Most large organisations have a wide range of stakeholders, and almost all such bodies, at some stage or another, need to find ways to balance conflicting interests.
Identifying the key stakeholders
The average company might include amongst its key stakeholders: employees, suppliers, customers and investors.
Externally, and depending upon the nature of the business and/or the industry sector, there may be local communities, trade associations and even Government departments. There is also the media.
Their interests are not always aligned. True, they all benefit from the organisation being professional and well-run. Being a stakeholder of a shambolic institution that changes its mind and direction every few months and finds innovative ways to upset everyone in sight is bad news all around. Maybe that is what happened to the Conservative Party at the last General Election!
But, aside from appreciating a degree of stability, your stakeholders often represent interests that can be in serious conflict with those of other stakeholders. Classically, companies had to balance the demands of shareholders for dividends against demands for higher wages from trade unions.
More contemporary challenges are for planning authorities to balance the interests of property developers and builders against those of local people who would prefer to retain their existing towns and villages just as they are.
So, a key part of stakeholder management is to find ways of making the right trade-offs without destroying all-important stakeholder relationships.
It takes skill and the development of a distinctive approach that recognises the imbalances of power and influence in your stakeholder base. It is one of the reasons why stakeholder mapping is so important. Recognising that some of your stakeholders have considerable influence – and others have little or no power – is crucial to your decision-making and your relationships.
Nowhere are these challenges better illustrated than in the processes of public regulation. There are over 100 bodies involved in regulation in the UK – and that’s not including professional associations and other semi-regulated activities.
When the Prime Minister wrote just to 17 of the bigger ones in December 2024, it was calculated that their combined headcount was 36,000 and their combined revenues was £5.4bn. The Government has now decided that it wants all these bodies to shed their ‘risk averse’ culture and become more oriented towards economic growth. That sounds great, and there may be a legitimate debate about Ministers’ plans for this agenda.
For now, however, let’s focus on the process aspects. Most of these bodies were set up because politicians did not wish to be directly engaged in trying to satisfy conflicting interests. And for good reason.
That is because many issues are often deeply technical, and the Whitehall machine (and their devolved equivalents) often lacks the know-how to make judgements on specialised industry issues. If we decide, for example, as a society, that it is not a great idea to let any quack doctor sell their latest wonder medicine on the open market, then you equip a regulator with the researchers and clinicians to decide what is and is not safe.
Similarly, if we determine that we shouldn’t build high-rise buildings using dangerously flammable materials, the same thinking applies. Assemble the expertise that can have a dialogue with industry experts and suppliers – and build a standards regime that works.
Models like this typically involve a Regulator in relationships with customers or consumer bodies – with an interest in high standards. It will also, no doubt interface with suppliers who may wish to minimise rules and regulations that might affect their ability to sell their product. It does not end there. There will be others who may be affected by the terms of what’s decided.
Consider the water industry. Over the years, OFWat has carefully sought to secure higher investment levels by water companies but has needed to minimise increases in water charges for domestic and business consumers. Then along come Government Ministers, prodded by public opinion and a strident media to complain that more should be done! It’s difficult to avoid being unpopular with every single stakeholder you have!
To avoid this, most regulators devise bureaucratic processes of fact-finding and consultations. They are designed to make decisions as objective as possible and to reduce any perception of bias. After all, huge sums of money can be at stake, and for regulators to be accused of corruption is about as bad as it can get! The result is that the business community regularly complains – and has persuaded the current Government – that the costs of meeting various requirements are too high.
In consequence, we have large numbers of organisations surrounded by customer/consumer stakeholders demanding ever-stronger protections and supplier stakeholders resisting such demands – and complaining about the costs of the process. How to handle?
Balancing conflicting interests
In terms of stakeholder management, here are four issues to bear in mind:
- If the interests diverge, there is no way to avoid the difficult balancing acts. There is no option of sweeping such differences under the carpet. “Let’s all be nice to one another” can only work for a short time. Many organisations delay and defer difficult decisions – often through a protracted series of consultations. It seldom works and is often called ‘kicking the can down the road’. Even if doing so is helpful to a stakeholder in the short term, your long term reputation suffers if you are seen to procrastinate and maybe, make matters worse in the long run.
- Dig deep to find areas of common ground. Often stakeholders may agree on long-term objectives but disagree on how to achieve them. The old axiom of short-term pain for long-term gain is a real dilemma, and in a democracy with a fixed-term election cycle, great communication skills are needed to persuade those representing today’s stakeholders to suffer in order to benefit future generations. Despite this, regulators who can work with stakeholders to uncover areas of agreement – are more likely to find workable compromises.
- Remember that many stakeholders themselves are coalitions of competing views. This is especially true in civil society and in the voluntary and community sector. It also occurs in the business community. Although on your stakeholder database, the Bedfordshire Widget Forum may appear as a single entity, you may soon establish that it represents a range of members with different goals and priorities. You deal with them by getting to know and understand the complexities of their agendas and the cross-currents of opinion within the group.
- Be alert to the perils of being ‘lobbied’. For those stakeholders who do not represent an amalgam of interests, but a clear unambiguous position, this is the opposite tendency. There is a real distinction between transparent public advocacy and the brute force intimidation of powerful vested interests using not-so-subtle political or commercial pressure. The best organisations know that being seen to be lobbied (not the reality - just the perception!) is toxic to the relationship with other, more reticent stakeholders. It’s why integrity, propriety and trust are the cornerstones of effective relationship management. And why transparency is the best defence to allegations of undue influence.
Navigating regulation and achieving long-term stability
The balancing act between competing stakeholder interests ultimately depends upon YOUR objectives.
You need to ensure that all your stakeholders understand what YOU are trying to do. In the rough world of politics, this can be difficult as politicians sometimes like a degree of constructive ambiguity, allowing Regulators and others to ride the ebb and flow of the tides and the times.
You and your stakeholders are all living with the uncertainties of macro economics and big-picture politics. The ability to read the runes is an exceptionally important skillset for the best Stakeholder Managers.
In turbulent times, everything can change; just ask any American! What’s in any particular stakeholder’s interest can change overnight and if for no other reason, it is therefore as well for everyone to keep channels of communication open and to manage key relationships on a positive and professional basis.
Written by Rhion Jones
Rhion Jones was the Founder Director of the Consultation Institute and is an acknowledged authority on all aspects of public and stakeholder engagement and consultation. He advises Tractivity and contributes expert analysis and commentaries on current issues.
Rhion now publishes thought leadership articles regularly as the Consultation Guru.