Angered by Shell’s arctic drilling plans, Greenpeace started a multi-stage online hoax in 2012 to raise public awareness. A YouTube video, a website with an interactive ad generator, and a Twitter feed went viral as millions around the world – and dozens of media outlets – spread the word. Forbes called it a “social media nightmare”. Instead of invading oil rigs with boats filled with protesters, Greenpeace was able to send reputation-damaging blows without leaving dry land.
The financial and reputational damage a single individual or small group is capable of causing can be catastrophic
Most crises don’t attract this much attention, and most aren’t started by global NGOs with decades of experience and big budgets. But, says Wharton Management Professor Witold Henisz, “Activists are increasingly able to access virtually everything companies or their suppliers do anywhere in the world. The financial and reputational damage a single individual or small group is capable of causing can be catastrophic.”
Improving diplomacy
Henisz, an expert on corporate reputation management and author of a forthcoming book (April 2014) on the topic, continues: “Companies expanding into unfamiliar foreign markets to source natural resources or access growing middle classes can be particularly vulnerable as these same countries also tend to have gaps in or weak enforcement of regulations governing human rights, environmental discharge and safety and health; local populations sceptical of foreign investors; and grassroots activists who are increasingly watching over the operations of multinational corporations.”
Henisz has been teaching executives from around the globe how to improve diplomatic skills as a consultant and in Wharton Executive Education programmes. He recently became faculty director of the new four-day Corporate Diplomacy: Building Reputations and Relationships with External Stakeholders course, to help senior leaders develop a broad set of tools needed to manage risks well before a crisis hits.
Henisz stresses, “Diplomacy must be an organisation-wide concern. You need to build a culture that involves everyone in the effort to assess stakeholder opinion and integrate that knowledge into financial and business planning, as well as into every interaction between employees and external stakeholders.”
Based on Henisz’s research and work with executives there are five ways to improve corporate diplomacy.
Professor Witold Henisz’s five tips for improving corporate diplomacy
1. Be open-minded
Henisz advises not to focus solely on finance (defining investments and determining the risk-adjusted rate of return). This narrow view misses the strategic element of interacting with stakeholders.
2. Explore new frontiers
Next, Heinsz encourages us to question conventional wisdom about which countries to avoid – some of your best opportunities may be in locations where others haven’t succeeded.
3. Seek to understand stakeholders
It is also vital to gain a deep understanding of your stakeholders to determine what is important to them, who is most important, who to reach out to, and what to say. Conduct interviews, check the local media, and read blogs to create a 360 degree view.
4. Implement company wide corporate diplomacy
Heinsz also believes in the need to develop a company-wide strategy for reaching out to external stakeholders that takes a more integrative perspective towards risk, and that recognises that better management of stakeholder opinion is critical to its long-term success. The entire C-Suite must be committed to it.
5. Authenticity is key to success
Finally, we must recognise that stakeholder engagement is more than just what you say and what you financially commit to. It’s how you do it. If people perceive you as being driven solely by financial returns instead of a genuine interest in how you can grab those win-wins and deliver them, they’ll never accept you.
Wharton Executive Education is offering Corporate Diplomacy: Building Reputations and Relationships with External Stakeholders, from May 12-16, 2014.
A free live webinar about the programme will be offered March 5, from 1 p.m. to 2 p.m. EST.
For further information visit whartoncorporatediplomacy.com