Episode #290: Stakeholder Mastery

Moving from chaos to control

In last week’s episode, I outlined the 10 key ingredients that contribute to your promotion prospects. In doing so, I realized that, after almost 300 full-length episodes of No Bullsh!t Leadership, we hadn’t yet produced one that deals specifically with the key discipline of stakeholder management.

Well, this is it!

In today’s complex organizational structures, the amount of influence you can wield (and, therefore, your ability to achieve results) depends on how well you build your most critical relationships. 

As you move into more senior roles, your ability to identify and influence key stakeholders becomes increasingly important. If you don’t pay attention, your relationships are likely to be chaotic and unpredictable — and this directly impacts your performance.

The best leaders do the work to master their stakeholder ecosystem, taking it from chaos and unpredictability to control and alignment.

In this episode, I explain how to avoid the pressures, the politics, and the failures that ultimately eventuate when relationships are left to chance.

 I walk you through how to identify and classify your key stakeholders, how to build their trust, and how to make every engagement deliberate and methodical. I also give you some strategies for escalation, which I know you’ll find incredibly useful.

HAVE YOU LISTENED TO THIS WEEK’S
MOMENTS WITH MARTY EPISODE?

 

Moment #60:
Getting Help Without Breaking the Bank

I’m a big believer in avoiding the problems that inevitably emerge when you become too isolated, or spend too much time cocooned in your own little world.

There’s no end to the number of consultants out there who hold themselves up as experts, and promise to make your business better in oh-so-many ways. How would you know which options are likely to give you real value for money, and which are likely to be an expensive waste of time?

The management consulting market is segmented quite clearly, but can still be quite difficult to navigate. In this Moment I give you a feel for its complexity, and a few rules of thumb for how to bring expertise into your organization, without breaking the bank.

 
 
 

Episode #290 TRANSCRIPT:

Stakeholder Mastery

Moving from chaos to control

STAKEHOLDER MASTERY = SUSTAINED PERFORMANCE

In last week's newsletter, I outlined the 10 key ingredients that contribute to your promotability. In doing so, I realized that after almost 300 full length episodes of No Bullsh!t Leadership, we hadn't yet produced one that deals specifically with the key discipline of stakeholder management.

Well, this is it!

In today's complex organizational structures, the amount of influence you can wield, and therefore your ability to achieve results, depends on how well you build your most critical relationships.

As you move into more senior roles, your ability to identify and influence key stakeholders becomes increasingly important. If you don't pay attention, your relationships are likely to be chaotic and volatile, and this directly impacts your performance.

The best leaders do what's needed to master their stakeholder ecosystem, taking it from chaos and unpredictability to control and alignment.

In this newsletter, I explain how to avoid the pressures, the politics, and the failures that ultimately eventuate when relationships are left to chance.

I walk you through how to identify and classify your key stakeholders, how to build their trust, and how to make every engagement deliberate and methodical. I also give you some strategies for escalation, which I know you’ll find incredibly useful.

YOUR “WHO’s WHO” OF STAKEHOLDERS

I'm going to launch straight into some instructions for identifying and managing your stakeholders. If you’re on your laptop, you may even want to start building a spreadsheet as you go!

Any interaction with people outside your immediate team usually indicates that a level of cooperation and collaboration is required, in order to get the job done. While this is a great place to start your thinking, of course, not every stakeholder is equal.

Listing everyone you interact with will potentially give you an extremely long list and, as I'm sure you've already worked out, some stakeholders are going to be much more critical to your success than others.

Given how limited our bandwidth is to absorb information, interact with others, and focus our attention, we need a way to rank the value of our relationship with each stakeholder. But, just to begin with, it's worth listing everyone you interact with as a baseline — you can refine it from there.

For each identified stakeholder, you might consider the following attributes:

  • How important are they to your success?

  • How frequent are the touch points you have with them?

  • What are the typical issues you face with that relationship?

  • What risk does this stakeholder present to the successful performance of your team?

  • What motivates them?

  • How active are they with your other critical stakeholders?

  • How often should you and your team maintain contact?

  • What level should your team engage at?

  • How do you synchronize communications?

  • If you needed to escalate an issue due to an impasse, how would you do that?

You can track as many or as few properties about your stakeholders as you find useful, but those are just some suggestions to get you going.

IDENTIFYING THOSE WHO MATTER MOST

Once you know who your stakeholders are, you can map each of them on a simple, two-by-two matrix. As many of you know, I've spent many years studying business and management, and I've worked with most of the elite consulting firms on the planet. My conclusion from all of this work is simple: if you map anything on a two-by-two matrix, it will feel smart!

But, in all seriousness, a stakeholder matrix can be really useful as a visual representation to help you work out where you need to place the most attention. The two axes on your matrix are:

  1. Support; and

  2. Influence.

These can either be high or low. You want to be able to assess how supportive each stakeholder is, and how influential they are in the results you're trying to achieve. This is going to provide essential guidance on where to put your time and energy. It's only a qualitative measure, but it's going to help you to visualize how to work with each stakeholder.

For example, if a stakeholder has high influence in your ecosystem, then they can either be very effective allies or very dangerous counterparts.

You should focus on any stakeholder whom you believe has a high level of influence on your outcomes. For those people, you have to ensure they're as high on the support axis as possible. Likewise, if you have stakeholders who are incredibly supportive, it's worth thinking about how to make them more influential in your ecosystem.

The big dangers come from stakeholders who are highly influential, but obstructive. Your objective is to neutralize the threats and mobilize support. It'll definitely be worth your while to map your stakeholders, and spend some time thinking about how to do this. Influencing is a key part of leadership, and leaving this to chance can be a major career derailer.

BUILDING STAKEHOLDER TRUST

Building trust with your stakeholders can be difficult, for one major reason: you don't have much interaction time in which to do it! This is getting even harder with hybrid and remote work.

I don’t think there's any better model for building trust than the CEO's relationship with the board of directors. A CEO has limited interactions with the board – and when you add the dynamic that requires a natural level of separation to ensure independent governance, it’s no wonder the relationship is often vexed.

Without trust, the relationship between board and management becomes strained, decisions become overly conservative, and management starts trying to think about how they can go around the board. As a key stakeholder in the CEO's success, high levels of trust have to be built with the board in a very short period of time.

But I've used the board example before, so today, without divulging anything that would be considered commercial-in-confidence, I want to use another example of building stakeholder trust from my time as CEO of CS Energy.

We managed to resolve a long-standing dispute with one of our suppliers that was costing us well over $100 million every year in lost revenue. This supplier was a critical stakeholder, because it owned the mine that supplied coal to our largest power station – and it was the only viable source of fuel for that power plant. Not having the right quantity and quality of coal was limiting the amount of electricity that we could generate.

The supplier had an onerous contract with CS Energy, which means that, in order to fulfill the terms of the contract over its life, the supplier would actually lose money… a lot of money. Of course, this made the supplier highly motivated to force us to renegotiate the contract, and give them terms that were more commercially sustainable.

By the time I got to CS Energy, the dispute had already been going on for almost 10 years, and it had already been the subject of lengthy and expensive court proceedings.

There was a massive amount of bad blood on both sides of the negotiating table. We had to rebuild the trust with this supplier, so that we could recommence negotiations productively. So, guess what the very first thing we did was? 

We recommenced the litigation!

This might sound like a strange way to build trust, but it was an important signal to send. We were putting some guide rails around our interactions, effectively saying, "Hey, look, we're prepared to take this all the way if we’re forced to, but we’d prefer to sort it out amicably to get a better outcome for all of us, if we can."

At the same time as bringing this commercial and legal leverage, we were rebuilding trust inside the negotiating room in parallel. It took years – literally years – of meetings between me and the supplier's top executive in Australia. Both of us had to win each other's trust.

To do so, it meant:

  • Being open and honest about what our organizations needed in order to solve the problem;

  • Being clear about what was and wasn't possible;

  • Doing what we said we'd do;

  • Being prepared to give some ground in order to create a zone of possible agreement;

  • Fighting internally for the concessions that would make a deal possible; and

  • Being really clear and strong about our respective boundaries.

After almost three years of negotiations, we were able to find a solution that allowed the supplier to exit the mine, and transfer ownership to a new supplier, whom we were able to strike a new contract with.

This deal was one of the key planks in lifting CS Energy's EBITDA earnings from $17 million (at the height of the dispute) to $441 million at the end of my five-year tenure – and if I hadn't been able to personally establish that level of trust with the stakeholder who was most influential to those outcomes, both companies would likely still be fighting it out in court today.

METHODICAL, PROACTIVE ENGAGEMENT

One of the most important elements of stakeholder management is to create a rhythm of engagement at every level.

Continuing my example of the dispute between CS Energy and our coal supplier, we put time, energy, and deep consideration into formulating a plan. Once we had done so, it was incredibly powerful:

  • We knew exactly which individuals we needed to engage with at every level;

  • We mapped the relationships that needed to be forged – from their global CEO, who was based in London, right down to the in-house lawyer in Brisbane who was drafting the legal documents for the court proceedings;

  • We assigned roles and responsibilities for each person;

  • We established processes for ensuring everyone was precisely aligned with a messaging and intent at any given point;

  • We prescribed the frequency that was required for every interaction; and

  • We coordinated this with our team of external lawyers and risk management advisors.

Although I took the lead in negotiations, most of the real work was done at the levels below me. We established a rhythm of weekly, monthly, and quarterly meetings, where we would meet with our counterparts at different levels in both formal and informal settings.

I can't really begin to explain how incredibly sophisticated that stakeholder management strategy had to be. We were living double lives: we were beating the crap out of each other in court, doing lawyers at 20 paces… all the while, each party was trying to extract maximum leverage to ratchet up the pressure in the day-to-day operations… and at the same time, I was trying to engage in a without prejudice commercial negotiation with (what was undoubtedly) CS Energy's most critical stakeholder.

This would've been impossible without a clearly articulated stakeholder management plan.

Clearly not every stakeholder relationship is going to be this critical, or this complex. You can start much more modestly. Like anything, baby steps. Just taking the simple step of assigning individuals as contact points for your high influence stakeholders is going to move the needle.

You want this to be deliberate, not left to chance. You know who your most critical stakeholders are, so even just a little bit of thought and effort can give you a huge advantage.

NAVIGATING ESCALATION DECISIONS

Not everything is going to go to plan. Sometimes, you'll just find yourself in a situation where a high influence stakeholder simply isn't that cooperative – and you may not be able to change that, for one reason or another.

When this happens, it's easy to fall into a victim mentality. But just remember, more often than not, it's not personal. In all likelihood, your stakeholders just have different priorities: they may have different KPIs which aren't aligned with yours.

Let's face it, for all the strategic planning that goes on in organizations, most companies are incredibly poor at aligning priorities across different teams and business units. In fact, it would actually be a little surprising if that misalignment didn't exist. When those mismatches in intent and objective occur, you need a way of dealing with them.

The golden rule is: always exhaust every avenue for solving a mismatch in objectives directly with the stakeholder involved.

That is, do everything you can to convince them that their cooperation is, in fact, in the best interest of the organization. Having said that, when you can't influence your stakeholders despite your best efforts, it's important to have an escalation path that you can use to bring pressure to bear.

I think a very clear conversation with the individual is an important first step and, to do this properly, you've got to be really comfortable in a conflict situation. I found over the years that the most effective technique is to bring that stakeholder into your world to share the problem, and to make it a joint obligation to solve, not just yours.

This requires a lot more than just saying, "I've got priorities that I need you to help me with."

It's much more effective to say something like, "It seems like our priorities aren't aligned. If we can't figure out a way for both of us to meet our objectives, we'll obviously need to kick it up the line, and let our bosses decide which priorities are the most critical. I'll start with my boss. Why don't you come with me? We can explain our respective positions and solve any mismatches in expectation pretty quickly."

This approach is dead-set genius, for a few reasons;

  1. It brings your stakeholder into a shared problem, and lays out an obvious shared incentive to solve it;

  2. It preserves trust, because you don't escalate behind your key stakeholder's back, which could otherwise cause them to become bitter and twisted; and,

  3. More often than not, in order to avoid the escalation, your stakeholder is going to actually respond and do everything within their power to accommodate your objectives. Everyone's a winner!

SOFT ESCALATION CAN BE ESPECIALLY POWERFUL

When I was dealing with critical stakeholders, I always found it beneficial to identify possible escalation points well in advance of having to use them in anger. This enabled me to employ what I call ‘soft escalation’ techniques. 

For example, when I came across a particularly obstinate stakeholder who refused to cooperate on my critical deliverables, I would just give the CEO a quiet heads up. It would go something like this:

"Hey, Wayne, I don't want you to do anything at this point, but I want to keep you in the loop. I'm working with Patrick to sort an issue out, but we seem to be at odds about priorities and deliverables. 

I think you've been pretty clear with me about your expectations for this initiative. I just want you to know that I'm going to apply a little pressure to Patrick. If you don't want me to do that, just tell me now and I'll back off. But, hopefully, I can resolve it quickly and I won't have to bring you into the loop."

This does a few important things:

  • It demonstrates that you are taking accountability for managing your stakeholders;

  • It shows that you are thinking about the highest value outcomes for the company;

  • It shows that you intend to fight your own battles, and only escalate as a last resort; and

  • It positions you on the moral high ground if you do eventually require intervention.

DON’T WAIT – START TODAY!

If you can master the relationships with your key stakeholders, you will massively impact the quality of the outcomes that you are able to achieve. Many leaders allow their most important relationships to evolve by default – but if you can be just a little more thoughtful, and pull yourself out of the day-to-day firefighting so that you can proactively manage these relationships, you will see an immediate benefit.

Productive alliances with your stakeholders are built through trust, shared objectives, robust conversations, and a focus on the greater good.

If you want to start a virtuous cycle of stakeholder mastery, you may need to be ‘the bigger person’. So, think about the stakeholder relationship that you are finding most challenging right now. If you apply some of the techniques we've just covered, there's no reason why you can't begin to improve that critical relationship… today!

 
 

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