Stakeholder Communication- 3 Essential Components
A business's stakeholders typically include its investors, staff, suppliers, and customers. These parties are key to a company's success because they can help the business move towards common goals and provide financial support. Therefore, a stakeholder communication plan is necessary for an efficient operation.
By regularly exchanging integral information with stakeholders, businesses can be transparent, comprehensively understand their goals, and gain insight into how they can improve.
3 Components of Stakeholder Communication
An effective stakeholder communication strategy contains 3 components-
1. Stakeholder Identification
Successful communication begins with identifying all stakeholders. This will prevent any future delays or disruptions since all the necessary parties are accounted for and can share input about the business's projects.
The 4 types of stakeholders that business owners need to identify are-
- Upwards - These are investors, financiers, and project sponsors who are launching or financing a business plan. These stakeholders have a lot of influence in the decision-making process.
- Downwards - These are people who perform the work necessary to complete a project, such as contractors and suppliers. These stakeholders are compensated for their work and have a goal of gaining new references or skills after the completion of the project.
- Sideways - These stakeholders are competitors, organizations, and department managers that have to share the same limited resources, such as talent. They may support the business plan, but they need to balance the use of resources to fulfill their own needs.
- Outward - Neighboring landowners, taxpayers, and government agencies are examples of outward stakeholders.
2. Stakeholder Analysis
After identifying the various stakeholders, businesses need to analyze what these parties need and their motivations. This will help owners effectively communicate their objectives and relate to their stakeholders.
Executives can first begin their stakeholder analysis with the power-interest matrix, which is a model that defines the stakeholder and helps businesses see which groups they need to prioritize. The two categories are-
- Power - This is the stakeholder's ability to make a difference, change, or stop a project.
- Interest - This is how much a stakeholder is impacted by a business plan and vice versa.
Stakeholders are then plotted within the power-interest matrix chart depending on their level of power over the project and overall interest. Placements can indicate-
- High Power/High Interest - These are the most important stakeholders and they must be closely communicated and managed.
- High Power/Low Interest - These groups are also critical and because they are not as interested in the project, they should be kept satisfied so that they do not force any changes.
- Low Power/High Interest - These stakeholders should be informed and included in any business decisions.
- Low Power/Low Interest - Stakeholders in this category need to be monitored in case they attempt to hinder the project.
Businesses can further analyze stakeholders by understanding their motivations, such as-
- Financial Interest - This depends on whether they will make a profit from the business.
- Moral or Ethical Values - This is when the stakeholder believes that the project will positively impact society.
- Legal Rights - Stakeholders will likely support a plan that upholds legal rights.
- Religious Beliefs - Opinions can be shaped by stakeholder's religious values.
- Political Beliefs - Stakeholders may or may not fund or assist a project if it does not align with their political opinions.
- Knowledge - Individual knowledge and awareness can impact a stakeholder's choice to support a business.
- Demographics - Where a stakeholder resides, their age, or ethnicity can affect their decisions.
- Environmentally Conscious - Those that are conscious of sustainability may oppose certain projects that leave an environmental footprint.
Organizations will then track stakeholder's level of support by using a scale. The scale, also known as the stakeholder engagement assessment matrix, helps business owners see their progress in informing and persuading stakeholders to support their plans.
1. Unaware - The stakeholders are not cognizant of the project.
2. Resistant - They know about the business model but they do not support it.
3. Neutral - They do not support or reject the plans.
4. Supportive - The stakeholders approve and back the project.
5. Leading - They are actively working with the project to achieve success.
By understanding stakeholder's level of support and where they stand in the power-interest model, management teams can curate a communication plan that determines what needs to be disclosed and the intentions in engaging with the stakeholder. Additionally, the plan defines what communication methods should be used and how often they need to reach out to stakeholders.
It is recommended that executives personally meet with individual stakeholders and address their needs separately. There are various ways they can communicate, including phone calls, presentations, newsletters, and press releases. Businesses can also have focus groups, consultations, and progress reports to present their goals to stakeholders.
3. Stakeholder Management
Stakeholder management consists of making sure the communications plan is effective and is helping the project to develop towards its goals.
By monitoring stakeholder communications, executives can identify any adjustments that need to be made, and if new information needs to be added to the communication plan. This also gives managers visibility into whether they are on schedule and are staying within their budgets.
Effectively engaging with stakeholders will allow executive teams to have a greater understanding of their motives and business objectives, as well as what adjustments need to be made so that the business can thrive.