Leadership

Stakeholder feedback is crucial for setting direction

Kim Harrison, Cutting Edge

Inequality leading to major disruption

Findings from the highly respected annual Edelman Trust Barometer surveys over 20 years pointed to community trust around the world being spurred by economic growth. However, the conclusion in 2020 is that community trust continued to be maintained in Asia and the Middle East, but not in developed markets, where income inequality is now the more important factor. Many respondents in every developed market do not believe they will be better off in five years’ time, and more than half of respondents globally believe that capitalism in its current form is now doing more harm than good in the world.

Income and wealth inequality has become a key cause of unrest in many western countries as statistics reveal the rich have gotten richer and the lives of most others have not improved much. For example: • Income inequality in the United States in 2019 hit its highest level in more than 50 years, according to US Census Bureau data published in September 2019, even as the nation’s poverty and unemployment rates were at historic lows. • According to a study by the US Economic Policy Institute, CEO pay rose about 1,000% between 1978 and 2017 in 2017 dollars.

The Standard & Poor’s 500, by contrast, rose 637%, while the typical worker’s salary increased all of 11.2%. The average

American worker’s wages were flat in real terms from 2000 through 2018 before picking up in 2019. • Nobel Prize-winning economist Paul Krugman observed in

The New York Times on 24 November 2011 that in the 25 years to 2005 the inflation-adjusted, after-tax income of Americans in the middle of the income distribution rose 21% while the income of the top 0.1 percent rose by 400%.

In recent years, employees have seen CEO salary packages skyrocket. For instance, in Australia in 2018, the highest paid CEO was paid 435 times the average wage. The chart below reveals the huge differences in pay between CEOs and average workers in a range of countries shown on page 34.

Company profits have risen sharply at the same time, but the pay of workers has stagnated during this period, and many jobs have been lost in traditional industries.

PR publisher Paul Holmes quotes Christopher Storck, head of a large German consultancy and professor of communication management and strategy at a Berlin university: “Business leaders have to reconnect with society again. Companies must create value for all stakeholders. They must establish and maintain mutually beneficial relationships with all individuals, groups, and communities who provide resources that the organization wants to deploy in its value creation process.”

Holmes also quotes Richard Edelman, head of Edelman, the largest PR firm in the world: “It is time for business to move beyond words to action if it wishes to restore trust. In the absence of trust and credibility, anything companies have to say will be treated with skepticism, if not downright hostility. Only actions will matter. When people trust nobody, they will turn to anybody.”

Top-down management inefficient and unsatisfying to workers

Uncertain economic conditions, unpredicted business challenges, and pressure for organizations to be more agile has led to further uncertainty for business leaders. Most business leaders work through all this in the traditional way – by managing from the top down. Many of them don’t understand that their employees are the most important stakeholders of all. Organizational

LEADERSHIP

managers need to work on managing their workforces in a more enlightened way.

However, 64% of employees surveyed in a CEB survey of 6,686 employees in 2016 said their bosses persist in a top-down approach that lowers workers’ level of trust and confidence in their leaders. Workers say they hesitate and wait for direction before changing their work methods. They report that they are doing too much unproductive work and they tend to resist change.

Ratio between CEO and average worker pay in 2018, by country

Genuine dialogue vital

CEB consultants conclude that the organization should push decisionmaking and accountability closer to the frontline. Management should use a two-way conversation strategy, not just a communication strategy. The best leaders engage employees in a dialogue rather than increase the volume of communication delivered to them, i.e. they should listen with more respect.

In their 2016 survey, the CEB consultants found two-way communication makes employees less anxious (29% compared with the top-down-telling approach causing anxiety among 51%), increases employee hope (35% compared with 17%), reduces employee anger (5% compared with 24%), and builds organizational pride (59% compared with 27%).

One very clear thing is that governments and companies in recent years haven’t been listening enough to their constituents – their stakeholders. The recent upheavals are a result of this.

Alon Feuerwerker, head of the political practice at Brazilian firm FSB, says: “In a world with easy access to multiple sources of information, it is not enough to repeat the message…you need to dialogue and interact to obtain attention and trust from those affected. You need to avoid arrogance.” Social media is only a partial solution to enable people to feel their views are being taken seriously and acted upon.

Companies also need to recognize that as the credibility of mainstream media declines – third-party endorsement from that source has weakened, and companies need to learn to use new channels that involves genuine interaction with their stakeholders.

Within organizations, due employee recognition is one way to increase satisfaction and engagement, but management needs to approach this activity with authenticity and respect to their employee stakeholders. The worst thing is to use employee recognition to increase worker productivity at minimal cost. Employees will see through fake management attitudes and will respond negatively. The core of employee recognition is genuine two-way interaction between the organization and its employees.

Avoid the ‘post office’ method

Communicators need to minimize the one-way communication mentality. Management consultant and former Harvard University fellow Elizabeth Doty says the approach of too many organizations is based on an outdated mental model: “It’s a model best described as a ‘post office.’” They view themselves as the sender of a message, and others as the receivers.” These leaders are preoccupied with their own message, which leaves them ignorant about the larger context and the views of their stakeholders.

Effective listening to stakeholders should be built into organizational behavior

In a 2013 paper on organizational listening, Australian communication professor Jim Macnamara said, “Other than for strategic planning and targeting purposes, organizations listen to stakeholders sporadically, often in token ways, and sometimes not at all.” A stakeholder is any person, group, or organization who can place a claim on an organization’s attention, resources, or output, or is affected by that output. They have a stake in the organization, something at risk, and therefore something to gain or lose because of corporate activity.

In his pilot study, Macnamara found the job descriptions of heads of communication and public relations “contained no reference to functions related to listening, such as systematically collecting and evaluating feedback, doing formative research, or

LEADERSHIP

responding to stakeholder opinion or concerns…there was no mention of changing organization behavior to meet stakeholders or publics’ concerns…only reference to achieving organizational concerns, interests and objectives…the only function that seems to make any sustained effort to listen and respond directly to publics or stakeholders is customer relations.” Check your management and communicator’s job descriptions. To what extent is a listening or intelligence role apparent?

The intent should be to explore issues or opportunities together with stakeholders. This two-way dialogue is powerful for creating breakthroughs. Professor James Grunig’s concept of symmetric two-way communication returns – taught to all PR students as the perfect model! This model recognizes that others have something worthwhile to say and we should be willing to listen.

Develop one-on-one listening skills

Strong face-to-face listening skills can make a critical difference to the performance of senior executives, but few are able to cultivate these skills because they are more intent on pushing their own preconceptions than absorbing the perspectives of others. This matters because listening is the surest, most efficient way for senior executive to come to the judgments they must make.

A useful formula incorporating some key recommendations by former McKinsey consultant Bernard Ferrari in his article “The executive’s guide to better listening” are: 1. Slow down. If others find you stressed, overloaded, or distracted, they will avoid disrupting your preoccupations. By being respectful to the presence of staff, you will create the opportunity for people to come to you with new information, questions, and ideas. 2. Show respect by a willingness to be influenced. Create time and listen with an open mind. 3. Keep quiet. Try to follow the 80/20 rule – allow the other person to speak 80% of the time rather than trying to speak over and past them. Ask open-ended questions to encourage the other person to think through solutions. 4. Challenge assumptions. We must be prepared to challenge long held and cherished assumptions, as in item 2 above. Ferrari quotes the title of a book written by highly successful baseball coach Earl Weaver: It’s What You Learn After You Know It All

That Counts. 5. Summarize and ask for commitment to the next move.