How well do you know your key stakeholders? Times of stress will tell!

Stakeholder Engagement

by Franklyn Ofonagoro

How many directors really understand how each of their key stakeholders will react when their economic interest is at risk?

All companies as they travel through their particular life cycles will at any given time have a subset of “key stakeholders” - corporate speak for individuals or organisations that have played a significant role in a company’s evolution and continue to be key to the company’s future prospects.

These key stakeholders will usually come from the population of lenders, employees, investors, suppliers, customers and public authorities (e.g. HMRC, Regulators etc.). These entities will each have a vested interest in a company’s future prospects.

During periods of exciting growth or maturity when a company is thriving and cash generative, directors are usually keen to engage with these key stakeholders as after all, who doesn’t like to revel in a success story! 

However, in a market based economy when most businesses will encounter some periods of stress (and many, distress) at a given point in time, how many directors can, hand on heart, say that they understand how each of their key stakeholders will react when their economic interest is at serious risk; and have a plan ready to dust out and use to manage these entities? And more to the point how confident are directors that they could pro-actively manage the expectations of these stakeholders, to ensure that the board remains in control of the agenda and the company in charge of its own destiny?

As an advisory and restructuring professional, I have been drafted into numerous situations where directors have been caught by complete surprise at what they consider the unexpected hardening of attitude by a lender or supplier during times of business stress / distress, or have seen an escalation by HMRC or a Regulator because of inappropriate interaction (or no interaction at all!).

In my experience there is no substitute for seeking early advice from advisory professionals who have deep situational experience of helping boards of directors develop management strategies to support pro-active engagement with diverse stakeholder groups that may have differing individual objectives. Having a management strategy running parallel to crisis stabilisation or a turnaround process is usually critical in ensuring that the board is able to identify the leverage points of each stakeholder, and come up with bespoke communication strategies that manages expectations and avoids any precipitative action being commenced.