Stakeholder mapping

This blog past was written by Mark Wearden, an experienced NED, a nationally recognised authority on corporate governance, a prolific author, and an outstanding trainer and mentor.

Companies Act 2006 s172 requires all directors to take stakeholder interests into consideration when making decisions.

A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole….

and in doing so have regard (amongst other matters) to:

1. the likely consequences of any decision in the long term,
2. the interest of the company’s employees,
3. the need to foster the company’s business relationships with suppliers, customers and others,
4. the impact of the company’s operations on the community and the environment
5. the desirability of the company maintaing a reputation for high standards of business conduct, and
6. the need to act fairly as between members of the company

All too often, directors fail to consider the breadth of stakeholder interest in their organisation (actual or potential). A regular review of who is influenced by your organisation, and who you influence, can be simply achieved through a process of stakeholder mapping.

Stakeholders can be classified as

• Internal – owners and employees – those who have a close and dependent relationship with the business and a vested interest in its success.
• Market – suppliers and customers – those who have a direct trading relationship with the business.
• External – all other stakeholders of the business with either direct (eg banks) or indirect (eg Government, environmental) relationships with and expectations from the business.

It is useful to start by considering the primary and secondary expectations of these differing groups.

These levels of power, influence and strategic impact of different stakeholder groups can be mapped to help to identify when and where a business needs to consider the potential impact of not satisfying the stakeholder expectations. In his 2017 seminal book on strategy, Johnson suggested that the two core stakeholder dynamics are the ability to disrupt and the levels of interest that the stakeholder would take in its ‘stake’. These can be mapped as follows.

Power

The exercise of power reflects the ability of one or more individuals to persuade other people to follow different courses of action. The strategic journey of an organisation can be significantly influenced by the forces of stakeholders and others. This is often referred to as the politics of power.

In any organisation, as time evolves, the power balance is likely to shift. In a fast-moving organisation with many demanding stakeholders, this could mean frequent changes of strategic focus, which can lead to disruption and chaos. In a slower-moving organisation the politics may still come to the fore from time to time but be far less likely to cause disruption.

When undertaking a stakeholder mapping exercise, it is useful to look at and understand the origin and indicators of the differing powers that might be at play.

These aspects of power need to also be considered within the context of the type of organisation, and the stakeholder impact upon strategy. Whilst most businesses exist somewhere in the middle between the two ends of the different dynamics, they are usually positioned more towards one end than the other. Where do your stakeholders sit?

• At the traditional end of the dynamic it is much harder for a stakeholder to influence the strategic direction of an organisation, which is probably focused on a rational strategic approach.
• In a more empowered organisation, there is more likely to be an emergent and collective approach to strategic development and therefore a greater ability for stakeholder influence.

Non-commercial organisations

Many non-commercial organisations, for instance some public sector bodies, charities, cooperatives, and other social-based enterprises will often involve their stakeholders to a much greater extent than a commercial organisation. This can be a great source of strength but can also provide a significant restriction on strategic growth and direction.

An organisation with multiple stakeholders (each viewing themselves as ‘members’) can often find itself with too many people involved in the strategic and bureaucratic leadership of the organisation, and/or trying to influence that strategic direction.

In this type of structure it is important to be able to differentiate stakeholder positioning.

• Who are the members?
• Who are the customers?
• Who are the suppliers?
• What are the expectations from the surrounding environment, both political and other?

Often, in a non-commercial structure an individual may be a member, a customer, a supplier, and an intrinsic stakeholder within the forces of the surrounding environment. This can create multiple conflict for strategy and governance which needs careful governance and control.

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