Exclusive: Closing the gap between stakeholder expectations and corporate behaviour
City PM revealed two weeks ago that six firms agreed to merge into a new stakeholder solutions entity that is backed by Falfurrias Capital Partners.
The relatively unusual merger, given that six separate firms managed to reach a merger deal, involved Ballast Research, Hamilton Place Strategies, Flag Media Analytics, alva, Gotham Research Group, and Decode_M.
The firms shared with this paper that they officially rebranded and launched as Penta, a stakeholder solutions firm combining intelligence and strategy capabilities.
Time for City PM to sit down with Alberto Lopez-Valenzuela, who was until recently the CEO of one of the six merging parties, alva.
Discussing the much-talked about deal, Lopez-Valenzuela explained this morning the idea behind the new combination: “There is a growing recognition among the C-Suite of the significant impact that stakeholders have on the business and its ability to create value.“
He added: “With this recognition comes a need for an integrated and connected approach to stakeholder solutions.”
Post-merger, the combination employs around 200 people in London, New York City, Washington and San Francisco.
It is likely more agencies or units will be added, as Falfurrias Capital Partners is looking to make more acquisitions for Penta so it “can expand the firm’s global reach.”
Penta will be led by President Matt McDonald, previously a partner at Hamilton Place Strategies for over a decade.
“By combining intelligence tools with advisory capabilities, we will work with clients to help understand, predict and mitigate the impact of stakeholder issues, as well as enabling understanding between business leaders and their stakeholders,” Lopez-Valenzuela continued.
Stakeholder issues
What does the City veteran mean by stakeholder issues?
Such issues might be environmental, they might be focused on business ethics, employee welfare, or any other issue that impact stakeholder expectations, Lopez-Valenzuela clarified.
“But they happen when there is a gap between stakeholder expectations and corporate behaviour.”
When that gap occurs, the resistance from stakeholders increases and so it does the cost of doing business.
“Indeed, in the worst cases they can have a debilitating and disruptive impact on corporate reputation and company finances, which can even lead to the downfall of prominent companies,” he stressed.
While such issues are formed seemingly driven by change in social trends and activism by pressure groups, Lopez-Valenzuela was quick to stress businesses can impose order on such issues.
It appears that issues mostly follow the same lifecycle.
An issue may be dormant for some time but may suddenly, as a result of a change in society, become something that causes considerable change and potential damage.
“Smart firms can predict issues before they surface, by monitoring the right stakeholders.”
Alberto Lopez-Valenzuela
By closing the gap between stakeholder expectations and corporate behaviour as early as possible in the issues lifecycle, they can avoid crises, he said.
“That’s why the most important phase in the issues lifecycle is the first one: potential issues.”
Lopez-Valenzuela pointed out that “in the first phase, we can identify potential issues before they affect the organisation and connect with stakeholder to better understand their expectations.”
To achieve this, companies need to have a data-driven issues management process in place, he argued, “so that they tackle the risk of the issue becoming a reputational or operational crisis.”
Mismatch
Core to an issues management process is stakeholder intelligence, which can surface issues where there is a mismatch between corporate behaviour and stakeholder expectation as early as possible in the issues lifecycle.
Core to an issues-management process is stakeholder intelligence, which can surface issues where there is a mismatch between corporate behaviour and stakeholder expectation as early as possible in the issues lifecycle.
“An organisation needs to have a connected and coordinated approach to issues management,” explained Lopez-Valenzuela. “This highlights the need for an individual or individuals within the organisation to act as a connecting force – to be a connecting leader.”
“Connecting leaders can ensure that the functions involved in the organisation are working together and heading off issues in a joined-up way by bringing together communications, policy, general counsel, sustainability, operations,” he concluded.