Cultivating Stakeholder Active Engagement

A Leader’s Tool for Excellence

Female retail employee handing a bag to a male customer

It has been twenty years since this memorable customer experience; nonetheless, it’s as fresh in my mind today as it was on the day it occurred. We had purchased two vacuum cleaners from Costco. They never seemed to work right, so we decided to return them. For lots of reasons, it took us more than a year to act on our decision. With this much time gone by, no receipt, and no idea of how much we had paid, I was not optimistic about our chances for a refund. I hung back and let my wife Marta step up to the counter while I guarded the vacuums.

To my surprise, the first thing the employee did was thank her for bringing the vacuum cleaners back. I leaned in, hearing him apologize for our disappointment and offer an exchange or cash refund. My courage sparked, I boldly stepped forward, asking: “How do you know we even bought the vacuums from Costco?” “I don’t,” he replied. “Then why take them back?” I countered. “We trust our members and we sell this brand,” he said with pride. He had us at “trust.” This memorable experience turned us into raving fans who go out of their way to shop at Costco and to recommend it at every opportunity.

Understanding Stakeholder Active Engagement

Our Costco experience made me wonder about the roots of what I call Stakeholder Active Engagement and how business leaders cultivate it within their companies and teams. In my view, this understanding is simply another tool of leader excellence to be used in conjunction with all the other tools that effective leaders use.

As a leader, you use lots of tools. When reviewing the numbers, you are a “historian,” because they tell you where your company has been and where it will likely go if and only if the world stays the same. When speculating about things such as the path to “exceeding customer expectations” or how to build a “service culture,” you are a “theorist” of your company’s success as you imagine the “what” and “how” of improving. When you combine your role as a historian with your role as a theorist, you’re being stakeholder-centric and focused on turning your company’s wish list into the reality of its success. Stakeholder Active Engagement (SAE) should be high on your wish list because of how it drives results. When it comes to building SAE, your focus should be on the Big Four:

1. Customers who shop often, pay full price, and enthusiastically recommend the company to their friends and family

2. Employees who are productive, stay for the long-term, and recommend the company to their friends and family

3. Suppliers who are honest, on time, and give their best price the first time

4. Investors who invest for the long-term

Each of the four reflect voluntary behavior on the part of the stakeholder; that is, they are doing things that directly benefit the company even if it costs them to do so. That’s why the Big Four are the nirvana of company success. In order to earn SAE, you inevitably have to consistently repeat the best of your company’s history with the stakeholder, while evolving and adding what is relevant and resonant to the stakeholder. As a leader, your challenge is to identify the path to earning each stakeholder’s active engagement through understanding what motivates the stakeholder. The challenge is not to exceed each stakeholder’s expectations, but to understand them.

Building Stakeholder Active Engagement

Building SAE is based on a fundamental principle of human behavior: People are most likely to value the relationships that value them. Recall how easy and comfortable Costco made it for us to return the vacuums. No questions asked; simply affirmation that we had done the right thing and that we were valued customers. This is a principle that you intuitively understand through personal life experience. Not surprisingly, it’s also one that applies to the relationships between leaders and followers, as well as companies and their stakeholders.

When people feel good about a relationship (including the one with your company), they do the little extras that support it, such as going out of their way to be loyal. As Walt Disney put it: “People spend their money in the places that make them happy.”  People also spend their personal capital (time, energy) in the places that make them feel good about themselves.  In this sense, leaders are in the feel good business and your job as a leader is to build valued relationships. Before you shout “Duh!” to this obvious statement, let me challenge you on how well you are doing at making your wish list a reality. Is your base of regular customers growing or shrinking? Are your current employees your best recruiters or your loudest critics? In short, is your business driven by SAE?

All stakeholder experiences share a common denominator: feelings. People – and all stakeholders are people – resent affronts to their sense of personal worth, hate having their integrity questioned, or hearing “I’ll see what I can do.” People are bundles of feelings and leaders who want to engage their stakeholders do so by engaging the feelings of their stakeholders. The feelings that are most closely related to earning SAE are belonging and significance, and relevance and resonance.

Belonging and Significance

A long, long time ago our ancestors made a life-saving discovery: The larger, stronger, meat-eating, and faster animals living in the community loved people – but not in a good way. The loners in their communities simply did not survive.  Living within a group was the only insurance of survival.  This discovery of “we before me” gave rise to an innate part of human nature: we are driven to belong. We enthusiastically join groups, respect hierarchies, dress like our peers, and work hard to fit in because it enhances our sense of belonging. If the story of humankind ended here, all would be well and good. As a leader, all you would need to do in order to be successful is to develop “belonging programs” – and you’d be up to your ears in happy campers.

However, belonging is far from the whole story of human success. A defining quality of our species is that we think about the future. Among all of God’s creatures, we are the only one that contemplates its own demise — and we don’t like our prospects. That whole “ashes-to-ashes and dust-to-dust” thing makes us crazy unless we somehow hold it at bay. Mostly, we do so by constructing a parallel reality along the lines of “Somehow the world would be less without me – big time.” In a word, we are compelled not only by the need to belong, but also by our need to have significance.

The philosopher-psychologist William James noted that everything about our humanity — every thought, feeling, and action — is an effort to affirm our worth. Small children paint a compelling picture of what James meant with their incessant call to “Look at me” and insistence on sharing their art via the family refrigerator. This need for affirmation does not magically disappear with age. Instead, it goes underground to be fulfilled in less obvious ways and reinforced by experiences such as the sincere apology and vote of trust illustrated by the Costco experience.

We all cry out in countless ways for affirmation that we belong and have significance. In turn, we handsomely reward those who do it with our engagement and loyalty. These two needs are so critical to your ability to earn SAE that I have defined them below.

Belonging: Feeling welcomed as a natural part of the group, suitably positioned within the group, and assured one’s position is secure.

Significance: Having one’s position within the group valued and feeling irreplaceable.

Reflect on these definitions and ask yourself how well your follower or customer experience (or any of your stakeholder experiences) reinforces this sense of belonging and significance. In addition, ask yourself what your company could do to systematically enhance this sense among its stakeholders. The payoff is a significant leg up on your wish list into the reality of results.

Relevance and Resonance

There is something else you see in the Costco experience; namely, relevance and resonance. If a relationship is not relevant to the needs of its participants, it will not endure — regardless of whether the stakeholder has a sense of belonging and significance. That is because the stakeholder derives nothing relevant to his or her wants and needs. However, even if the relationship is relevant (e.g., “You sell hamburgers and I am hungry.”), it may not resonate with a stakeholder’s core values and, therefore, not connect with his or her emotions. For example, a burger and fries restaurant that communicates its community involvement and environmental sustainability will resonate with people who hold these values.

Relevance and resonance are the attributes of a relationship that bring richness to the stakeholder’s sense of belonging and significance. These important attributes are defined below.

Relevance: Connecting with a person functionally, through the physical and emotional needs served by the relationship.

Resonance: Connecting with a person emotionally, through feelings of belonging and significance, confidence, competence and pride.

It should be recognized that providing a relevant experience is simply the price of entry to compete for the stakeholder’s loyalty. Resonance raises the stakes and deepens the relationship from being largely instrumental to the stakeholder’s needs (e.g., a job, something to eat, something to clean the floor) to being personal. So understanding what is relevant and resonant to a stakeholder, and building both into the stakeholder’s experience, is necessary to earn SAE – and key to keeping their experience fresh, alive, and vital.

The Axes of Stakeholder Active Engagement

The purpose of delivering a stakeholder experience that is relevant and resonant, and creates a strong sense of belonging and significance is to engage the stakeholder in a valued relationship with your company – and to keep it that way. The level at which each of the four elements is created, determines whether you will be able to check each stakeholder off your wish list and create a path to success. This path can be mapped as shown in Figure 1.

Corvirtus model of the Axes of Stakeholder Active Engagement

Each side of the grid represents one of the four elements of SAE. The poles for belonging are exclusion and inclusion, for significance they are insignificance and significance, for relevance they are irrelevant and relevant, and for resonance, they are disconnecting and resonance. It is only within Quadrant I that SAE is earned – and our experience of Costco perfectly illustrates these dynamics.  When a company begins to lose touch with a stakeholder, it is because any one of the axes has become negative for the stakeholder. As a consequence, the relationship between the company and the stakeholder has lost at least some of its value to the stakeholder.

Using the Tool

As leaders, we are accustomed to focusing on the people we lead; namely, our team. However, when you consciously expand your focus to include both internal and external stakeholders, it is far more likely that you will be able to capitalize on the natural synergy among stakeholders. As an example, in the early days of Outback Steakhouse, restaurant employees – called Outbackers – derived a great deal of pride and satisfaction from customer engagement with the restaurant. It was quite common for an hourly employee to tell the story of being stopped when out in public wearing Outback logoed clothing by a customer who just wanted to tell the employee how much they loved the restaurant. This is word-of-mouth advertising times two.

The elements of SAE are tools and, like all tools, they take practice in order for skill to be developed and effectively used. As an initial step toward developing the skills of Stakeholder Active Engagement, I recommend that you start simple. Pick a stakeholder that is important to your success and examine their experience by asking the following questions:

1. What are we consistently doing that results in a sense of belonging and significance with this stakeholder?

– How do we know it is working?

– What else could we do to improve how well we are affecting this stakeholder’s sense of belonging and significance?

2. What needs and wants are consistently met by the experience we are currently delivering?

– What else could we do to enhance the relevance of this stakeholder’s experience?

3. What are we consistently doing that resonates with this stakeholder?

– What else could we do to enhance the resonance of this stakeholder’s experience?

As a leader, working with your team to answer these questions is a useful exercise for getting everyone on the same page and making effective strategic and tactical decisions. In my experience, the discussion is just as important as the result. One of the problems often revealed by the discussion is a lack of consensus on what the stakeholder’s experience is intended to be, other than in terms such as “exceed expectations,” or “be best-in-class.” When these distractions to effective stakeholder leadership are encountered, the best thing to do is to stop and go back to square one where your team defines the intended stakeholder experience and what will produce active engagement.

This is just one tool for leaders in working toward and earning Stakeholder Active Engagement. However, cultivating SAE cannot happen without first having a strong culture – and one of the greatest opportunities to build your culture is to invest in the development of your leaders.

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