It should be obvious, but, as in most things, neglect has consequences.
Experienced Managers know that the way we relate to our stakeholders makes a difference. Those with influence on our organisations’ plans and activities may take decisions we dislike and may treat us badly, but how we react – in the long term – matters. Equally, those affected by our own actions - be they favourable or unfavourable – will also need to maintain sound relations with us. Again, how we react matters. This is why many large organisations and public bodies have invested in a professional approach to stakeholder management.
When you're really enthusiastic about an idea or concept, as I've been about stakeholder management now for some years, you want to talk about the positive benefits. You want to promote those. And yet, and maybe prompted by such bad economic and political news, occasionally, you need to look at the flip side and maybe look at the jeopardy that organisations find themselves exposed to when things go wrong and where stakeholder relations maybe have not had the investment that they require. I thinking along these lines when I read the other day about the travails of national savings and investment. They've been unable to pay thirty seven thousand people the money they're due. The chief executive has gone. There may be some other consequences. There might even be a taxpayer bailout, punish the thought. And on the same page of the magazine I was reading was the story of the civil service pension scheme, which is also in deep trouble since an outsourcing, deal didn't quite work as planned. Then it's a year ago now, if you remember, that there was a fire in the National Grid substation in West London, and it brought Heathrow Airport to a standstill for a whole day. It cost billions. And you think about these extraordinary events happening to large reputable organisations. We can think of Marks & Spencer, Jaguar Land Rover cost one point eight billion. JD Sports had several, NHS trusts with cybersecurity. And you read often that it came out of the blue. Actually, they didn't. Many of these failures were predictable, and they were predicted. Just like the awful tragedy of Grenfell Towers, it was predictable, and it was predicted. And they were predicted very often by their own stakeholders. Those of you in large organisations watching this video, the truth is you have stakeholders who may know your business, your organisation as well, if not better than you do, who know and understand the risks to which you are exposed. And one of the reasons why you maintain relations with some of these key stakeholders is you need their advice. As indeed, they need your advice as to what might happen in the event of difficulties. And in this day and age, we're all vulnerable, not necessarily because something goes wrong in our organisation, but in the backwash of somebody else's problems. And what I've done for the Tractivity article this month is try to identify three situations where that vulnerability is higher. Situations where the vulnerability is greater. Number one, where there's an industry in trouble. And the example I've taken, you can read the article, is from the UK privatised water industry, and I need to say no more. The second example, when projects get into trouble. And the obvious one to highlight, which I have, is high speed too, but it is not the only public or private sector project that is facing significant difficulties. The third scenario I've quoted is where a public policy is also struggling. And the example from England is special educational needs and provision for disabled children. That has been a major difficulty for local authorities and for national government for many years. There's a consultation now to see what happens next. And there are other situations as well, I'm sure. Nobody is trying to say that better stakeholder management removes the risk of something bad happening, But it can reduce the risk if you listen to other people's advice. And it also strengthens your ability to have a dialogue platform with your own stakeholders to consider how you can have a resilient response if ever something goes wrong.
When PR Isn't Enough: The Case for True Stakeholder Management
There are still too many Boards of Directors and Management Teams that are taking risks by confusing this discipline with PR. Public relations and reputation management are, of course, important tasks for any large organisation, but their role is clear – to present the best narrative possible that enhances the way in which it is perceived, and to handle any dialogues that arise from that. In the course of this, they will naturally develop relationships with journalists and other channel actors. But it is not their job to map out and manage the whole range of relevant stakeholders in a comprehensive way.
This is what marks out stakeholder management as a pivotal core task for business leaders and public service executives. It’s the tool whereby the organisations’ relationships are understood and strategically managed.
And this begs the question – why do so many neglect it, continue to rely on amateur spreadsheet-based record-keeping supplemented by the odd bit of intelligence gathering? Why stick to unreliable methods when they could systematically organise themselves to do the job properly?
No matter how the inexorable rise in legal challenges, judicial reviews and parliamentary inquiries is publicised, many large public space Companies and service providers continue to bury their heads in the sand and convince themselves, “It won’t happen to us”.
Whilst preparing this article, news broke that the venerable state-backed National Savings and Investments Bank had spectacularly failed to reunite 37,000 savers with monies to which they were due. Its Chief Executive has had to go, and there are fears that a taxpayer bail-out might become necessary. At the same time, there is an ongoing issue for the Civil Service Pension Scheme, which transferred a backlog of 86,000 unresolved cases or queries to the newly-appointed CAPITA sub-contractor in December. Thousands of retirees are unable to obtain vital pension information, causing considerable financial hardship. Here, as elsewhere, the problem is compounded by totally inadequate access to under-resourced call centres! Heads will surely roll here, too.
For most people, these reputational disasters appear to have come ‘out of the blue’. So did the lengthy closure of Heathrow Airport exactly one year ago because of alleged failures by National Grid, which probably never realised that a substation fire could close one of the world’s biggest aviation hubs. Examples abound. The cyberattack that cripped Jaguar Land Rover for five weeks in 2025 and apparently cost the UK economy £1.5bn also occurred without much warning. Ditto for Marks & Spencer, NatWest Bank, JD Sports, a fair number of NHS Boards and even the Ministry of Defence.
The Warning Signs Were There
Of course, it’s possible that these crimes, accidents or misdemeanours cannot be avoided just by having better stakeholder management. But examine these closely – and the plot thickens. Many of these incidents were predictable – and were predicted. Among your stakeholders, there are often people or bodies who know your own business as well as you do. And they may understand the risks that you face. Some may well know them even better than you do!
In the same way that construction experts and fire safety specialists predicted the Grenfell Tower disaster, cybersecurity experts have been clear that many of our institutions are in danger of attack and have urged the creation of far more robust contingency plans. Listening to well-informed stakeholders who have good advice is one half of the equation. The other is to build trust and confidence among those who depend upon you – that when things go wrong, you have effective means to minimise the implications for them.
Sadly, no organisation is immune to threats. Not just from cybercrime, but also the interdependence of one business on another. You are as likely to suffer from the backwash of someone else’s crisis as you are to struggle with your own problems. Building and maintaining great relationships with the stakeholders who are most relevant is a no-brainer. The investment case is strong.
Three Environments Where the Stakes Are Highest
It is strongest, however, where specific vulnerabilities can be identified, and here are three situations worth highlighting.
Where industries or activities have well-known problems
The best current UK example is the Water industry. Last year, the Cunliffe Review laid bare decades of political and regulatory mistakes that have damaged operational performance and undermined public confidence in the service.
Last week, Channel Four aired a drama-documentary called Dirty Business, which told the story of how campaigners against sewage discharges were thwarted by the Environment Agency and how specific Water companies used the ‘operator self-monitoring’ policy to camouflage the extent of their failures. Public reaction may be similar to Mr Bates v The Post Office, where over 14 million people had their contempt for a once-proud public body confirmed.
When organisations experience low levels of public confidence and where there is customer distress and anger, they are very vulnerable. But they still need to communicate with stakeholders – and the job is naturally more difficult.
Where specific projects or programmes run into difficulty
Most visibly, the High Speed Two project seems a good illustration of a long-term investment that has been criticised by most commentators, and which has been subject to so many revisions and cutbacks that it barely resembles its original intentions. To say that the project is in trouble is to underestimate how difficult it can be for those working with key stakeholders.
When projects or services are failing, they acquire around them an air of disappointment and demoralisation. Access to NHS Primary Care has its fair share of dissatisfaction, and mention the word ‘potholes’ to most councils, and you send them screaming and hiding for cover. No one likes being associated with failure, and one is filled with admiration for those who take their courage in both hands and take up the challenge to rebuild or restore confidence despite the obstacles.
Where top-level policies are in trouble
Public policymaking is not an exact science, and things go wrong. Parliamentarians are prone to pass legislation, and only slowly does it emerge that statutory changes may not be working. One of the best recent examples is the troubled approach to Special Education Needs and Disability, or SEND. Well-meaning changes enacted in 2015 have led to entitlements which local authorities were not funded to deliver, and there is widespread consensus that they need further amendment; hence the current consultation. Other initiatives, such as closing courtrooms and the management of the prison estate, spring to mind.
Again, stakeholders in these fields were almost certainly the first to see what was going wrong, and many have the best ringside seat to recommend what changes to make. Those in charge of a policy are seldom as aware as these stakeholders, and it highlights the need to nurture these relationships to provide better ‘early warning’ of issues that need to be addressed
Conclusion
Failure to invest in stakeholder management can give rise to several forms of jeopardy and can even include existential threats to an organisation’s reputation. Some environments are more vulnerable than others, and even though we have highlighted industries, projects and policies in trouble, there are many more telltale signs of potential risks that organisations of all kinds need to consider.
Better stakeholder management is not a panacea, and cannot, of itself, avoid the perils of many modern events. But it can massively reduce some risks and strengthen the capabilities and capacity of organisations to respond when times get tough.
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