The stakeholder environment in which businesses operate has never been more complex. As CEOs and Boards of Directors navigate dizzying economic, social, and political challenges in an interconnected global economy, the often conflicting demands they face from both internal and external stakeholders have intensified–and become more public.
CEOs’ ability to balance these relationships–not just customers, investors, and boards of directors, but employees, policymakers, suppliers, activists, and many others–has never been more consequential to the success of their organizations. Staying ahead of the game requires a new level of situational awareness across the stakeholder landscape.
CEOs are increasingly turning to a historically undervalued role for help: that of the Chief Communications Officer (CCO). No longer expected to simply promote or defend senior leadership decisions after the fact and without any input, CCOs are providing critical intelligence and counsel about stakeholder management that informs the decision-making process on the front end.
By continuing to empower CCOs to influence business strategy and equipping them with the right tools to deliver actionable intelligence, CEOs can untangle the knot of stakeholder challenges they face and seize new opportunities for growth. Now, with the arrival of Penta, the market’s first comprehensive solution for stakeholder management, CEOs and CCOs can take their partnership to the next level.
CCOs and those with similar roles–heads of global public affairs, corporate reputation, communications, and so on–fulfill the same fundamental purpose: They determine how the company positions itself, builds and maintains its reputation, and communicates with the internal and external stakeholders who influence its success.
The impact these stakeholders have on a company’s bottom line and ability to achieve its mission is significant. CEOs that mismanage their relationships with these stakeholders incur serious reputational and ethical risks that threaten the viability of their organizations. These risks can even morph into crises, subjecting businesses to public and regulatory scrutiny and undermining their credibility among customers. In fact, McKinsey & Company estimated in 2019 that 50-60% of EBITDA for companies in banking, automotive, tech, aerospace, and defense is at stake from external engagement.
At the same time, cultivating positive relationships and brand credibility with stakeholders is an equally significant opportunity. For example, companies that distinguish themselves with respect to environmental, social, and governance (ESG) practices can attract more talent and customers. A 2021 PwC survey found that 80% of consumers and 84% of employees are more likely to buy from or work for companies that value sustainability. To make the most of this opportunity, CCOs must communicate their companies’ ESG principles to internal stakeholders, such as employees, while being transparent with external stakeholders about their ESG commitments and practices.
CCOs facilitate communication between the business and stakeholders in both directions. Not only do they tell their businesses’ stories to others, but they also bring stakeholders’ desires to the executive team and board of directors.
Moreover, CCOs are taking on a broader set of responsibilities, impacting business success in new ways. In a 2020 Spencer Stuart survey, a majority of corporate affairs directors said they were responsible for external communications, internal communications, government affairs, and sustainability, with 40% saying they are also responsible for marketing and branding. CCOs and Chief Marketing Officers (CMOs) agree that their traditional responsibilities are increasingly overlapping, as customers incorporate ESG and critical considerations such as diversity, equity, and inclusion into their purchasing decisions.
Most CEOs recognize this and empower CCOs to influence decision-making at the highest level, but there is still room for improvement. According to a 2020 Watson Helsby survey of FTSE 100 companies, 76% of CCOs report directly to the CCO, and 51% of CCOs are executive committee members. CCOs who report directly to CEOs, rather than other C-suite officers, will exercise more influence over business strategy, as will those who have executive committee membership.
Notably, the FTSE 20 has a higher rate of CCO executive committee membership, at 58%. More businesses should adopt this best practice to ensure that their strategic decisions reflect relevant stakeholder concerns.
In addition to elevating CCOs within their leadership structures, businesses should give CCOs the tools and resources they need to succeed.
This starts with a strong team. The 2020 Watson Helsby survey found that the communications functions at FTSE 100 companies shrank during the pandemic. Among the FTSE 20, 44% of companies had corporate affairs and communications teams of at least 300 employees, down from 65% the previous year. In addition, 30% of CCOs reported cuts to their budgets.
In addition to investing in communications teams and budgets, businesses should expand data and metrics capabilities for their communications functions. The complexity of CCOs’ responsibilities can render it challenging to measure inputs and outputs, but new technologies and methods, in combination with more traditional metrics, can provide a strong understanding of a company’s relationship with its stakeholders. Giving CCOs the resources to work with firms that offer these tools is an important first step to navigating today’s stakeholder environment.
Penta provides the most advanced solution on the market to meet the pressing need for actionable stakeholder intelligence. Penta combines analytics and research with deep issue and communications expertise to deliver insights and drive measurable impact for our clients. We use proprietary AI tools, polling, policymaker interviews, and other methods to help our clients understand their position relative to the stakeholders who impact their success. This intelligence, combined with our team’s experience at the highest levels of business, government, non-profits, and politics informs our strategic counsel to clients.
As of 2018, however, only five percent of CCOs were expecting to hire a data analyst. This indicates that businesses may not be giving sufficient consideration to the value of intelligence, not just for the communications function, but for the business as a whole.
CCOs have an essential role to play in determining the success of the business. They serve as connecting leaders, bridging the divide between the C-suite and the internal and external stakeholders who impact the company. Not only should they have a seat at the table, but their strategic counsel should also be taken into close consideration by the CEO, board of directors, and other executives, and they should be empowered with the resources they need to succeed.