Listening: A Strategy and Change Blog | Hosfeld & Associates

By Kathleen Hosfeld

Looking to reap the many benefits of a stakeholder centric approach to business but wondering where to start?

First, recognize that you’re not starting from zero. You already have relationships with stakeholders. Many companies can benefit from taking an appreciative approach to identifying what they are already doing well. From there you can measure the gap between the current state and the desired future state of each relationship.

Second, accept that movement toward a stakeholder centric model represents both cultural and operational change and will take time.  This movement will take a combination of both “soft” skills and “hard skills.”  An effective change initiative will address individuals and teams, structures, behaviors and beliefs.

Third, get rid of the notion that this is just corporate social responsibility or good PR.  It’s actually a different approach to business altogether.   It means inviting stakeholders into the value creation process of your company.

While every company’s situation will differ, there are eight basic steps to implementing a stakeholder approach to a business:

1.  Determine the strategic context:  What are you trying to accomplish? Are you formulating business strategy or functional strategy?  Are you seeking the overall competitive advantage of the firm or are you working in service of a specific business unit, service or product’s performance?
2. Prioritize stakeholder influences in this strategic context:  Evaluate stakeholders using the criteria of power, legitimacy, urgency, interdependence, cooperation, and conflict. Consider all the stakeholders in your value chain. Note that research shows that investing in employees make the most significant contribution to overall financial performance. This is likely a good place to start.
3. Assess stakeholder interests and satisfaction: Many executives think they know what stakeholders want, but it’s rare when they actually do. Assessing stakeholder interests and the current state of their satisfaction can take many forms: discussion, surveys, group processes. What’s important is to make this determination based on data.
4. Harmonize stakeholder interests: Compare the interests of all key stakeholders to identify areas of commonality and difference. Look for the third way when needs or interests seem to compete.
5. Develop stakeholder strategies: Creating stakeholder strategies is an iterative process with the preceding step. Inherent in each stakeholder strategy is the best way to form a two-way exchange  that creates value for all parties. This step should include a determination of measurable outcomes.
6. Implement stakeholder strategies: Create a detailed action plan that defines accountability for full implementation of the stakeholder strategies, and support the plan with resources.
7. Evaluate: Using the measurable outcomes defined above, evaluate stakeholder efforts’ success in creating value for all.

Additional articles about the stakeholder model are available here.

Companies are moving beyond CSR to reinvent business models for business and social benefit

The current edition of Harvard Business Review features an article by Michael Porter and Mark R. Kramer describing the leading companies that are seeing opportunities for creating economic value by meeting social needs. Going beyond corporate social responsibility (CSR) approaches, which Porter describes as essentially public relations programs,  these companies are fundamentally reinventing business models as drivers of both economic and social value.

A BBC interview with Michael Porter concerning this article can be downloaded here.

The Harvard Business Review article is available here.

By Kathleen Hosfeld

It will seem oxymoronic to some to put the words spirituality and strategy in the same sentence. The mainstream world of strategy and marketing is transactional and fast-paced, rather than reflective. Or so it would seem.  Let me paraphrase the four-point test from the strategy model we use in order to make more clear how an organization’s strategy design process touches the spiritual aspects of business decisions:

• In what way do we create perceived value for our customers?
• What value do we create that reflects the best of our collective gifts and intentions?
• What is the unique value we can create in the market that no other company is as qualified to create?
• Which types of value creation in which we engage give us an opportunity for positive impact in a wide variety of markets or settings?

Some of you might recognize the pattern of the four-point test of the core competence model in the questions above. This model, developed by Gary Hamel and C.K. Prahalad years ago, is an enduring model for breakthrough strategy and strategic innovation.

The first question probes the extent to which we are serving the market by offering something of real value. The second question looks at who we are together as a work community; is there a cohesive sense of identity and purpose that we share?  The third question points to the unique capability that each company has distinct from any another company; what is it that we can do together that no one else can? The fourth question tackles the scope of the firm’s vision; how far does it reach, and how might it change our market, our community, our world?

Why are these spiritual questions? Spirituality taps the fullest experience of what it means to be alive, and for many of us this is expressed in relationships.   These questions help us examine the strength of our relationships with ourselves (are we deeply in touch with and expressing the essence of who we are as individuals and as a company?) and others (are we using our gifts and strengths to benefit others as ourselves through either support or challenge?).

Spiritual does not mean airy-fairy and impractical. All four of these questions can be used to advance key performance indicators and other benchmarks that measure organizational performance and outcomes.  The difference is hitching the practical, financial and quantitative aspects of business to something larger, engaging with meaningful action, and allowing the firm to be drawn upward as a result.

By Kathleen Hosfeld

Following a recent Special Report by the Wall Street Journal, commentators had a field day with columnist Dr. Aneel Karnani’s assertion that the concept of Corporate Social Responsibility is fundamentally flawed.  Many of the comments pointed out that not only was his analysis fundamentally flawed, it was the “same ole, same ole” whateverness we’ve been hearing from free market idealogs for the last 15-20 years.

Karnani, who is Professor of Strategy at the University of Michigan’s Stephen M Ross School of Business, asserts that all CSR initiatives have to “pencil out” financially before they are embraced by CEOs. “Pleas for corporate social responsibility will be truly embraced only by those executives who are smart enough to see that doing the right thing is a byproduct of their pursuit of profit. And that renders such pleas pointless.” See the article here.

Based on the interviews that Pat Hughes and I did for her study: “The Leadership of Sustainability,” and my work with clients, my perspective is that engagement with CSR or sustainability evolves.  Some leaders we spoke with started with a “because it’s the right thing to do” mentality. They kept their experiments small to see if they would hurt or help them financially. If it didn’t hurt, they kept going. In businesses where CSR or sustainability was not baked in from the beginning, it is developmental, occurring in stages.  As a result, early experiments have to be either revenue positive or at the least revenue neutral.

However, there are many firms who find that holding objectives for financial, social and environmental benefit simultaneously creates a crucible for innovation. They have broken away from the either/or thinking represented in Karnani’s article, and are now in the territory of Third Way thinking. Third Way thinking goes beyond hierarchical rankings of choices, one being the better “good” than another. Instead, it “holds the tension” between competing “goods” until a new solution appears that honors all of them. Harvard Business Review even published an entire special edition last summer about CSR and sustainability as drivers of innovation, citing breakthroughs of over 30 companies.

So, what is the Wall Street Journal’s problem? Commentators responding to the article repeatedly questioned the lack of balanced perspective, and a pattern of editorial bias against values-based management approaches. Companies every day are proving Karnani wrong with their actions. Is the Journal simply blind to the evidence? Or are the editors ignoring the firms who are doing well by  “doing good”  because they seem to be “outliers” rather than  mainstream. If they are intentionally disregarding outliers, then they do their readers a disservice because it’s in the outliers where the seeds of breakthrough innovations are sown.

Terrific blog post at Harvard Business Review  by Umair Haque who is Director of the Havas Media Lab  saying the proof of the benefit of responsible business is in. Wait too much longer for more proof and the responsible businesses will have eaten your lunch. Statistics he cites are:

• Ethisphere Institute: In 2008, ethical leaders outperformed the growth of the S&P 500 by 40%. In 2009, again. In 2010, by 35%.
• CSR Magazine found a shareholder value performance gap of about 10% between, for example, the most and least transparent companies.
• SRI Research finds that the mean Market Value Added of the top 100 Corporate Citizens is $36 billion, more than four times the Mean Market Value Added of the remaining companies — which is less than $8 billion.
• Berkeley’s Haas School of Business: Study found that companies high in social responsibility had significantly higher profit margins, returns on equity, and returns on assets.

What type of behavior characterizes these types of companies? It’s important to note that these are self-regulated practices of companies that take responsibility for relationships with and impacts on a variety of stakeholders, and incorporate an active, conscious commitment to the public interest (versus self interest alone) in their decision-making.

For additional details see the entire blog article here.