GETTING THE BEST OUT OF STAKEHOLDER AGREEMENTS
Stakeholder agreements are a useful tool to aid the achievement of mutually agreed outcomes in any partnership, alliance or joint venture. Whether between business partners, commercial entities, investors, suppliers and consumers of goods, or a service provider and community user stakeholder agreements allow a framework that confirms the expectations of each party, protocols of operation, and goals or objectives shared by all and to which all parties are, theoretically, aligned. A good stakeholder agreement clarifies roles and responsibilities, informs planning and day to day operations, assists the management of risk, and aids constructive communication.
Every stakeholder agreement, however, is merely the start of a journey shared by all those involved. It is not a static document but one subject to changes in market forces and personal circumstances, alterations in financial interest, and movements in political and economic conditions. All too often excellent stakeholder agreements, and parties entering into such agreements with great intentions and a clear vision and understanding, come across rocky shores that with some minor planning can be navigated with reasonable ease. What are some key factors for stakeholders to keep in mind, particularly when constructive working relationships are key to mutual success, to get the best out of their stakeholder agreement?
1. Clarify what consultation and inclusion means. Of all the factors I hear most about that negatively impact most stakeholder agreements it is the dual issues of consultation and inclusion. Both are different but related. After all, if you have a ‘stake’ in something this is often interpreted as a degree of ownership and input into the process(s) undertaken, and what the final result and shape of the ultimate objectives looks like, irrelevant of personal direct investment or involvement day to day. Clarifying mechanisms of consultation and inclusion, means of communication, and key responsibilities of parties to the agreement plays a significant role in managing emotion, improving relevance and accountability, and reducing the twin challenges of unnecessary fear and complexity.
2. Provide a mechanism to ensure key assumptions made within the agreement remain valid. Circumstances can and will change. An agreement highly relevant last year may need tweaking now as a result of unanticipated changes to factors impacting the original outcome. Regular review, every 12 months minimum (preferably more frequently), as part of business as usual will ensure a stakeholder agreement that remains current to the best knowledge and ability of the stakeholders involved. Minor alteration now amidst a culture of adaptability and continuing focus on relevance is preferable to radical change two years later when it is clear earlier modification would have been in all party’s interests and has impaired achievement of stakeholder goals.
3. Ensure a way to monitor and evaluate milestones and key measurables (both tangible and intangible). This provides a structured opportunity to evaluate progress, ensures sharing of outcome information relevant to all parties, and enables an opportunity for continued stakeholder awareness and involvement, no matter the level of ‘investment’ in the agreement itself. Sample questions might include, for example: What are our measurements of success? What are our key milestones and why have we decided on them? How are we tracking? What is our forecast and what factors are likely to impact that forecast in the short- and medium-terms? How are we ensuring continuing alignment of core values? How are we managing known risk factors?
4. Generate an opportunity to clarify core values held by different stakeholders at the start of the process. Clearly this is far more complicated for large and complex agreements between stakeholders with broad geographic, demographic, financial, and cultural variation and diverse objectives (e.g. between a public entity and a metropolitan community). However, it is this very appreciation of diversity and incorporation of it that aids the development of robust and enduring stakeholder relationships. Far more depth in values similarities and differences can be explored where stakeholder agreements exist between a few parties with relatively narrow interests (e.g. stakeholders in a financial investment or business opportunity), some significant personally controllable factors, and greater relative influence on the success and/or failure of the objectives the stakeholder agreement is designed to meet. This is referred to as the ‘Psychological Contract’ and relates to what assumptions and expectations we have regarding how others are likely to think (interpret information), act (information provided and actions undertaken as priority), and feel (the style or manner in which information is passed on or discussed and reaction to disappointment or disagreement). At the end of the day this is about identifying the hidden factors that can pull us toward (build trust) or push us away (distrust) from our agreement partners.