steps in this transition is conducting a stakeholder analysis. But what is a stakeholder analysis and where do you start?
A stakeholder analysis is a process that helps a company assess the strength of the relationships it has with its key stakeholders — the individuals and entities that are impacted by the business’s decisions — and identify critical opportunities to improve its operating model. A stakeholder analysis consists of three steps: 1) Creating a stakeholder map, 2) measuring the quality of the relationships between the company and the stakeholders on the map, and 3) identifying company priorities as a result. Let’s look at each in turn.
Stakeholder Analysis Step 1
Create a Stakeholder Map
A stakeholder map is a visual representation of the key relationships that allow a company to function. It can be used as a reminder to executives, the board, and employees to make decisions that will create value for all stakeholders, rather than dismissing the needs of some in order to maximize returns for shareholders alone.
The process of making a stakeholder map is straightforward. Begin by putting the company in the middle of the map, and then add all of the stakeholders without whom the company could not function. Start with the environment for providing raw materials including the clean air, water, and life-supporting climate that all life on Earth requires. Then list the community where your company does business, for without it and the services it provides, the company could not function. Next move on to trace your value chain step by step, listing your key stakeholders along the way. Consider your vendors and suppliers, your investors or owners, your employees, and your customers. Those six stakeholder groups are widely considered common to every company.
Now move on to consider any additional stakeholders your company relies on. If your industry is regulated, then the government might be an important stakeholder. If you’re in the news regularly, the media might be an important stakeholder. If you have important R&D partnerships with universities, list those. Don’t forget to consider the company purpose and values in this process, too. If achieving your purpose requires partnerships with specific non-profits or civic organizations, they belong on the map, as well. If your corporate values prioritize a family-friendly workplace, then consider adding employees’ families as a stakeholder group.
The process of creating a stakeholder map can be accomplished in a single meeting, but it’s a good idea to involve at least your board and employees in the process, too. The more they help to create it and participate in the discussions surrounding it, the more they will understand the ideas behind stakeholder business. It also helps to involve those groups in the process because they frequently identify stakeholders that an executive team might not have considered. Arrange all of the key stakeholder groups you have identified on the map, and move on to step 2.
Stakeholder Analysis Step 2
Measure the Relationships
Once you’ve identified all of your key stakeholders, it’s time to measure the quality of the relationship that exists between your company and each stakeholder group. In order to do so, you must identify people who can represent each stakeholder group, which is relatively straightforward for employees, customers, vendors, and investors. But what about the community where you do business and the environment? Who can speak for them? For most companies those stakeholder groups are best represented by outside experts. For the community, consider a former elected official or community foundation officer with broad knowledge of the needs of the community. For the environment, it’s best to work with a knowledgeable environmental consultant or officer from an environmental organization.
The critical thing you are measuring in this step is the extent to which your current relationship is meeting the stakeholder’s needs. There are many ways to do this including surveys, focus groups, workshops, or simply getting into a regular pattern of check-in meetings with them. The key question is: To what extent is our business relationship meeting your needs? If your scores are anything less than stellar, dig in to explore what needs are currently unmet. Then, along with the stakeholder, generate ideas for what could be done to better meet those needs.
Critically, a company should also make this a two-way exchange. To what extent is each stakeholder meeting the company’s needs? If there are unmet needs in the relationship, share them and transparently explore together what possibilities exist to better meet each other’s needs. Note the best ideas and bring them back for the company to consider.
Stakeholder Analysis Step 3
With your list of stakeholder-co-created ideas for better meeting each other’s needs, it’s time to identify priorities. Be careful not to overcommit or try to do too much, as poor execution risks hurting relationships, not strengthening them. Choose what ideas are best for the company now, and which will have to wait for later. Then communicate these choices to your stakeholders and execute your plan.
For extra credit, consider inviting your stakeholders to participate in this prioritization process with you. You may be surprised at the new opportunities that emerge as your stakeholders get an inside view of what you’re dealing with.
Rinse and Repeat
It’s a best-known practice to repeat a stakeholder analysis every 1-3 years in normal times and more frequently during times of crisis to help a company optimize its stakeholder business model. The cadence for this process is up to you, yet the more you engage with your respective stakeholder groups, the more insights you’re likely to glean that will help you successfully run your organization.