How engaging are you? McKinsey’s three steps for better stakeholder management


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Victoria Draudins discusses what makes some organisations better than others at good stakeholder engagement.

During these turbulent times, government departments and agencies have had to hit the pause button on many activities until the proverbial dust from the coronavirus settles. However, one activity they should continue doing or even ramping up during this crisis is their stakeholder engagement outreach, so that they keep communication lines open and can act on up-to-date information about how their stakeholders’ priorities have changed.

Given the clear public interest involved in government organisations and the large amount of co-ordination often needed between departments and agencies, stakeholder engagement is something at which departments and agencies must be particularly adept, whether it be with consumer groups, business, other agencies, or other jurisdictions.

But what makes some organisations better than others at good stakeholder engagement?

Factors for successful stakeholder engagement

McKinsey & Company has recently surveyed business leaders on their approach to external engagement across a range of industries, including the public sector, healthcare, hi-tec, financial services, and automotive. From their findings, they isolated three key areas, which break down into more specific sub-factors, that separate the organisations that excel at stakeholder engagement from those that don’t.

1. Articulating and embedding a strong purpose

Leaders at high performing organisations were about three times as likely as other organisations to say they were effective at defining their societal purpose both internally and externally as well as embedding their purpose within the organisation.

In particular, these organisations ranked themselves as highly adapt at articulating a strong, fact-based narrative about their organisation’s purpose. This is one area in which public sector organisations should excel.

Next, they were more likely to say they could demonstrate thought leadership about topics of public interest. In government, this typically takes the form of white papers, providing updates in budget documents, and publishing speeches made by senior leadership. However, there is room for improvement for many government organisations to step up their thought leadership in other ways, such as through publishing shorter-form materials or bite-sized factoids on social media – the ABS is particularly good at this.

Participants ranked highly their own ability to define their purpose in a way that engages their employees. Doing things like regular pulse surveys of their employees can help government agencies gauge their competency in this area.

2. Engage through technology and metrics

Leaders at high-performing organisations were five times more likely than other organisations to say they were effective at externally engaging through digital technology – in contrast to 7% of other organisations. In the public sector, 27% of organisations noted they did not use digital tools at all.

Higher-performing organisations used these tools for more basic activities (such as tracking reputation or news mentions) and more advanced ones like stakeholder-sentiment analysis, which computationally identifies, categorises and scores stakeholders’ opinions. This is something that could be applied as a standardised approach to analysing stakeholder submissions across agencies or more interactive forums like citizen juries.

High-performing organisations also ranked themselves higher in their ability to effectively map and quantify the external issues that could affect their organisation (which in turn can help them to help prioritise engagement activities). These respondents also put more resources into tracking – using more metrics to than others to track the external-engagement activity itself and the resulting outcomes. This is in contrast to nearly 40% of organisations that don’t use any outcome-based metrics, and 20% that don’t use activity-based metrics at all.

External engagement activity-based metrics include tracking social media engagement (e.g. number of likes or tweets), number of meetings or events held with stakeholders, or number of media references. Outcomes-based metrics include value created (e.g. changes in regulations), or cost consequence impact (e.g. change in compliance costs).

3. Designing more agile engagement

Unsurprisingly, organisations that helped prepare and train their leaders for external engagement also performed more strongly. High-performing organisations were over 4.5 times more likely to say they effectively trained top executives to engage stakeholders in their regions. They were four times more likely to say they effectively shared best practices for external engagement across teams and regions. They were almost four times more likely than others to say their organisations were effective at putting sufficient resources into external-engagement activities.

Lastly, they were also more likely to organise teams dynamically around issues or work cross-functionally as required – so those employees with strengths in external engagement were placed to work in areas requiring stakeholder engagement.

While the benefits of cross functional teams in developing more innovation has been a feature in the public sector, it’s the first time I’ve heard about embedding stakeholder engagement expertise in cross-functional teams. There’s a real case for this arrangement though given the wide range of ways an agency may be expected to engage with stakeholders, and given there may be strong talent pools to draw on, with the McKinsey survey notes that backgrounds of leaders of high performing organisations were more likely to have worked in government or diplomacy.

Where to from here?

The report notes that more senior leaders have been investing in their external engagement over time. As governments now move to reopen economies, effective stakeholder engagement is more necessary than ever given the new uncertainties being created for citizens businesses and their communities. By ensuring they invest in being effective in the three areas mentioned above, departments and agencies will be much better placed to engage with their stakeholders and handle the new phase of challenges being created by the coronavirus.

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