Member Article

Ignore stakeholder management at your peril

I have just come back from seeing a client who is hoping to start a new business. This is a significant new venture and it is something that he and his fellow directors have been considering for sometime.

They have found the premises, worked on the graphic designs, found the key staff and feel that they are almost ready to press the ‘go’ button. The only thing they have yet to finalise is their funding. Clearly this is fundamental to their success and cannot be overlooked.

The Directors have decided to fund the new venture using investors rather than bank debt. They have outline offers from several investors and feel that they would prefer to sell equity rather than try to raise bank finance which might not be forthcoming. They are also very conscious of the strain which bank debt can cause on cash flow.

I have been asked to prepare their business plan. During our discussions it has become apparent that the Directors have not considered the importance of stakeholder management. It is clear that once these shareholders are on board, they will need to be managed effectively to ensure their on-going support for the business.

I have seen many instances of poor stakeholder/ shareholder management that have led to paralysis – with the management failing to share their vision for the direction and strategy for the business effectively with the shareholders. This is particularly common in long-established businesses where the shareholdings have dissipated over generations to a large number of people who know very little about the business and only really care about their annual dividend cheques – but it can happen with any business where shareholders are not directly involved with the business on a day-to-day basis.

As a result I have advised the directors that they need, as part of the business planning process, to create a reporting framework which will allow them to communicate effectively on progress towards the opening of the doors on day 1 and thereafter to allow for reporting of key financial information. Failure to proactively share information can lead to constant interference and the absorption of an inordinate amount of time and energy

So if you are currently planning a new project or investment and you haven’t considered how you will communicate with your stakeholders you should perhaps think about inserting a formal reporting process into your business plan. The more proactively you communicate, the more control you retain.

Phil Dibbs

Managing Director

Hawkmoor Associates Limited

www.hawkmoorassociates.com

www.twitter.com @hawkmoortweets

This was posted in Bdaily's Members' News section by Phil Dibbs .