Factors for effective external engagement

Strong relationships with external communities like customers, owners, and other external stakeholders can help companies understand and meet their needs. managing external engagements becomes all the more important at the time of crisis, like epidemics, natural or man-made disasters. This need has been recognized by CEOs' and in a survey by McKinsey 60% o the CEOs' said this topic is one of the top priorities.

Addressing societal issues and stakeholders' priorities creates longterm value. Many companies consider external issues to be an opportunity to engage with external stakeholders. 

External stakeholder management has remained a challenge for many companies. The best-performing companies focus on three factors that are important for effective external management namely

• effectively define and embed an engaging corporate purpose,
• enable external engagement with technology and metrics,
• make organizational-design choices that improve agility.

Many companies see external-engagement issues as an opportunity o create longterm value. Companies that excel at an external engagement are more likely to do so. However, very few companies align the interest of stakeholders and their businesses. 

To engage with the external stakeholders effectively let us analyze in detail the above three factors that distinguish the best-performing companies. 

Define and embed a corporate purpose

Several external engagement capabilities that the leadership is expected to have is considered important by top-performing companies. There should be clarity on companies' societal contributions to external and internal contributions in three different ways.

1. Leaders articulate a strong fact-based narrative about the company.
2. Companies should demonstrate effective thought leadership on topics of public interest(eg., social, environmental issues).
3. Companies should be very effective at defining a corporate purpose that engages the employees.

Enable external engagement with technology and metrics

Companies should effectively use digital tools in external-engagement activities. Many companies do not use digital tools or they use it for basic activities like news and reputation tracking.

High-performing companies use digital tools to predict and measure external-engagement performance. Digital tools are used for stakeholder sentiment analysis and predictive legislative analysis also besides the basic engagement activities. these companies are more likely to map out the external issues that could affect the business. This helps companies understand the short-term and long-term value at stake and prioritize the external activities to track. They excelled at tracking the impact with strong digital capabilities. they were also in a position to quantify the economic impact of external issues on the business. 

Design a more agile external-engagement function

Excelling at external engagements and at predicting issues that will have the greatest impact on the organization requires that the company trains its leaders to share best practices internally, and allocate resources to issues with most value at stake. this will enable them to become more agile and help the company become more capable in external-engagement and be stronger in the long run.

Top managers o the company must be trained to engage the external-stakeholders in their region. Companies should also effectively share the best practices for external engagements across business units. They should have a more agile operating model for engaging with external interactions.

Looking ahead

the stakes for ineffective engagement and potential value of engaging proactively are very high, especially in a crisis situation. To better manage the relationship with external stakeholders, companies should focus on building three strengths that will differentiate them.

• Define and embed a corporate purpose: Defining helps the company to redefine its role in society and embedding a purpose that emphasizes the contribution to the world can increase the topline growth and reduce costs.
• Enable technology and deploy metrics: Many new, reliable technologies can boost the impact of external-engagement activities. Companies that adopt and customize digital technologies stand to gain a strong competitive advantage. 
• Desing a more agile function: Agile ways of working can help external-engagements create a more flexible resource allocation and make employees' expertise available across the organization. By engaging experts early in projects, they can promote external-engagement practices. providing the managers with a clear set of priorities can help equip them to engage externally on the company's behalf.

The pivotal factors for effective external engagement

Mckinsey May 2020