Engaging with external stakeholders is more important than ever to company leaders, according to the fifth McKinsey Global Survey on external affairs. Yet while most executives believe outside stakeholders will be increasingly involved in their industries in coming years, few say their companies have taken an active approach to engaging with stakeholders or that they have found success in their external-affairs efforts.

52% of CEOs say external affairs falls as their top or top 3 priority

The results suggest that to step up their game, companies should start by strengthening their capabilities—many of which aren’t any stronger now than they were a few years ago. The companies that, according to respondents, are most successful at external affairs not only have better overall capabilities than their peers but they also are particularly skilled at organizing their external-affairs functions.

External affairs is a rising priority for CEOs and boards. When asked about the most influential stakeholders, executives expect government entities and regulators—as well as customers—will have the greatest effect on their companies’ value. Furthermore, executives in developing markets and in Asia are likelier than others t see external affairs as an opportunity rather than a risk.

11% of CEOs say their companies frequently succeed at shaping government and regulatory decisions

Despite the growing focus on external relations and the recognition of the value at stake, responses suggest that success is rare. Only 11 percent of executives say their companies frequently succeed at shaping government and regulatory decisions, and there are no regions or industries where more than one in five respondents report success. Managing the corporate reputation is challenging as well: just 22 percent of respondents say they frequently succeed at this.

On average, respondents (n= 1,334) report little progress – and even decline – in the strength of their companies’ capabilities since 2012. What’s more, few executives report that their companies are actively engaging with stakeholders. Just one-quarter say that in the past year, their companies have taken a very active approach to engaging with governments and regulators

Not surprisingly, those companies that are engaging external affairs are reporting greater success. More importantly, what are they doing – and what do we help with at NettResults?

We break it down into three areas that really differentiate those that are doing well and those that are reporting not to succeed:

Strategy formation:

- Building a fact-based narrative to support positions

- Aligning external-affairs agenda with company’s corporate strategy

- Prioritizing items on external-affairs agenda based on potential value at stake

Organization:

- Tracking quality of relationships with most relevant stakeholders

- Engage CEO to support external-affairs activities

- Balancing local engagements with corporate-level priorities

- Attracting talent with the right skills

- Having a coordinated response to a crisis

Stakeholder engagement:

- Mapping stakeholder landscape to understand networks of influence

- Engaging with stakeholders in response to unfavorable policies

When setting the external-affairs agenda, respondents at the most successful companies are 2.5 times likelier than their peers to say they’re very effective at building fact-based narratives to support their positions. They are also much likelier to report effectiveness at tracking the quality of their relationships with stakeholders.

Other data suggest that digital tools have a role to play. Although a whopping 82 percent of all respondents say their organizations use digital tools (such as social media) for business reasons, those at successful companies use these tools differently. When asked about their main goals for using digital tools, for instance, they most often cite promoting their companies’ priorities and engaging with specific stakeholders, rather than driving website traffic or increasing their companies’ media visibility—which respondents at other companies cite more often.

If you would like to find out more about how your organizations (or an organization you represent) can engage external stakeholders more effectively, then call or email to set up an informal conversation and we’d be delighted to discuss your situation.

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