Nadine B. Hack, named one of 100 Top Thought Leaders on Trustworthy Business Behavior, is Executive-in-Residence at IMD in Lausanne, Switzerland, and President and CEO of beCause Global Consulting based out of New York, USA. She has advised The Coca-Cola Company, Omnicom Group, Unilever and other Fortune 500 companies on rethinking stakeholder engagement. Follow Ms. Hack on Twitter @nadinehack and at http://blog.beCause.net.
This article details my concept of “Strategic Relational Engagement (SRE).” By developing productive rapport with internal and external stakeholders, a company increases its bottom-line and its strategic impact, while often heightening its status as a good corporate citizen.
Successful businesses have moved from a transactional foundation (where enterprises serve their own benefit) to a relational foundation (which acknowledges that interdependence among a diversity of parties is essential for sustainable success). Dramatic new technological communications, evolving national and international business models, political upheaval, economic instability, environmental impact, and the emergence of the BRIC-and-beyond nations, now demand improved engagement between business leaders and their myriad stakeholders.
A broad spectrum of stakeholders has a direct impact on your core business. That’s why I call my technique “Strategic Relational Engagement” (SRE) because incorporating meaningful relationships into your business can transform stakeholder fear and/or animosity into understanding, productivity and strategic impact. In a shareholder environment in which annual growth is expected (achievable or not), all-out strategic relational engagement of stakeholders is the only path to satisfaction of shareholders and stakeholders.
Business leaders’ assumptions (often prejudices) about the capacity and validity of stakeholders – inside or outside the company – weaken the leaders’ ability to make wise decisions. When they rise above such bias and engage all stakeholders, they strengthen their decision-making and status. Economic Science Nobel Laureate, Michael Spence, emphasizes inclusiveness as key to sustainable growth – and SRE is a critical for achieving inclusiveness.
To help you envision the stages of SRE, I’ve delineated three core components:
- Create Value through SRE
- Overcome Obstacles to SRE
- Sustain SRE for Long-term
For each component, I’ve used a real-life case in which I participated as a facilitative consultant. I believe you’ll recognize the lessons stakeholders learned, because you may have faced comparable situations. Whether or not you’ve been through such experiences, I hope you’ll see how the insights from each case can be applicable to your own challenges and opportunities.
I. CREATE VALUE
To create value with SRE, leaders must know what capabilities they have and which they need to acquire; what conditions must be created or eliminated; and which processes will move them forward. The following case is about engaging external stakeholders with opposing views, but the core principles also apply to engaging internal stakeholders.
Case I: Seeing the Forest and the Trees
Until the mid-1970s in California, US, the logging industry – among the most important enterprises in the state – was in flux. Major companies, state government, community organizers, and environmental activists were vehemently unwilling to work together to solve industry-related problems. But addressing their disparate concerns was essential to the industry’s prosperity, as well as for environmental protection and community quality of life. Ultimately, as a cross-sector team, they developed a series of legislative initiatives called “Investing for Tomorrow’s Prosperity” still in place today. As a group, they started with reforestation and moved on to other state-wide renewable resources. Their efforts became a blueprint for international Global Green Plans.
How did the transformation from enemies to partners emerge? The lynchpin for success was that each stakeholder group had to understand how they would benefit before they would willingly engage. First, a small group started talking. Isabel Wade, from the State Department of Forestry, outlined a tree planting plan to Executive Director Paul Cobb and others from the civic organization Oakland Citizens Council for Urban Renewal (OCCUR). That organization championed Oakland’s initiatives for community development, including combating considerable blight. OCCUR’s daily imperative was getting food, clothing and shelter to needy families, so initially it was disinterested in tree planting. But Wade said she viewed community involvement as her key ingredient for success. The OCCUR organizers listened.
The city’s previous tree planting initiatives had failed, because as soon as the trees were planted, local kids cut them down. There had been no prior consultation with communities – a lack of SRE – and trees weren’t what communities asked for. Wade suggested that if OCCUR went house by house and got residents to “adopt” the trees, they would be valued and survive. OCCUR recognized the plan would give them an opportunity to visit people’s homes and champion their other efforts; if trees could provide such entrée, why not?
Wade also knew she had to unite the loggers and environmentalists to show them they had more in common than they thought. She first met with environmental leaders most likely to cooperate. She chose Hunter and Amory Lovins, co-founders of The Tree People, which had substantial policy and mobilizing capabilities. They realized their efforts would benefit from positive relational engagement with the industry: without it they might not achieve the changes they advocated.
So, the State Forestry Department, OCCUR and Tree People approached the primary logging company, Weyerhaeuser, which had the financial and operational capabilities necessary for a significant impact. The company was still practicing (profitable) strip logging, but was experiencing costly disruptions by environmental activists who opposed logging and chained themselves to trees in protest also creating unfavorable publicity for Weyerhaeuser.
As the company already had begun rethinking their logging practices, a workable solution emerged when Weyerhaeuser pledged to plant two trees for every one they cut down. This satisfied environmentalists and ensured the company’s future sustainability and profitability. Through better practices, Weyerhaeuser moved towards year-on-year double digit growth and helped safeguard the environment. They’ve consistently built on that and in 2011 Fortune Magazine ranked them number 10 of 350 companies recognized for social responsibility.
When representatives of each stakeholder group went united to the state legislature, they were able to convince lawmakers to champion state-wide legislation to protect its renewable resources. These politicians, who formerly were wary of substantial environmental policy changes, were impressed by the endeavor that had unified previously adversarial constituencies.
The ROI was enormous and for all stakeholders. Logging became more profitable and substantively transformed its position on the environment. The governor began to work in better harmony with legislators. Local environmentalists connected with global counterparts. Community organizers began to work with more local and state businesses. Beyond the many logic-based benefits, the human connection was essential to make the plan understandable and acceptable. This was an SRE triumph for all.
In summary, everyone benefitted from the practicality of productive relationship-building. Agreement on the processes that created progress included: the ability to identify other catalytic leaders among similar constituencies; constant re-clarification of shared goals; explicit distinctions between corporate, government, and community responsibilities; and celebrating small victories, as well as coping with inevitable compromises.
II. OVERCOME OBSTACLES
To overcome obstacles to SRE, leaders and their teams must: recognize and articulate obstacles that exist in the company; identify specific drivers to overcome those obstacles; and understand how to mobilize those drivers. Creating effective SRE within a business is not necessarily easier: in fact, it’s sometimes more difficult if silo isolation is entrenched, or, if an event results in low morale and retreat into self-protection mode. The following case shows how to overcome that.
Case II: Conquering Impediments to SRE
In 2008, after the economic crash, Xhong Inc., a global corporation, made drastic cuts in personnel and budgets across all business lines in all countries. One Executive Board decision reduced the corporation from thousands of employees in scores of countries to significantly smaller operations in just a few countries. Senior management had to rely on a reduced staff and using other resources (e.g., IT infrastructure, etc.) to leverage remaining assets. Managers and team members who had cooperated previously became territorial, having lost trust in the company, and felt insecure, guilty and resentful. No one was sure they’d be retained and barely participated in reorganization efforts. As a result, fissures in management and function hidden in the larger entity surfaced in the streamlined one.
The Board wanted an immediate strategic plan, but CEO Ying Lin and COO Michael Chang knew that first rebuilding confidence was critical to getting key players to execute any strategy. They understood that keeping the company alive required getting Xhong’s employees re-engaged. The lessons from how Xhong managed this using strategic relational engagement (SRE) are broadly applicable even without a precipitating crisis.
The Board tasked Lin with deciding how to restructure. She was a sharply analytic leader who understood company priorities. But she knew Chang had stronger human relations skills. Given his engaging personality, he was right for communicating. Therefore, Lin decided Chang’s first SRE effort should be openly acknowledging to his colleagues the seriousness of Xhong’s obstacles. He began with individual meetings with managers, candidly explaining Xhong’s severe financial straits.
Chang solicited feedback, listening to managers’ assessments of key issues and paying attention to their ideas for solutions. By accepting their input, Chang turned mistrust into openness to change. Managers again felt valued, re-engaged with each other, and supported the company’s changes. Good SRE had a very positive impact.
Once Chang re-created a willing team with renewed confidence in the corporation’s future, he identified the company’s most talented “drivers,” those with the ability to engage colleagues in coordinated action and successfully further the transition. Chang dealt comfortably with the drivers’ professional and personal concerns, allowing them to communicate their fears and hopes.
This rebuilt trust among a core group who, as drivers, convinced others to re-engage. Chang stayed in regular communication, soliciting uncensored feedback about what they were hearing from peers and among the ranks. He and Lin then modified policies and practices to reflect their input. This level of SRE created increasingly stronger engagement among a broader group of stakeholders. The streamlined corporation began to function effectively, repositioned to rebuild core competencies.
Chang introduced a process of public acknowledgment. He sent a monthly email extolling efforts of those who were helping others work together for the company’s common good. Those who were praised were invited to meet with Lin. These were celebrations of achievement and opportunities to share their insights with the CEO. Word spread that this was a sincere effort to assess input from any source. Thus, more people were motivated to become drivers, expanding SRE even further.
Most of Xhong’s workforce stepped outside their respective silos and comfort zones to cooperate together, creating a turn-around to profitability. However, it’s easy to fall back into “business as usual” with everyone focused on their own deliverables. Sustainable success is achieved only when policies and procedures that encourage stakeholder engagement are reinforced repeatedly, in good times and bad. Is this a time- and labor-intensive luxury? I believe this type of SRE-driven corporate culture is essential to 21st century business.
In summary, the key points to overcoming obstacles to SRE are: be open and transparent the obstacles; push yourself and others to deal with them; and recognize that interconnectedness and a larger overview will lead to better solutions. Build chains of trust that encourage stakeholders to engage; develop procedures that recognize and reward drivers; and foster a culture where people feel safe to participate actively and honestly.
III. SUSTAIN SRE LONG-TERM
How many times have businesses overlooked systemic problems because they’re focused on executing standard operating procedures, productive or not? Companies need systems to nourish relationships – even when there seems to be an imperative to just “get the job done.” To keep SRE going for the long-run, companies must learn how to: sustain it by acknowledging when it does breakdown and knowing what to do to mend the breaches when that happens.
Case III: Cooperation is the Key to Sustainability
In the 1990s, Fujisimo Industries, an international conglomerate, acquired several related companies with the aim of leveraging synergy, yet lost sight of that intention. By 2001, each unit within each business in each country was operating within the singular vision of its own silo and the whole was no longer greater than the sum of its parts; to the contrary, it was less. An SRE intervention was critically needed.
Even in the company’s global C-suite, the only ones with a comprehensive picture of all the businesses, not all the executives understood the problems or their solutions. But COO Shingo Shabu immediately realized that lost interconnection among the businesses was causing a decline in revenues for the parent company, as well as within each business. Shabu knew that recreating synergistic connections was vital to fulfill the motive for their acquisition: increased profitability. He also understood he had to launch a creative initiative that would give all stakeholders a compelling rationale for mending the broken relationships.
To do this, in 2001 Shabu organized an off-site retreat for the heads of all global operational units to analyze what was preventing them from achieving synergy. Professional external coaches led individual reflection sessions and cross-function team-building exercises to help everyone remember how and why they had mutually benefitted from supporting each other in the past. Unit heads individually and collectively confronted the negative results of separation. In preparation for the retreat, Shabu and the coaches created wall-size charts showing the financials of Fujisimo and its various companies. They knew that showing how profits had risen during the years of effective SRE, and fallen after collaboration ended, would get the attention of all stakeholders.
It worked. The unit leaders, stimulated by the bottom-line facts, grasped that SRE with their counterparts in the other businesses was to their advantage. The strong bonds that had temporarily lapsed and been forgotten were successfully re-established. But, we’ve all been to off-site events replete with epiphany moments, only to return to the office where nothing changes. The real challenge began when executives who experienced insights at the retreat brought their revived understanding to their respective teams. Each was given autonomy to decide what mechanism would be best for transmitting insights they had gained.
Some led open, spirited discussions about the problems and potential solutions. Many took their teams through similar exercises from the global gathering at their own off-site retreats. In some cultures, certain exercises would have been off-putting, so they weren’t used. But all used the financial charts; no one, anywhere, regardless of culture, could refute the economic impact that the charts revealed about the importance of relationships. Within six months, each business and the parent company saw a rise in revenue and profitability.
Even though Shabu had properly understood that recreating connectivity was needed, some members of the C-suite and the Board initially thought it counterintuitive to finance the retreat when the corporation was in financial decline. But Shabu made a compelling case to outright opponents and fence-seated skeptics that the so-called soft mechanisms of SRE were actually the much-needed hard backbone for the parent company and its subsidiaries to survive.
After Fujisimo’s SRE was re-established, executives were encouraged to watch out for breakdowns and facilitate their repair through discussions with their teams. As SRE is an active, dynamic process that requires upkeep, it is subject to erosion, misdirection, or being ignored. It can break down in response to changes like the removal or introduction of new team leaders or members, products or services, IT procedures, production technology, and other reasons.
To avoid such breakdowns within Fujisimo, SRE openness allowed them to use constructive critique from many sources. This is indicative of a growing phenomenon in business globally. The arrival of cloud computing has led to the concept of “cloud thinking,” which espouses that “more brains are better than one.” Less secure leaders may be threatened by this non-ego-driven model but, if so, they will not keep up with 21st century business needs.
The SRE action at Fujisimo opened opportunities its companies missed when individual agendas blinded them to larger purposes. But they came to see how much they gained from each other when they dropped territorial protectiveness – because weakness in one silo, compensated by strength in another, created mutually beneficial outcomes. Introducing (or re-introducing) SRE in an environment where it has lapsed or has never existed is no easy feat. At Fujisimo, Shabu was the catalyst who brought stakeholders back into cooperation. He first targeted his colleagues in the C-Suite, creating authority from the top down through the hierarchy to support his efforts to reinvigorate synergy among the conglomerate’s subsidiaries.
In summary, companies must keep bolstering awareness of how individual goals align with mutual goals; and explore new areas of common interest. Relationships inevitably break down. Company leaders must openly, honestly and respectfully acknowledge when communication has broken down; remind people of the value these relationships; monitor distractions that pull people away from staying connected; and act promptly to repair lost bonds and recreate trust.
CONCLUSION: SRE is Essential
The central message from these cases is that all stages of SRE require increasing relational intelligence and implementing practical mechanisms for it. Interestingly, the most important is what has defined human evolution: the ability to communicate and form intricate relationships. How often have you criticized a business (or bureaucracy) by saying “the left hand doesn’t know what the right hand is doing”? Solidly-incorporated SRE assures that everyone functions as a connected team in an increasingly interconnected business environment.
Stage I. Create Value through SRE
The Weyerhaeuser case describes how wildly divergent stakeholders came together. To incorporate its lessons – whether with internal or external stakeholders – you must determine the capabilities, conditions, and processes that are necessary for you to create value through SRE. Remember: create a safe, trusting, collaborative environment in which your stakeholders feel engaged, valued and motivated to contribute to your business goals.
Stage II. Overcome Obstacles to SRE
The Xhong, Inc. case outlines effective action in dealing with obstacles that hindered SRE among their subsidiaries and the parent company. To translate lessons from that, acknowledge your obstacles honestly, identify the drivers you have to overcome them, and determine how you can effectively mobilize those drivers. Remember: be open and transparent, and find those willing and able to help stakeholders find common ground for the benefit of all.
Stage III. Sustain SRE for the Long-term
The Fujisimo case conveys how stakeholders from related companies learned to make SRE last. To use insights from that case, determine what it is that will sustain SRE; acknowledge when, where and how a breakdown might occur or has already occurred; and create what’s needed to mend the resulting breaches. Remember: strengthen relationships continuously and take quick action to restore lost connectivity among stakeholders.
Please note that all cases described are real, but some identifying names have been changed at the request of the companies and/or individuals who prefer anonymity.
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