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During a business turnaround, once the initial crisis has been stabilised and leadership has been replaced or realigned, the next step is managing the company’s stakeholders – those with a vested interest in its success.
Ensuring stakeholders are on board with a turnaround plan is crucial. Not only do supportive stakeholders have the power to accelerate improved performance, but their backing, or lack of, can be the difference between feat and failure.
But what exactly needs to be done to turn negative perceptions around, obtain stakeholder support, and get those key relationships back on track?
Identifying business stakeholders
The first and most obvious action in gaining stakeholder support in a turnaround is identifying who those stakeholders are. Most businesses can quickly identify them.
Common examples of business stakeholders include:
- Financial (debt and equity)
- Creditors
- Customers
- Unions and employees
- Government
- Board of directors
- Press
- Communities
Prioritising stakeholders in a turnaround
Once a company’s stakeholders have been identified, the next step is to figure out how important a part they play in the business – and how central their support is for turnaround success.
It can be easy to assume that it’s only financiers you need to focus on in a financial crisis, but it’s important all stakeholders are included.
However, each stakeholder or group will have different interests, attitudes, and priorities – and varying things at stake. Financial and creditor stakeholders, for example, will be focused on payment, employees would have jobs and income on the line, while government may be worried about tax payable.
To figure out which stakeholders to prioritise, a good exercise to carry out is stakeholder mapping. This involves plotting your stakeholders according to both their interest and their influence or power.
Stakeholder mapping can help highlight the characteristics of the stakeholder groups. Questions to ask include:
- How do they fit into the business?
- How could they hinder the turnaround?
- Are they more or less influential in certain areas?
- Do they have legal rights?
- What responsibilities does the business have to them?
- Could they easily be replaced?
In a normal trading scenario, customers will be the primary focus. However, during a turnaround, this shifts to stakeholders impacting supplies, capital and other elements that will positively impact cash flow in the short term.
A turnaround expert can help analyse and understand what’s at stake for each stakeholder in this situation.
Rebuilding relationships in a turnaround situation
Quite often in a crisis situation, communication between a business and its stakeholders will have broken down or can be notably fractious. In some instances, the relationships can be past the point of no return.
The challenge is often convincing these stakeholders that turning around the business will be a better option than termination and winding up. This involves being honest and sharing clear and concise information with them.
Often CEOs and senior management don’t have the knowledge to deal with financiers effectively in a crisis situation. Because of this, having a turnaround expert to negotiate and communicate on their behalf can be highly beneficial.
They’ll work to rebuild confidence, bridge any knowledge gaps and reinstate the relationships so appropriate communications can be actioned.
Developing a communications strategy
Once relationships have been initially smoothed and the lines of communication are open, a plan should be developed for ongoing communications.
Managing competing interests is often a complex and delicate task. It requires timely communication of relevant information throughout the turnaround period.
The process of stakeholder mapping and determining stakeholder and stakeholder group characteristics, interests, and influence can help identify the most suitable communications for each and how to structure them.
With this in mind, a communications strategy needs to be developed and agreed upon. This should include the channels to be used, the frequency of communications, and the information to be shared.
An effective communications strategy will ensure that the information they receive is relevant to their needs, so messaging should be tailored accordingly. It should also build positive attitudes towards the company and the turnaround process.
Mapping out your communications plan
A stakeholder communication matrix or grid is a good way to plan it out. This grid should cover the following:
- Which stakeholders you’re communicating with
- What message you’re going to communicate
- When and how often you will communicate
- What channels/methods of communication you will use
High interest and influence stakeholders, such as creditors and employees, will need more in-depth financial updates. They’ll also need more regular communications.
There are a range of communications channels you can use, including:
- In-person (individual or group)
- Virtual face to face meetings
- Phone
- Email and newsletters
- Social media
- Online platforms
Communication with critical stakeholders is often best done in person or face to face. This makes them feel prioritised and also enables two-way conversations, so you’re not just talking at them.
Our top tips for gaining stakeholder support
- Understand each stakeholders agenda
- Don’t judge what your stakeholders’ value; understand why
- Manage perceptions and expectations
- Make sure all communications are honest, factual and concise
- Only share relevant information – how are their interests being resolved?
Next steps: Strategic focus
Gaining the support of stakeholders through proper management and communications is crucial to turnaround. Once achieved, the next priority should be strategic focus, covered in our next blog in this seven-part series.
If you have a client facing financial difficulties and needs to turn things around, contact us today to set up a meeting. We’re experts in leadership changes and in other turnaround strategies required to get them back on track.