Listening: A Strategy and Change Blog | Hosfeld & Associates

By Kathleen Hosfeld

Over a Christmas holiday in 2004, I was working on an article that describes the strategy framework we use at Hosfeld & Associates.  As I often did, I shared my draft with my dad, Bob Hosfeld, a retired Alcoa executive, whose perspective always expanded my awareness on any topic we discussed.

There were two key questions in the model at the time:

• What is the change we want to create in the world with our work?  This question spoke to the larger purpose and intention of the company.
• What are the means we will use to create this change? This question speaks to the particular strategy the company will employ to create this change. What is the work it is uniquely positioned to do?

So far so good, I thought.  Dad, however, replied to the effect: “This is all well and good, but it won’t matter at all to the rank and file.”

“What do you mean Dad?”

My father had worked his way up through the executive ranks at Alcoa by first working at smelting facilities in Washington state. Aluminum smelters take the ingredients of aluminum, melt them down and form the basic products that are sent off for further shaping or fabrication.  What came to his mind were the men and women who worked the “potlines,” doing hard physical labor, with the potential for injury, day-in, day-out.

“Your questions are for the white collar people at the top.  What the person on the potline cares about is relationships.  Can I go to the break room at lunchtime and sit with people I like and trust? If I’m injured, will the company care for me and help me get back to work?”

“So for them it’s about how we treat each other in the workplace?”

Dad agreed. This gave birth to the third question in the model :

• How do we want to be together as we do this work?

I published the article we worked on in 2005 just before Dad passed away. Much has changed since then in terms of the expectations that people have toward their work. Increasingly more employees expect their employer to have a purpose that transcends profit alone. They do care about the first two questions more than they once did.

Yet, lately I’ve been realizing the genius of Dad’s contribution to the model.  Too often an inspirational purpose is designed only for the benefit of customers “out there.”  While that’s important, it forgets that one of the largest impacts a company can have is on its employees. Translating our noble purpose into values that we intend to live out every day within the company does two things.  First, it gives us a way to “be” the change we seek to create in the world.  Second, it creates the authenticity that comes from “walking the talk.”   When employees see it, they believe it.  When it matters to them personally, they see how it can matter to the customers they serve.  They are then more compelled to live it themselves.

Brand, strategy or purpose. They all suggest values to which we aspire and seek to live out.  Claiming and institutionalizing these values is the way to make the change we seek here and now.

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.

By Kathleen Hosfeld

A recent Forbes article on the changing nature of web search rankings kicked up a firestorm of controversy. In the cross hairs was the practice of trying to “game” the search ranking systems. Recent changes to Google’s search algorithms, however, give privilege to real content especially that which is shared out via social networks.  Author Ken Krogue wrote:

“The bottom line is that all external SEO efforts are counterfeit other than one:

Writing, designing, recording, or videoing real and relevant content that benefits those who search.”

Not surprisingly, the ability to write and tell compelling stories is becoming increasingly important to businesses and non-profits.

I recently partnered with journalism professor Cliff Rowe, of Pacific Lutheran University, to deliver a writers workshop for non-profit organizations who produce organizational blogs and newsletters.  We created this workshop to focus on writing compelling content: headlines that bring you into the heart of the story immediately, and stories that keep readers reading. Stories that get shared.

We subsequently discovered a terrific writing book that we plan to share in future workshops because we think it’s a great fit for this type of writing.  It’s “The Writing Book” by Paula LaRocque, a writing coach.

Any good writing book will include sections on grammar and style, and this one does too.  Chapters cover good sentence construction, avoiding passive tense and jargon words, sharpening otherwise vague language.  What makes this book special and especially appropriate for the purpose described above is its emphasis on storytelling. Chapters 13-22 focus on aspects of storytelling such as “archetype, character and plot,” use of metaphor, and advice like “write fast, edit slow.”

As Cliff puts it this section “is a practical, straightforward approach to writing that is intended to, indeed, tell stories.  Not report stories…or formally craft stories…but to really TELL stories.”

As the role of real content becomes more important to your online visibility, treat yourself to expert advice from a seasoned writing coach, and get inspired to tell your stories in the most compelling way.

Read the book:

The Book on Writing

By Kathleen Hosfeld

You may call it the triple bottom line, sustainable, green, conscious, responsible or worthy business. Underlying the labels is a common commitment to maximizing value for multiple stakeholders including the community and the environment.  Research continues to show the approach pays off. Financially.

Many people find their motivation for “good” business in an instinctive or intuitive desire to “make a difference,” even if it risks lowering profitability. In the early days of so-called green business, most mainstream business owners and executives saw efforts to manage environmental and social concerns as expensive indulgences that would ultimately cost money and possibly competitiveness.  That perception has shifted as organizations realize meaningful cost savings and risk mitigation from entry level commitments to waste and energy reductions.

But the strategic upside potential of a values-based, stakeholder approach is growing increasingly clear thanks to books like Good Company: Business Success in the Worthiness Era by Laurie Bassi, Ed Frauenheim, and Dan McMurrrer  with Larry Costello.  The book travels many of the same paths of the book Firms of Endearment, by Rajendra S. Sisodia, and colleagues in 2007.  Firms of Endearment made the point that a positive relational approach to multiple stakeholders resulted in superior financial performance. The companies they profiled achieved a higher return on equity (10 year rate of 1025% compared with S&P 500 of 122.3% and Good to Great Companies 331%) in spite of spending considerably more on employees and other stakeholders than most companies.

Bassi et al have done two things to advance the conversation. First, they have compiled a boat load of more recent “hard-nosed” evidence that companies who do well do better and those who do not do poorly by comparison.   A sampling of their citations:

• In a recent study by consulting firm A.T. Kearney, firms that embraced sustainability outperformed industry averages by 15% from May through November of 2008.
• According to a study by Packaged Facts, in spite of the recession, sales of “ethical” consumer products have grown at a rate of high single and low double-digits to a projected $38 billion in 2009.
• Firms on Fortune’s 100 Best Companies to Work For outperform the stock market as a whole.

Bassi’s group has taken this analysis one giant step further. They created a quantitative index of what constitutes a “worthy” company, profiled all the Fortune 100 companies and compared them on three levels: as employers, as sellers and as stewards of society and the environment. They found that companies with a higher Good Company score outperformed their peers with a lower Good Company score by an average of 19.8 percentage points.

On the strength of their findings, the Bassi and her colleagues created Bassi Investments, a money management firm that invests according to the Good Company criteria. The funds were established in 2001 and results continue to support the finding that investing in employees is a best practice of wealth creation.

It may seem counter intuitive that in order to be more profitable a company has to invest more money in an area.  These business results point to the new insights that are emerging as the way we do business continues to change.

More about the Book:

Good Company

By Kathleen Hosfeld

It was in the 1960s that management guru Peter Drucker first said that “Marketing is the whole company seen from the point of view of the customer.” Half a century later, we have another chance to catch on.

In a recent article released by McKinsey Quarterly, titled “We’re All Marketers Now” authors Tom French, Laura LaBerge and Paul Magill describe the growing realization that marketing is “everyone’s job.”

Drucker may have first published on the subject, but it has been reinforced recently in research on purpose-based businesses conducted by Raj Sisodia, who noticed that some companies outperformed others financially but seemed to spend less on marketing.  In an earlier article, I took issue with that statement, clarifying that they spent less money on advertising and promotion – not marketing per se. How do they outperform other companies if they don’t spend as much on push forms of marketing? Answer: Through living out a purpose that fosters good will from customers and other stakeholders. In these companies marketing didn’t go away. It became focused on relationship and the customer experience. As a result, it became everyone’s job.

Social Media is Not Driving Transformation

In a recent discussion forum, one of my contacts asserted that “social media is driving” significant changes in marketing. I disagree, social media is the enabler, not the cause.  Customers want engagement with the people and companies with which they do business. They want to trust the people with whom they work. A desire for, no, an expectation of engagement is driving the transformation of marketing.

Engagement is a word we have previously heard mainly in HR circles, centered on employees. Increasingly, however, engagement is the word used to describe successful marketing relationships that shape customer experiences. Delivering customer experiences requires the cross-functional coordination that previously was only used to service very large corporate business to business accounts.

Today, however, those who want to deliver world-class experiences are working across organizational silos to make sure customer touch-points deliver the experience and reinforce the brand.

As described in the McKinsey article, this approach requires a new level of organizational alignment and conflict resolution, including adaptive financial systems that can respond rapidly as needs arise.

The authors say that the major barrier to creating engagement is organizational rather than conceptual. Delivering superior customer experience means building processes to create internal engagement and alignment, cross-functional collaboration, and the ability to dialogue internally as well as externally with customers and other stakeholders. These capacities enable companies to design and execute superior customer experiences and, ultimately, value to all parties.

The McKinsey article: “We’re All Marketers Now”

We’re interested in your thoughts, and the customer experiences you’d like to deliver.

Noted green business journalist Joel Makower caused quite a stir when he published this article in May: “Green Marketing Is Over. Let’s Move On.” What Makower fails to do, as comments pointed out, is define what he means by “green marketing.”  This makes the article somewhat confusing because many of the things he points to as working are also marketing issues. Turns out that he’s describing green marketing communications, not the full marketing discipline. With this clarification, this article provides substance to the position we’ve taken on green marketing for several years.

I welcome the demise of obsession with green marketing communications.   No one is ever going to scale sustainability by trying to get people to buy green for green’s sake.  As I’ve discussed in previous articles, the people who will buy green for green’s sake are the innovator’s and early adopters of the industry. Everyone else buys for other reasons, primarily the utility of the product or service.

It’s my hope that as people recognize the limitations of so-called “green marketing,” they will rediscover the other 3-4 “P”s of marketing (depending on how you count them), will discover the value of strategy as a place to embed sustainability values into the core business rather than bolting them on through features-benefits descriptions.  According to Makower’s article, this *is* what’s working.  Let’s get to it!

“To listen is to lean in, softly, with a willingness to be changed by what we hear.”

Mark Nepo

By Kathleen Hosfeld

Increasingly strategy must be about dialogue. In a recent article about the changing nature of strategy and marketing  in the “Twenty-Tweens” (our current age),  I described three different forms of communication – information sharing, persuasion and dialogue. Information sharing and persuasion are the two forms most people associate with marketing. But the nature of business, the demands of customers and stakeholders are quickly outstripping the capacity of information sharing and persuasion alone to respond.

What do we mean by dialogue? I’ve said that it’s the type of conversation where two or more parties bring together information out of which something new is created.

Poet David Whyte has talked about this type of communication in terms of what it means to be a leader today. In a video on his website he talks about the conversational nature of reality:

“The conversational nature of reality has to do with the fact that whatever you want to happen will not happen. A *version* of it will happen. Some aspects of it will happen. You will be surprised also and quite often gladdened that what you wanted to happen in the beginning actually didn’t happen and something else occurred. Also it’s true that whatever society, or life or your partner or your children want from you will also not happen. They also will have to join the conversation.”

Whyte’s speaking engagements with companies on the conversational nature of reality have to do with what kind of leadership stance one can take in response to this dynamic. Who do we need to be as leaders to participate in the conversational nature of reality?

The same question faces organizations. What kind of stance do we need to take with our customers and partners in order to thrive in the conversational nature of reality? Many companies who have been early pioneers of collaboration and co-creation will say there’s tremendous potential return on investment from engaging in dialogue. Strategy– including communications, product innovation and more – is at its best in dynamic collaboration with customers and other stakeholders. To tap that potential we need to start from a place of strong core of identity and purpose, and then have the skills and tools to support dialogue as it scales through the organization.

The scale of dialogue takes place on a continuum of complexity. On the left side of the X axis we have dialogues one-to-one; on the right side we have dialogues one-to-thousands or even millions. On the left side of the continuum we rely on interpersonal skills and good facilitation of conversations to get to the shared creation. On the right side, we need technology platforms (crowd sourcing, social media and corporate social platforms) to support true two-way “conversation” on a mass scale.

All along the continuum, we need to be able to relax our grip on our own ideas and be open to what we can “create together.” In his video, Whyte takes issue with what he calls the “strategic” approach, by which I think he means predetermining a set of actions and getting too attached to them in ways that ignore the conversational nature of reality. I would say that the type of strategy – marketing and organizational — that actually works today is one that takes the conversational nature of reality into account. It is not static. It is not a fixed plan. Rather it’s a framework that includes a strong purpose and identity and that creates a container – much like a greenhouse – where the seeds sown in dialogue can take root and grow.

The future of brand building “will involve all stakeholders (in a)… fluid, uncertain world where a brand evolves in dialogue with others. This in turn will require both openness and trust.” So say Nicholas Ind and Majken Schultz in an article from Strategy + Business.

Pointing to two examples – LEGO and Robobank – of companies among other examples, the authors comment on how brand building is slipping from arms of marketers into the hands of managers who are tending the total customer or stakeholder experience. “These organizations have understood that brand building (even if the terminology of branding is not used) is a participative process involving the whole organization and is the responsibility of all employees.”

Critical success factors for organizations creating brands in this environment, we predict, will include the abilities to align the organization on compelling strategies based on stakeholder dialogue, to foster and facilitate dialogue among multiple stakeholders, to channel greater flows of information into, within, and outside the organization, and to build authentic trust with stakeholder groups.

Strategy + Business Article: Brand Building Beyond Marketing

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.

By Kathleen Hosfeld

The Journal of Public Policy and Marketing released a special issue devoted to stakeholder marketing this month, which among other things, features an article by our academic partner Jenny Mish, professor of marketing at Notre Dame, with her colleague Debra Scammon.

As the journal has limited visibility with people in business and non-profits who engage with stakeholders, I’m reporting here on some of the ideas that have the most applicability to day to day practice.

What is Stakeholder Marketing?

Stakeholder marketing is an approach to marketing that examines the impact of marketing on stakeholders other than the customer.  Our short-hand description is that it is about “marketing with rather than marketing at stakeholders.” It seeks to partner and collaborate with stakeholders in the creation of value for the company, its customers and other stakeholders. One article in the special edition, “Stakeholder Marketing and the Organizational Field,” says that research demonstrates a strong business case for responding to stakeholder issues efficiently. Among the benefits are improved financial performance, greater stakeholder identification with the firm, and stronger stakeholder support.

The ideas from this special edition, combined with my own research, leave me with two observations on the current state of stakeholder marketing:

Best Practices Not Yet Clear

First, the primary obstacle to the adoption of stakeholder marketing it that it does not lend itself to tactical considerations as easily as green marketing, social media marketing, relationship marketing or any other similar approaches. These other practices often comprise a set of tools and tactical strategies that can captured and shared. So far, stakeholder marketing has not been reduced to a checklist of best practices. These articles, rather, describe an intention. One essay suggests that stakeholder orientation is best represented in a definition of marketing management. As Jenny’s article indicates, stakeholder marketing begins with a set of principles rooted in values, which then inform the culture of the firm, which then informs marketing practice.

Jenny’s article actually goes farthest toward identifying practices that show up in a stakeholder oriented approach to marketing. Among them:

• Approaching promotion and sales from the perspective of educating consumers about their choices rather than persuading them or seeking to control their behavior in favor of the firm’s objectives.
• Engaging customers as partners in creating value for other stakeholders
• Giving away innovations and market intelligence in service of improving the overall well being of the industry or market.

Marketers alone are not organizationally empowered to implement these practices.  More so than other marketing approaches, stakeholder practices must be supported from the top and must be coordinated across functional boundaries throughout the company. This leads us back to the role of marketing management as key in implementing stakeholder marketing.

How is Stakeholder Marketing Different From Stakeholder Engagement?

The second takeaway is that this edition does not yet answer the question “How is stakeholder marketing different from stakeholder engagement?” To answer this will require comparing companies’ stakeholder engagement or Corporate Social Responsibility (CSR) programs with their marketing strategies, taking into account all aspects of the marketing mix: product/service, pricing, distribution/sales, and promotion. Where are the linkages, overlaps or gaps?

Over the last several months I have contacted a number of well-known companies that I perceive to be practicing aspects of stakeholder marketing. Unfortunately, they don’t recognize their actions as such. They are more inclined to say that their CSR programs have elements of customer engagement. Even Timberland, whose stakeholder initiatives have been integrated into aspects of marketing and promotion, declines to call what they do stakeholder marketing.

It may well be that in many companies a stakeholder orientation in marketing will come from gradual encroachment of CSR initiatives.  As long as companies reinforce short-term thinking among marketers through mandates on measurement and quarterly financial goals, marketers will understandably resist embracing stakeholder methods which are often long-term in nature and difficult to measure – even though enhanced financial performance may be the ultimate outcome.

In the following series of articles, I’ve taken some of the topics raised by the authors in this special edition and provided brief summaries of findings that I feel are the most practical for those who manage marketers or have strategic oversight on a firm’s marketing.

Evolution of the Marketing Orientation – Researchers propose that stakeholder orientation is the next evolution in what began as a product orientation and evolved next to a market orientation.

Stakeholder Practices of Triple Bottom Line Firms – What does stakeholder marketing look like? Exemplary Triple Bottom Line firms provide the most insight and examples.

Like it or Not: Dragging Companies into the Stakeholder Perspective — Market events often trigger stakeholder activism that forces companies to shift from stakeholder management to stakeholder engagement.

Social Networking Taps the Creative Potential of the Stakeholder System — Social media marketing technology gives companies ways to manage stakeholder ideas and input.

Copies of the Journal of Public Policy and Marketing are available from the American Marketing Association. Purchase requires a subscription, which for individuals costs $90. The Journal publishes twice a year. Digital versions are available, but only to subscribers. Additional Information is available here .

If you are interested in integrating stakeholder strategies into your own marketing programs or strengthening stakeholder relationships in other ways, please contact us.

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This series of articles is dedicated to my beloved friend Coffee, with whose help they were written.