I often compare Stakeholder Relations to oxygen. When it is done well, no one even recognises its existence. Like oxygen, when one is suffocating, one values the importance of oxygen. Similarly, only when stakeholders have had enough of the organisation and are voting with their feet do most organisations value having a well-resourced stakeholder relations division.
A well-resourced stakeholder relations department can safeguard an organisation’s reputation and drive long-term success and sustainability. In today’s interconnected and transparent business environment, having a robust stakeholder relations infrastructure is more critical than ever. Let’s delve into why this is crucial, the potential pitfalls of neglecting it, and some compelling examples of successes and failures.
A well-resourced stakeholder relations department has sufficient personnel, technology, and budget to manage and nurture relationships with all stakeholders, including customers, employees, suppliers, investors, and the community. It’s not just about having a team; it’s about having the right mix of skills, tools, and strategic vision to engage effectively. This includes skilled professionals in communications, public relations, crisis management, and community engagement; advanced CRM systems, analytics tools, and communication platforms; and strong backing from the highest levels of management to ensure that stakeholder relations are prioritised and resourced adequately.
For stakeholder relations to be truly effective, they must have the unwavering support of the organisation’s top executives. When leaders champion stakeholder relations, they underscore the importance of these relationships across the company. This support ensures that resources are allocated, stakeholder relations strategies are seamlessly integrated with the company’s overall goals, and swift and effective responses to potential crises are more feasible.
Several companies have exemplified the benefits of prioritising stakeholder relations. Starbucks, for instance, has long been a leader in stakeholder engagement, prioritisingemployee welfare, ethical sourcing, and community involvement. Their commitment to sustainability and ethical practices has strengthened their brand and built deep trust with stakeholders worldwide. This approach has significantly contributed to their sustained growth and positive public image.
Unilever’s Sustainable Living Plan is another testament to its commitment to stakeholder relations. By integrating sustainability into its core business strategy, Unilever has enhanced its reputation and built strong relationships with consumers, employees, and communities. This strategy has not only boosted brand equity but also driven business growth, with sustainable brands growing 69% faster than the rest of the business.
Patagonia, known for its environmental activism, offers a model for corporate responsibility through its stakeholder engagement. Their transparent practices, commitment to environmental causes, and innovative products have cultivated a loyal customer base and a strong brand identity. Patagonia’s approach has supported its growth and set industry standards for responsible business practices.
On the flip side, organisations that overlook stakeholder relations often face significant challenges. Volkswagen’s Dieselgate scandal is a stark example of what happens when stakeholder relations are neglected. Volkswagen’s failure to engage transparently with regulators, customers, and the public led to a massive crisis that severely damaged its reputation, resulted in hefty fines, and eroded consumer trust.
The infamous 2017 incident involving the forcible removal of a passenger from a United Airlines flight highlighted the company’s lack of effective stakeholder management. The company’s initial response was widely criticised, causing a public relations disaster and a sharp decline in customer trust and stock value.
The Wells Fargo fake accounts scandal demonstrated the severe repercussions of poor stakeholder relations. Wells Fargo’s practices alienated customers, employees, and regulators, leading to billions in fines and a significant drop in consumer confidence and market value.
Investing in a well-resourced stakeholder relations department is not a luxury but a necessity for sustainable success. Companies prioritising stakeholder relations are better positioned to navigate challenges, build trust, and achieve long-term growth. As the examples of Starbucks, Unilever, and Patagonia show, a strategic focus on stakeholder engagement can lead to remarkable success. Conversely, the failures of Volkswagen, United Airlines, and Wells Fargo underscore the risks of neglecting this crucial area.
In the end, stakeholder relations are the lifeblood of a thriving organisation. Just as we recognise the value of oxygen only when we lack it, so do we understand the importance of effective stakeholder relations only when they are compromised. Let us ensure that our organisations are well-equipped to breathe freely, with a stakeholder relations infrastructure that is robust, proactive, and deeply integrated into our core business strategies.
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Thabang Chiloane is the Chairperson of the Institute for Stakeholder Relations in Southern Africa (ISRSA). He writes in his personal capacity.