George Bernard Shaw famously said that “the single greatest problem in communication is the illusion that it happened”.
This is often the case when it comes to interactions between companies and stakeholders. organizations need to improve communication with key stakeholders to foster trust, improve collaboration and mitigate potential risk and conflict. But what does this communication look like? And should it be different depending on the stakeholder profile?
in one Recent study published in journal of business ethics, Witold Henisz, Sinziana Dorobantu* and I will examine the four factors that are important when dealing with stakeholders: topicality, value, richness and topicality. We observe how the speed of an organization’s response (timeliness), the tone of that response (valence), the depth of engagement (wealth), and the level of responsiveness to the specific issues raised by the stakeholder (timeliness) affect stakeholder responses.
Our results indicate support for greater promptness, openness of tone, depth of response, and relevance in fixed responses. However, the relative importance of these elements depends on the Type of stakeholder as well as their status.
Identify and understand stakeholders
Cooperation between those involved is particularly important extractive industry like gold mining. Conflicts with stakeholders over environmental issues and social factors, including labor practices, human rights and broader community impacts, can result in costly delays, regulatory actions and court judgments.
By focusing our research In terms of the gold mining industry, we were able to narrow our sample to 19 Toronto Stock Exchange-listed companies that own and operate three or fewer gold mines in emerging markets that have reached the proof-of-concept stage.
By examining media reports, we collected data from interactions between gold miners operating 26 mines in 20 countries and 199 stakeholders with a political, social or economic interest in the mines.
First, we analyzed news articles extracted from the Factiva database related to the company and mine between 1993 and 2010. From this we extracted a comprehensive set of stakeholders, including actors that are often overlooked in the business world, such as: B. Rebels in the Democratic Republic of the Congo (DRC), the Romanian Orthodox Church and even the actress Vanessa Redgrave.
Second, we coded sentences to extract source-verb-destination triplets specifying who (source) did or said what (verb) to whom (destination). We assigned all verbs to a 20-point conflict-cooperation scale ranging from −9 (extremely conflicting action or statement) through 0 (neutral statement of fact) to +10 (extremely cooperative action or statement). A cooperative action like “provide financial support” or “build partnership” was coded as +7, while a conflictive action such as “protest” or “dismantle property” was coded as -7.
We identified 6,068 instances of media-reported interactions that encompass three sequential elements: a stakeholder’s initial interaction with the company (expressing an opinion or taking an action), the company’s response, and the subsequent stakeholder response.
We examined the impact of the timing, magnitude, scope and timeliness of an organization’s response to a stakeholder’s initial statement or action, and noted changes in the subsequent stakeholder response.
Measuring conflict and cooperation
To assess the meaning of timelinesswe determined whether the company responded a day, a week, or a month after the stakeholder’s initial engagement.
We measured them value the company’s response as the difference between the stakeholder’s initial statement or action and the company’s response. In other words, whether the company responded with more cooperation or conflict.
Next we calculated the difference in degree from wealth (i.e., verbal communication vs. action) between the stakeholder’s initial engagement and the company’s response. We developed a five-point scale to determine the extent of a company’s commitment of resources and time to the event.
Finally, we used the Python tool EMPATH to do this analyze the disparity in the distribution of issues within the company’s response versus stakeholder engagement. This allowed us to estimate that timelinessor lack thereof, the answer.
Our results indicate that timely, positive, rich, and timely responses are associated with overall positive stakeholder responses. For example, when the government of the Democratic Republic of the Congo announced its intention to nationalize all gold mining assets in 1998, Banro American Resources responded within a day. The company sought an explanation, threatened a lawsuit and condemned the government’s actions in a rich and timely response that, while conflicted, did not escalate tensions or take concrete action. The government responded the following day by clarifying the terms of the company’s long-term mining concession and highlighting its close relationship with company executives. It also acknowledged a mistake in its previous announcement.
Years later, the government announced that a state-owned company would receive permits, which were not exploited by Banro. In this case, the company did not respond for over a month and announced that it would protest the license redistribution and file a lawsuit against the government. This represented both an escalation of tensions and concrete action. The government’s response to Banro the following day was far more conflictual.
Different stakeholders value different answers
In a post-hoc analysis, we replicated our results for different sub-samples of stakeholders. These included state actors (e.g. related ministries and agencies such as the Ministry of Mines), economic actors (e.g. other business and economic actors such as other mining companies) and civil society actors (e.g. protesters, communities and non-governmental organisations). organizations like Greenpeace) as well as high and low status interest groups. This allowed us to examine how the sensitivity of stakeholders differs towards different elements of fixed responses.
Our results show that state actors prioritize richer commitment and timeliness over timeliness and value. In contrast, economic actors are less concerned with richness and timeliness and are more sensitive to timeliness. For civil society stakeholders, timeliness and value matter most, while wealth does fined. Low status actors in all sectors deprioritize Timeliness and richness, while high-level actors demand performance in all four elements.
Ultimately, managers must decide which elements to prioritize when dealing with stakeholders. For example, a quick response might come at the expense of a rich or timely response.
We argue that the tradeoffs managers make between these elements should vary based on stakeholder characteristics to create deeper communication and trust.
Effective engagement influences stakeholders’ impressions, and how one company responds to one stakeholder influences another’s opinion. This can lead to impacts across the stakeholder network, which could have potentially adverse consequences or benefits for the business.
*Witold Henisz is the Deloitte & Touche Professor of Management at the Wharton School, University of Pennsylvania.
Sinziana Dorobantu is one Associate Professor of Management and Organizations at New York University’s Stern School of Business.