Stakeholder engagement

9 minute read

Identifying stakeholders

In addition to the three broad categories of stakeholders identified by McKinsey & Co.:¹

• Internal company stakeholders
• External stakeholders who directly interact with the company
• External shareholders who set the operating environment

Stakeholders can also be categorised as primary, secondary, or key stakeholders.

• Primary stakeholders are the people or groups that are directly affected, either positively or negatively, by an effort or the actions of a company. In some cases, there are primary stakeholders on both sides of the equation: an action that benefits one group may have a negative effect on another 
• Secondary stakeholders are people or groups that are indirectly affected, either positively or negatively, by an effort or the actions of a company 
• Key stakeholders, who might belong to either or neither of the first two groups, are those who can have a positive or negative effect on an action or effort, or who are important within or to an organisation²

Identifying and engaging with stakeholders when setting out on projects such as a brand building exercise has a number of important advantages:

• Puts more ideas on the table than would be the case if development and implementation were managed solely by a group who already had a shared clear idea of direction
• Includes varied perspectives, giving a clearer picture of the context and potential pitfalls and positives of a given project
• Gain buy-in and support by making groups and individuals integral to a project’s development and implementation. When people feel ownership of an effort they are more supportive of it
• It’s fairer to all when affected parties are involved in making decisions that may impact them
• It gives you early sight of concerns that you may not have been aware of, rather than being caught out further down the line. Even if there are concerns raised that can’t be solved, they won’t come as a surprise and derail the effort at a later date
• It strengthens your position if there is opposition. Having all/ a wide range of stakeholders on board gives a project significantly more moral or political weight in the event of an issue
• It creates bridging social capital. Social capital is the web of acquaintances, friendships, family ties, favours, obligations, and other social currency that can be used to cement relationships and strengthen community.  Bridging social capital, which creates connections among diverse groups that might not otherwise interact, is perhaps the most valuable kind. It makes possible a community without barriers of class or economics, where people from all walks of life, or from across a business and its spheres of influence, can know and value one another³
• It can increase the credibility of your organisation by establishing a reputation as fair, ethical and transparent
• It increases the chances that your efforts are successful. For all of the reasons above, having greater and wider support for an initiative significantly increases its chances of success. In the example of brand building exercises, people who are involved in developing the brand direction already feel a part of it, rather than feeling like they are having an identity, that they do not associate with, imposed upon them

Who are potential stakeholders

Primary stakeholders

Beneficiaries of a project or initiative are those who are set to gain something from it. – services, skills, financial gain, goods etc.

Targets are those who may or may not make a personal gain, or whose actions represent a benefit to a particular (usually disadvantage) population/ community.

Examples:

• Employees
• Clients
• A particular regional population 
• People facing a specific challenge or issue
• People involved or participants in a particular organisation or institution
• People whose behaviour the initiative aims to change
• Policy makers and agencies

Secondary stakeholders

Those directly involved with or responsible for beneficiaries or targets of an initiative, as well as those whose jobs or lives might be impacted by the processes or results of an initiative.

This may include individuals and organisations who offer other goods and services to the primary stakeholders, or who are close to and/ or care for them in some way.

Examples:

• Service providers & contractors
• Colleagues
• Family members and friends

Key stakeholders

Those who can devise, pass and enforce laws that may have an impact on an initiative’s success.

Examples:

• Government officials and policy makers
• Regulators
• Trade bodies
• Stock exchanges

Those who can influence others.

Examples:

• The media
• People in positions of influence – people in positions of respect who can sway opinions (respected commentators, successful peers, etc.)

Those with an interest in the outcome of an initiative.

Examples, depending on the nature of an initiative:

• Other businesses
• Advocates
• Community activists 
• Academic and research interests
• Funders
• Broader communities

Identifying and analysing stakeholders and what matters to them

The stakeholders that are key to a business and its success will vary from case to case. Whilst the categories outlined above are a useful starting point there will be nuances and variety between businesses, even those in the same industry, and between projects within the same business. There are a number of approaches that you can use to identify and map key stakeholders – a couple are outlined in the materials below.

Stakeholder analysis

Mendelow’s Matrix and Liz Whitaker’s ‘The Power of the Personal’

Mendelow introduced the idea of analysing groups or individual stakeholders based on their power (their ability to influence) and interest (how interested they are in the success of a project or organisation). By mapping stakeholders on the grid, we are able to identify high power and high interest stakeholders who therefore require close management and investment of time and resource, versus those with lower power and interest who should be monitored and kept informed with minimal effort.

Whilst this is a useful starting point when assessing a range of stakeholders, it falls short of distinguishing the nuance of different stakeholder characteristics within each quadrant, or of giving much guidance on how to interact with and manage those different groups.

In her book ‘The Power of the Personal’, Liz Whitaker evolves Mendelow’s matrix to asses stakeholders based on their Royalty and Loyalty, assigning them a financial and relationship value in order to give a more precise positioning. The vertical Royalty axis is about value, influence and power. The horizontal Loyalty axis measures knowledge, buy-in and advocacy.³ Within each quadrant Whitaker has developed a set of personas you might encounter, and how you can interact with them to serve your end goal.

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High royalty, high loyalty: VIPs. These are people you already know well, they may be clients you already work with or decision makers within your organisation. Partnering with these people means being seen to be working with them  – involving them in meetings or in the case of external stakeholders, referencing them directly in external communications.⁴

High royalty, low loyalty: Upgraders. These people/ organisations are potentially VIPs but their loyalty is elsewhere. They are valuable and influential but you don’t yet have a strong relationship with them. They could be clients or groups you want to work with, media outlets you would like to report on what you do, or internal personnel who are not engaged with your work. With this group, it is key to seek out the common ground over which you can bond – what do they want or need that you can help with?⁶

Low royalty, high loyalty: Standards. These are people and groups who like you but who have low spending levels or don’t have connections or influence in areas that are of interest or help to you. It’s important to keep them up to date to maintain their loyalty, but it’s not an efficient use of your time and resources to expend too much on them. However, it is worth maintaining the relationships as there may be certain individuals or groups who could transition into the VIP category if their influence grows.⁷

Low royalty, low loyalty: No Frills. These are people or groups who are of little importance to you and are not that interested in what you are doing. It is still important to keep them up to date on actions you have taken as there may be some who will move into other quadrants. For example, an employee at a former client you are unlikely to work with again, may move to a new firm and become of interest or relevance again.⁸

Potential stakeholder characters you may come across, from ‘The Power of the Personal’, Liz Whitaker:

The Ambassador – organisations and people who will recommend you and stick by you/ offer protection in a crisis.

The Assassin – high influence organisations and people who don’t like you and could be potentially damaging.

The Boomerang – former clients, contact or employees who you are not engaged with at the present moment but who could be encouraged to return.

The Eager Beaver– an ambitious organisation or person on the way up.

The Prize – a target that others will follow. Winning the support of these individuals or organisations will lead others to lend their support also as they trust their judgement.

The Trojan Horse – an organisation or person who is in the upgrader quadrant who you have a close connection with/ know someone on the inside.

The Mirage – a very attractive looking potential client or supporter who may look like The Prize, but in reality is unlikely to ever make the move.

The Smiley – an organisation or person who is very nice to spend time with but will never be able to give you work or resources or the support and influence you need.

The Pirate – competition seeking to take your clients, talent, ideas and advantage.

The Deadweight – an organisation or person who is of minimal importance to you but takes up time and resource whilst offering no upside.

More detail on Liz’s approach can be found in her book, The Power of the Personal. She also runs workshops on stakeholder management – if you are interested in learning more or making a connection please reach out to the team at White Marble Consulting.

We will look at skills for managing and converting some of these characters in Module 5.

What matters to key stakeholders will vary from business to business and be impacted by factors such as: region, key audience(s), business activities, values and ownership & management structure.

Some groups of stakeholders are easier to access than others. For example, internal stakeholders are much easier to access than external stakeholders, although some groups of external stakeholders, such as clients, can be vital to the success of a business. Many firms are therefore reliant on their client-facing distribution or client service teams, alongside external research, to gather information on client motivations and challenges.

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¹2021. [online] Available at: <https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/from-principle-to-practice-making-stakeholder-capitalism-work>.

²Ctb.ku.edu. 2021. Chapter 7. Encouraging Involvement in Community Work | Section 8. Identifying and Analyzing Stakeholders and Their Interests | Main Section | Community Tool Box. [online] Available at: <https://ctb.ku.edu/en/table-of-contents/participation/encouraging-involvement/identify-stakeholders/main>.

³Ctb.ku.edu. 2021. Chapter 7. Encouraging Involvement in Community Work | Section 8. Identifying and Analyzing Stakeholders and Their Interests | Main Section | Community Tool Box. [online] Available at: <https://ctb.ku.edu/en/table-of-contents/participation/encouraging-involvement/identify-stakeholders/main>.

⁴Whitaker, L., 2019. The Power of Personal. Great Britain: Rethink Press, pp.102-103.

⁵Whitaker, L., 2019. The Power of Personal. Great Britain: Rethink Press, pp.126 -127.

⁶Whitaker, L., 2019. The Power of Personal. Great Britain: Rethink Press, pp.128-129.

⁷Whitaker, L., 2019. The Power of Personal. Great Britain: Rethink Press, pp.130 – 131.

⁸Whitaker, L., 2019. The Power of Personal. Great Britain: Rethink Press, pp.132 – 133.