This article is part of a series exploring the findings of our latest Board Report on stakeholder governance. You’ll find the entire series, including the research, at the end of this blog post.
When something new appears on an organisation’s radar, most boards follow these steps: add that something as an extra item to a future meeting that happens to still have a bit of room left on its agenda, discuss the matter once, and revisit it at some point next year if needed.
In many cases, this is fine: fresh developments — think “WFH & Cyber Risks” or “2021 Tax Law Updates” — don’t require more than the occasional debate, because their impact is limited and clearly defined. But what happens when they’re part of a “megatrend” that’s supposed to change everything, such as ESG and stakeholder capitalism?
As it turns out: just more of the same. Our latest research shows few boards have made it standard practice to discuss their stakeholders every time they meet. With the exception of customer-focused KPIs, which 55% of boards cover at each meeting, every other stakeholder-specific metric is primarily discussed on a yearly basis — or not at all.
It isn’t that directors don’t care. In fact, 82% of boards are actively trying to improve their stakeholder governance. Instead, it’s that agendas are already full to the brim and directors see no ways to discuss stakeholders frequently without compromising other matters.
The solution? Forget trying to squeeze stakeholders on the agenda. Put them in the agenda. In other words: instead of adding new items, make stakeholders an integral part of your existing items.
Put stakeholders at the heart of your strategy
First, start with strategy — the one guiding factor used at every board meeting throughout the year, and therefore the best vessel to transform every discussion you’ll be having.
When reviewing your strategy, ask yourself the following win-win question: “How can this stakeholder group contribute to helping us achieve our short and long-term goals in a way that is mutually beneficial to both of us?”
For example, can suppliers assist us in the co-development of new products to increase our market-share? Or could we work on local initiatives with our community to accelerate our talent pipeline?
It takes a conscious effort to find win-win questions for each stakeholder group. But once the work is done, you can be confident that your stakeholders’ success is core to yours — and that will keep them front and centre of your board’s discussions.
Account for stakeholders in your recurring items
Once the strategy is set, identify the agenda items that reoccur most frequently — which will likely be focused on financial or governance matters, such as risk management or investment proposals. Are there connections between these and your stakeholders currently being ignored?
In the case of the risk register, for example, do you account for both the short and long-term risks that could be caused by misunderstanding a new societal event and reacting poorly to it? Here are two questions the board could ask:
- “What could go wrong in relationship to each stakeholder group (operationally and reputationally) that could limit our ability to achieve our strategic goals?”
- “What must be true for us, as a board, to be confident that operational decisions that could impact our stakeholder groups are taken with due consideration, and, where appropriate, recorded?”
Get stakeholder champions in the room
Such connections between recurring items and stakeholders won’t always be obvious, so give your board members opportunities to better understand the various groups involved.
This could be through nominations. Just like it is increasingly common to have a board director nominated to be the voice of the employee, you might consider nominating a member of the board, or creating a committee for each stakeholder group. Their job will be to ensure that all agenda items are seen through the viewpoint of that stakeholder, they’ll own the annual deep-dive, and will sponsor any stakeholder outreach programme.
This could also be done by helping bring your stakeholders to life. Our research shows only 32% of boards see a clear connection between their suppliers and their financial performance — dropping to 18% for community and 16% for the environment — which reflects the fact that these are “abstract” stakeholders for many. So, make them more real. In this era of Zoom calls, you could for example invite community representatives to join your board meeting for relevant agenda items so they can share what’s on their mind, or use virtual site visits to talk to staff and visit operations. Why not even make use of it to explore locations where the impact of a decision might impact the local environment?
Measure how well you’re doing
Finally, track the results of these changes, by making a note of which stakeholders are reflected in each agenda item — something solutions like Board Intelligence’s Agenda Planner can automate. We call this agenda tagging, and it will give you a record at the end of any period about how your board’s time was spent, whether by stakeholder group or by conversation type.
This won’t just come handy when drafting your Section 172 report or evidencing your board’s ESG credentials. It will also allow your directors to get an unvarnished view of what their agendas are making them focus on. Our forecast, based on our research and much experience, is that the two S’s of strategy and stakeholders will be underweight — and it’s only when you see that clearly through actual numbers, not estimates, that you can course correct.