Stakeholder engagement pays – a silver bullet?

Effective stakeholder engagement contributes both directly and indirectly to the bottom line. This post provides a sample of some proven benefits of stakeholder engagement for the major stakeholder groups. What is exciting, is that the generic communication skills at the heart of engagement are effective in diverse stakeholder settings. Surely engagement capability has to be a top priority for organisational development.

Some of the examples here have been in other posts – they are assembled here to demonstrate the multiple benefits of stakeholder engagement.

Financiers

Companies with better CSR performance “face significantly lower capital constraints”. Beiting Cheng, Ioannis Ioannou and George Serafin’s research, Corporate Social Responsibility and Access to Finance, confirms their hypothesis that:

…better access to finance can be attributed to reduced agency costs, due to enhanced stakeholder engagement through CSR and reduced informational asymmetries, due to increased transparency through non-financial reporting.

Employees

An impressive array of research and anecdotal reporting evidences the vital importance of effective employee engagement. Here are a couple of examples:

  • David McLeod, in a report to the British government in 2008 estimated the cost to the UK economy of their low levels of engagement to be between £59 and £65 billion pounds.
  • Recent Gallup research identified a high correlation between effective engagement and high earnings per share (eps). Companies with “exceptional employee engagement” achieved eps more than four times that of their industry competitors.

By engaging employers, companies are engaging their engagers.

Customers

Gallup also provide impressive figures for those companies that engage effectively with customers.

Our studies reveal that customers who are fully engaged represent an average 23% premium in terms of share of wallet, profitability, revenue, and relationship growth than the average customer. Actively disengaged customers represent a 13% discount in those same measures.

Suppliers

This video from Walmart reveals efficiencies generated by the partnership between the company and Peterbilt, who supply trucks. The partnership is helping Walmart to achieve its target of a 100% increase in transport efficiency by 2015 from a 2005 baseline.

While I can’t support this anecdotal evidence with figures, the director of a local company attributes an effective relationship with suppliers with the survival of his company. When the company was experiencing difficulties, several suppliers extended credit to help the company through.

Community

Witold Henisz led a major Wharton School research project delivering evidence of the financial benefits of effective stakeholder engagement in gold mines in Spinning Gold: The Financial Returns to External Stakeholder Engagement. The research team studied the impact of stakeholder engagement on the financial performance of gold mines and gold mining companies. They created an index based on 50,000 stakeholder events from the activity of 26 gold mines.

By incorporating this index in a market capitalization analysis, we reduce the discount placed by financial markets on the net present value of the gold controlled by these firms from 72 to between 33 and 12 percent.

Increased productivity of the effective engagers where able to start mining earlier than poor engagers. You can read more about this here.

This is just a sample of the increasing evidence of the efficacy of stakeholder engagement. Please add any others as a comment.

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2 thoughts on “Stakeholder engagement pays – a silver bullet?

  1. Pingback: Stakeholder engagement pays – indirect benefits | Stakeholder Engagement

  2. Hi Peter,

    I have enjoyed reading your blog. Just a quick thank you and hat-tip for the Spinning Gold article – great find. I’m writing a post on how important it is to be able to quantify the financial return of stakeholder engagement: this type of research becomes especially useful when trying to build business cases for CSR/community relations/dev.
    I guess as the discipline grows, we will see more.

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