How to Create a Stakeholder Strategy

A data-driven approach to design, measurement, and implementation

by

and

Dunigan O’Keeffe

by

and

Dunigan O’Keeffe

From the Magazine (May–June 2023) · Long read

Nina Papiorek

Summary.

Lately companies have come to recognize the limitations of the view that they must create value only for shareholders. Recognizing that every stakeholder has an impact on other stakeholders—engaged employees improve customer satisfaction, which in turn spurs growth, and so on—many CEOs are pledging to generate benefits for all their constituents: customers, workers, suppliers, communities, and investors. But few leaders have explicit strategies for doing so; most seem to rely on intuitive approaches.

The good news is, firms can use data to design and implement effective stakeholder strategies. They should start by exploring outside perspectives of the value they produce—specifically, the ratings of agencies like the Drucker Institute and Just Capital. Firms must then bolster data from such third parties with inside insights and gain an understanding of the interdependencies among their particular stakeholders. Armed with that, they can develop a clear description of their purpose, establish criteria for evaluating progress toward it, set priorities among stakeholders, and start measuring value creation for each group. The last step is sustaining the new strategy through cultural change and by developing supporting processes and organizational structures.

Idea in Brief

The Problem

There has been growing recognition that the shareholder value movement went too far and that to create sustainable, responsible businesses, companies should provide benefits to all stakeholders. But the big challenge has been developing a strategy for doing so and a mechanism for implementing it.

A Critical Advance

Dozens of firms have helped substantially improve the quantity and quality of publicly available data about companies’ impact on their stakeholders. The data proves that the companies that create the greatest total value across all dimensions of performance don’t do so at the expense of shareholder value.

The Solution

Data can also greatly improve the strategy development process. First you need to make sense of outside perspectives of the value your company is generating. Then bolster data from those outsiders with insider insights, analyze the interdependencies among your stakeholders, and create your own strategy. Finally, build systems to implement and sustain it.

Most people will readily agree that the first responsibility of business leaders is to grow the long-term value of their companies. But that’s where the agreement ends and the debate begins: What is value, and how should it be measured and managed? Is a company’s value maximized by being shareholder-centric, customer-centric, employee-centric, or some-other-stakeholder-centric? In a complex system where every stakeholder influences other stakeholders’ outcomes—highly engaged employees improve customer satisfaction, which in turn helps accelerate profitable growth, and so on—are any stakeholders safe to neglect?

A version of this article appeared in the May–June 2023 issue of Harvard Business Review.

Darrell Rigby is a partner in the Boston office of Bain & Company. He heads the firm’s global agile enterprise practice. He is the author of Winning in Turbulence and a coauthor of Doing Agile Right: Transformation Without Chaos (Harvard Business Review Press, 2020).
Zach First is a partner in the Los Angeles office of Bain & Company. He leads the firm’s stakeholder strategy work. From 2016 to 2022 he was the executive director of the Drucker Institute.
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Dunigan O’Keeffe is a partner in the San Francisco office of Bain & Company. He heads the firm’s global strategy practice, focusing on long-term growth, building new businesses, and the founder’s mentality.

How to Create a Stakeholder Strategy

Idea in Brief

The Problem

A Critical Advance

The Solution

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