Are stakeholders making or breaking your strategy?

Leaders are often unaware of their value-critical stakeholders, inhibiting progress on strategic issues. The solution is to get rid of free riders and predators and build more involvement in the value-creation cycle by the stakeholders that matter. Here’s how it’s done.

Three steps to lose the leeches

1. Cut ties with free riders

Cut ties with those inside and outside the company who extract value for themselves despite its long-term impact on the organization, society, and the environment. This includes free riders such as overpaid executives who, in their self-interest, campaign to maintain unsustainable activities.

2. Part ways with predators

Sever links with parties such as those shareholder activists and external advisors who are in for short-term payouts.

3. Avoid blind spots that derail stakeholder strategy

Executives repeatedly exhibit four major blind spots when making strategic decisions:

Failing to support value-critical stakeholders

Failing to realize the importance of societal and environmental stakeholders.

Becoming hostage to the wrong stakeholders

Letting yourself become hostage to monopolistic stakeholders who extract value is potentially worse than not supporting your value-critical stakeholders.

Underestimating the value of soft assets

Failing to see the value of soft assets obscures the role of related stakeholders.

Ignoring broken stakeholder engagement processes

When the processes that integrate stakeholders into value creation are ineffective, it is tough to create value with them.

Three steps to optimize stakeholder value-creation

1. Integrate effectively

The relevant stakeholders must be explicitly integrated into the creation of soft assets.

2. Share value

The value created must be shared to ensure ongoing stakeholder commitment to developing and maintaining assets. Quality assets require the long-term commitment of those stakeholders relevant to value creation. Soft assets in particular take time to develop and are very vulnerable to neglect.

3. Keep score

Given the importance of quantitative financial data for investors and financial markets, a special effort is needed to monitor the quality of soft assets and related stakeholder engagement. A stakeholder ecosystem can play a major role in keeping engagement in the creation of soft assets front of mind.

Key learning

Free riders can seriously inhibit progress on strategic issues. To optimize long-term value, get rid of the blockers and fully integrate the relevant stakeholders into the value-creation process.

Paul Strebel

Professor Emeritus of Strategy and Governance

Paul Strebel works with boards of directors and top management teams as an advisor on strategic vision and the resolution of boardroom conflicts. He has twice received the Award for Research on Leadership from the Association of Executive Search Consultants and has won several case study awards from the European Foundation for Management Development. His books include Breakpoints: How Managers Exploit Radical Business Change and Smart Big Moves: The Story Behind Strategic Breakthroughs.

Angeliki Papasava

Angeliki Papasava is an academic and entrepreneur with over 15 years of experience teaching management in universities worldwide. She is the founder of allBITTech, an IT company based in Sofia, Bulgaria.

Patrick Reinmoeller

Patrick Reinmoeller has led public programs on breakthrough strategic thinking and strategic leadership for senior executives, and custom programs for leading multinationals in fast moving consumer goods, telecommunications, pharmaceuticals, healthcare, and energy on developing strategic priorities, implementing strategic initiatives, and managing change. More recently, his work has focused on helping senior executives and company leaders to build capabilities to set and drive strategic priorities.