The Four Corners of Stakeholder Strategy

Someone reading this will be the first Chief Stakeholder Officer of a Fortune 500 company. Turbulent times are creating demands for business leaders to transcend existing C-suite roles. Between new geopolitical conflicts, a global pandemic, as well as social and political unrest, the past five years have required business leaders to develop a new set of skills, tools, and framework for engagement with stakeholders.

Despite the growing importance of stakeholder engagement, business leaders lack a cohesive approach to comprehensively understand their stakeholders and inform their decision-making. In short, corporations live in a new world and require a new map. Present-day business leaders need a framework to navigate the increasingly complex and fluid world of stakeholder engagement.

Penta's Four Corners framework identifies four key stakeholder groups: customers, employees, investors, and policymakers/political actors. These groups may vary depending on the organization, and how leaders prioritize and engage each group will also vary by company type and structure. Reality demands a flexible framework, as stakeholder opinions are fluid and engagement will change over time. 

Step 1: Map out key stakeholders

Regardless of a company's profile, the first step of engagement is to explicitly and deliberately map out key stakeholders to understand each group, as well as the dynamics, power, and conflicts between them.

For effective stakeholder management, it's critical to identify which stakeholders matter the most to the company. A good pressure test to prioritize different stakeholder groups is to consider three features: power, legitimacy, and urgency. Power is the extent to which stakeholders have the influence to impose their will on the company or gain access to a network of influencers who will exercise pressure on the company. Legitimacy comes when the stakeholder's actions toward the company are widely viewed as appropriate within social norms, values, and beliefs. Finally, urgency is measured by how much the stakeholders' efforts can influence immediate action by the company.

While there can be layers of prioritization between or within stakeholder groups, it is also important to understand the natural tensions among the groups. Perceptions of the company are shaped by where stakeholders sit: A customer's priority may be different than an employee's. How do age, politics, geography, and other factors influence those priorities? Tension is an inevitable part of operating in a dynamic, diverse environment. It can make a company better, but only if leaders understand the underlying drivers of tension and manage them appropriately.

Step 2: Understand the information flow

The second step in stakeholder planning is to understand the information flow. What are stakeholders seeing, reading, and hearing from their sources of information and their relationships? It is possible—and essential—to measure and understand differences between the information flows to each group.

Stakeholder groups don't operate in isolation. Each stakeholder is swayed by external forces—such as media, competitors, activists, or influencers—that can either enhance or weaken a company's efforts. External influences are not limited to these groups. Advertisements, family and friends, unions, and other membership organizations all shape individual perception. The media helps shape public perception, while competitors' actions can force a company to adapt quickly. Political activists can mobilize public opinion and pressure stakeholders and companies through campaigns, protests, or targeted advocacy, often shaping the broader narrative around a company's decisions and reputation. Identifying the most important external influences on your stakeholders helps to map their information flow.

Step 3: Understand how stakeholders think

Having a grasp on what stakeholders are exposed to is important, but it is fundamentally an external measure. The third step is to understand how stakeholders think about an organization or brand. Tools of opinion measurement form the next layer of insight across a company's stakeholder audience, though broad surveys are insufficient to know the differences between and among groups. It is important to dive deeper and seek out those hard-to-reach audiences through individual in-depth interviews and specialized surveys.

This foundation of mapping, assessing information flow, and understanding stakeholder thinking becomes the foundation of a stakeholder engagement strategy.

To succeed in today's business environment, where corporations face unprecedented reputational risk from a hyper-engaged set of stakeholders, it is essential for leaders to have an integrated approach to stakeholder intelligence, strategy, and engagement. Penta's Four Corners provides leaders with the map required to navigate an increasingly complex business environment and develop the trust among their stakeholders that is necessary to achieve the company's goals.