Stakeholder Engagement

Organizational leadership cannot work in a vacuum and expect that all parties will be satisfied with the results of their efforts. In today's world of instant information exchange, it might be even more important than ever to share information with those who are affected by the organization's practices and decisions.

Why Does Stakeholder Engagement Matter?

Successful business practice is intertwined with recognizing and engaging with stakeholder claims. Stakeholder engagement matters for different reasons. Engaging stakeholders can be warranted because such individuals have crucial information or expertise to contribute to company policy or product design. Engaging with stakeholders is also essential to generating and maintaining their trust, which may be essential for the success of a business. Employees who don’t trust an organization are unlikely to stay long. Customers who don’t trust a product won’t buy it.

But there are also many circumstances in which engaging with stakeholders is morally required simply because they have a right to be informed or to have their voices heard. Keeping customers in the dark about a data breach or a product malfunction may violate their rights. Employees may have a right to participate in certain decisions that affect their lives. Even when certain stakeholders can’t be said to have a right to participate, seeking their input can be an important sign of respect.

Identification of Relevant Stakeholders

Different stakeholders have different priorities, given different interests and varying degrees of power. Effectively engaging relevant stakeholders therefore requires identifying and understanding different perspectives. For example, shareholders have an interest in company shares doing well, while members of the community who reside near a company may have a strong interest that the company not pollute the environment. And employees might prioritize rewarding tasks, job security, or a safe work environment.

The first step in engaging with stakeholders effectively is identifying different stakeholders and understanding their various interests and expectations. If not all interests can be respected, organizations must decide which stakeholders’ claims to prioritize, and how to justify these decisions. This is where the importance of ethical reasoning, which we encountered early in the course, comes in, and where effective communication with stakeholders is of the essence.

Different stakeholders might take priority in different contexts, and who counts as a stakeholder might also evolve over time.

Mechanisms for Engaging Stakeholders

Stakeholder interests and concerns are usually identified through data gathering and analysis. Companies may conduct surveys or focus groups with customers, suppliers, members of the community, civil society groups, or other stakeholders. Sometimes, sales figures, product usage, or marketing data will reflect relevant information. For example, user data in web and mobile applications may provide information about how users engage with a company’s services. Social media is another source of information about stakeholders’ interests.

Engaging stakeholders may take different forms. In addition to direct communication, stakeholders may be given a voice through voting and representation mechanisms, in surveys, hotlines, designated working groups, town hall meetings, and deliberative juries. Stakeholder engagement can range from responding to media queries and customers’ comments on Twitter to setting up a designated space to deliberate over stakeholder concerns, such as Facebook’s Oversight Board. This independent board was set up to review Facebook’s content moderation decisions.

Engagement During and After a Crisis

Despite your best efforts, your organization may experience an ethics crisis at some point. Even well-managed organizations with the best intentions and absolute integrity may face unexpected, ethically challenging situations.

A common response by organizations is to close ranks, clamp down on information, and shield themselves from scrutiny. Some may engage in symbolic gestures—such as firing scapegoats or increasing charitable donations—to deflect responsibility.

While there are risks of communicating information before it has been verified and the full scope of the problem is clear, in most cases, those affected by a scandal have a right to be informed as soon as possible. This should include information on the source of the problem, efforts underway to contain and investigate it, plans for corrective, compensatory, or disciplinary action, and opportunities for affected individuals to voice additional questions or concerns. If the situation is ongoing, the organization should provide timely updates on the progress of the resolution.