Author's Name: Mark Schultz
Date: Thu 22 Oct 2015

Stakeholder engagement – why and how

Every non-profit organisation (NGO) has a range of stakeholders that, whether it likes it or not, have either a direct or indirect relationship and impact on both the strategic and operational management of the business.

A stakeholder can be defined as an individual (e.g. a client, a supplier), a group of individuals (e.g. an industry association, an organisation’s members) or an organisation (e.g. the media, funding bodies the government), all of which have an interest in the daily activities of the business. In the non-profit sector, especially where government or third party funds are involved in contributing to service delivery, the board and management must decide how it will engage and manage this group to mutually satisfy individual needs.

Why is stakeholder engagement important in the non profit sector?

It is generally accepted that in today’s political and economic environment, the demand for NGO services is ever increasing and the funds available do not seem to be able to meet that demand – this means that funding bodies have to make choices and funding receivers have to be accountable and demonstrate that the service provided by their organisation generates change, not just an output or outcome. In the decision making process, funding bodies generally consider stakeholder engagement as one of their criteria in the selection process of who gets what and when. Stakeholders represent the community and government is spending community funds, so how an organisation engages with and is perceived by its stakeholders is a key success factor in the allocation of funds.

Furthermore, stakeholder engagement is important because it is the right thing to do, not just because it should be done to satisfy a third party need. If a board engages with stakeholders from a performance rather than compliance perspective, then a better result is guaranteed for all parties in the relationship.

How does an NGO create a stakeholder engagement plan?

To achieve the best result, a cross section of the organisation (from the board to service delivery and administration) should participate in all stages of creating the plan. These stages include:

  • Agree on the definition of a stakeholder in the context of the business’s activities;
  • Identifying individuals, groups and organisations who meet these criteria;
  • Quantifying the stakeholder reporting/accountability expectations and requirements as a result of the relationship;
  • Undertake a risk assessment on each stakeholder i.e. how critical is the relationship to the organisation achieving its mission? 
  • Develop an engagement plan that mitigates the above risks in a manner that takes the initiative rather than one that simply responds to an immediate demand or crisis;
  • Appropriately resource the implementation of the plan; 
  • Put in place a reporting mechanism that will provides evidence to the board that the plan that has been developed is actually being implemented and the expected results achieved through this process; and
  • Include the review process in the annual and monthly board agendas.

Other steps that can be taken to assist in the stakeholder engagement and management process include:

  • Create a Complaints Management policy including criteria, reporting and board review process; 
  • Establish a Whistle blowing policy and for the board to take a leadership role in the communication of that policy throughout the organisation – this will send a powerful message to all staff but none more so than taking immediate action if a  particular situation arises; and
  • Informal and ad hoc meetings with key stakeholders – this demonstrates that the board really does care about the relationship and wants to receive personal feedback to confirm that which is being reported – stakeholders generally appreciate the opportunity to interact directly with a board of an organisation.

In summary, stakeholder engagement should not be considered as simply a compliance requirement. Stakeholders have varying degrees of importance to an organisation and the engagement strategy should correlate to that importance level. It is a far better approach to take the initiative and keep all stakeholders informed relative to their relationship with the business than to wait until a crisis develops and then deal with that at that time. The board must take a leadership role in the development, implementation and review of the strategy and thereby demonstrate that stakeholder engagement is critical to long term success and sustainability.

Share this with your friends