The 3 Key Questions Of Stakeholder Management

There are a wide variety of people, groups and bodies that will have an interest in the success of your business, known in general as stakeholders, and who you might therefore wish to call on for support to see you through your difficulties and to rebuild your business. This article discusses some of the key issues in managing stakeholders during a turnaround.

Who Are Your Stakeholders?

Some of the key stakeholders that need to be 'on board' for any turnaround are easy to identify. The shareholders, directors, management, employees and bankers, or other funders will all be obvious players in any business restructuring discussions, and these groups naturally tend to be the focus of much of the communication, but it is important not to forget the wider communities that will have an interest. These will include:

The trade creditors (and increasingly these days the credit insurers such as Trade Indemnity Plc or Euler Hermes), who will have an existing interest in respect of the level of credit they already have at risk and an interest in the level of business they can do in future with you. The levels of support by way of credit lines which they are prepared to allow the business in future will be vital for managing the trading cash flows.

Landlords are creditors with powerful collection tools at their disposal, but again they have an interest not only in collecting the rent currently due, but in your continued ability to pay rent into the future and the strength of your covenant, on which their borrowing ability may depend.

Customers are the most vital resource required for your business's future, so their interest in the business should always be part of your considerations.

Of course, this is not an exhaustive list and many other bodies may have an interest that needs to be considered, from licensing organisations to local authorities.

What Should You Communicate?

Successful communication starts not just with knowing what you want to say, but by also thinking about what the other party is going to be interested in so you can tailor your message to your audience. So for each key group asking yourself:

- how much do they stand to lose if the business fails?

- how much do they stand to gain if the business succeeds, or to put it crudely, what's in it for them?

These factors will generally determine the degree of support you can hope to obtain from each stakeholder.

The degree to which you will be able to obtain support will in practice then depend largely on firstly the level of confidence you are able to convince them to have, in both you and the achievability of your plan, and secondly in the level of risk to their interests that the plan requires.

Techniques for getting each group on board and their degree of active involvement in the process will vary. Providing your bank with a brief presentation which demonstrates that you understand the business's problems and have an appropriate turnaround plan can for example be very valuable in securing bank support. It should include:

- a brief high level analysis of the business:

- causes of decline

- your competitive position

- the key issues

- your success factors.

- your turnaround strategy.

- a copy of your forecasts and action plan.

- details of any specific support you are seeking from them.

- your proposals for keeping them informed of progress.

I have covered how to ensure you bank continues to support you in more detail elsewhere which I won't repeat here, but the general principles that apply to banks will go for many other stakeholders.

How Should You Communicate?

With a large number of interested parties and issues, managing the messages can be complex. One approach used in acquisitions can help in providing a systematic and structured approach to communication. This uses a Q&A grid to prepare a message matrix. To use this technique, simply list all the interested parties across the top of a sheet in as much detail as you think you will need. Then you have to think up all the most basic questions that each of them will want to ask and list these down the left. This then provides you with a grid to fill in where each box requires an answer that is to be communicated to the relevant parties.

In each case you should need to then think about the best medium with which to put the message across to a particular audience. The means by which people are provided with information can significantly affect the way they react to it. For example, if the plan unfortunately requires a factory to be closed, then this needs to be communicated to those employees by way a face-to-face meeting rather than announced as a press release to local media.

However once the news is out, as a general rule you should put the answer out as widely as possible. It doesn't matter of someone hears it three times as long as everybody who needs to, hears it at least once

This approach ensures that as far as possible you have a consistent and coherent message on any topic and should follow these simple rules:

- your communication with stakeholders needs to be full and frank, and as your plan progresses, keep the stakeholders informed of both good and bad news in order to maintain your credibility.

- if you need to change your plan you will need to brief stakeholders on the change and reason for it, and reaffirm their commitment to your plan.

- ensuring that early targets are set so that they can definitely be hit will help to ensure that your credibility with stakeholders is established right from the start.

So, if you are gacing a crisis, shouldn't you start to plan your communication strategy by identifying the stakeholders that you will need to manage and considering what you will need to say to them?

Of course the information contained in an article like this can never be a full statement of the legal position as the relevant laws are complex and liable to change. This article can only therefore be a general guide as to the issues involved and as these can have serious implications you should always seek appropriate professional advice on your own particular circumstances before taking any action.