Corporations Need New Muscles To Enter the Fray on Social Issues and Corporate Responsibility

New Demands On Influence Functions
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The whole world paid attention recently when Cristiano Ronaldo made the intentional move at a post-game news conference to replace his Coke cans with water bottles.  That five-second action cost Coca-Cola $4 billion in market capitalization, at least temporarily… that’s billion with a “B”.

Whether it’s voter registration in Georgia or the controversy over Texas abortion rights, brand and reputation management is no longer focused on monitoring social media for company headlines and customer service surveys.  The battlefield of public scrutiny and headline risk is increasingly expanding to the broadest range of social issues in history.

The impact is being felt as a broader range of functional departments and teams are being required to add influence to their content responsibilities given the all-hands-on-deck nature of shaping reputation. And these are not just restricted to Environment, Social and Governance (ESG), Diversity, Equity and Inclusion (DEI), or Corporate Social Responsibility (CSR), they reach directly to all corporate departments like legal and compliance, finance, and human resources.  Each can have as much impact on company reputation as traditional external-facing functions such as public relations, government affairs, or external affairs.

All these staff units are being asked to influence internal leadership to do the right thing, as well as represent the company externally. To keep it simple, when acting in this role, we refer to them collectively as influence functions.

These new social or environmental-driven trends also have implications for the level of expertise, skills mix, and operating structures that may not reside in traditional generic external-facing functions.

The result can be internal confusion, delay, tension, damaged reputations, or other dysfunctions.

Here are some observations on what is happening to these influence functions and what to do about it:

1 – More audiences, more demands, and more technical content

The attention to corporate citizenship has expanded the ranks of stakeholders to include customers, shareholders, employees, interested parties, governments, and others. Best practice calls for recognizing and attending to each in strategies and plans. Stakeholders will continue to proliferate, specialize, and vocalize.

As more aspects of stakeholder capitalism concepts take hold, and the breadth of corporate consciousness continues, the dashboard will get busy, and the potential for irreparable reputational damage increases.

Stakeholder capitalism now recognizes five types of capital, each requiring specific attention. The traditional ones of human, financial, and intellectual capital have now expanded to include social, and natural capital (i.e., the environment).

All these players, concepts, and expectations place new demands on a range of corporate staff. For example, the new plant planned for next year might raise stakeholder concerns about hiring practices, environmental performance, executive pay, diversity, and community impact all at once.

Multiply that level of interest across the full portfolio of corporate investments and initiatives, and you have a challenge that most organizations are not ready for.

2 – The new “asks” demand new work and roles

The many demands are creating an expanding palette of critical work needed to take appropriate positions and develop relevant and impactful programs which range from research and benchmarking to measurement, reporting, and promoting.

The new work creates new roles. Serving as a content expert. Change agent. Influencer to leaders. Representative to curious third parties. Decider of measurement schemes. Analyst. Preparer of formal reports.

Even more challenging might be negotiating with stakeholders and NGOs or monitoring compliance to policy and procedure.

The people hired into these functions over the years may not be prepared for this broad range of capability and readiness. Nor will the processes they historically used be able to stand up to the new demands.

These units were created to develop a functional strategy and execute it. Now they are also asked to be a player in shaping and protecting corporate reputation.

Rather than being an expert in hiring, Mary needs to be an expert voice on diversity and inclusion as well as be able to debate the pros and cons of various measurement techniques and KPIs.  Rather than being an environmental scientist who knew how to file permits or oversee impact studies, Dorothy must know the ingredient supply chain in detail, so the company makes accurate sustainability-related claims on its labels.

It used to be that subject matter knowledge combined with company data mattered the most for the influence functions. Now it is who staffers engage with, what they say, and how they position their results that, at times, seems to matter the most.

3 – Greater need to balance across conflicting demands

We have heard the stories about how a product claiming superior sustainability attributes turns out to have a larger GHG footprint across the entire supply and usage chain than its alternatives. Since the metrics are not yet mature, conflicting claims are common in the marketplace.

Then there are the conflicts between various functions with the company itself. Is it better to optimize GHG emissions in production, but require price increases and reduce profitability? Reaching internal alignment on specific initiatives requires many debates to weigh the consequences.

Analogous situations exist for diversity, community impact, or other social issues. Staff are being thrust into more complicated and charged settings than in the past. Decisions will challenge professional judgments, governance processes, and potentially, ethics.

4 – Teaming more, while fighting the urge to defend turf

Not only is the content of decisions getting more complicated, but the players and dynamics among them are too.

Companies now have plenty of initiatives, programs, and issue teams that all demand attention of the relevant subject matter experts from staff units. People in influence functions need to weigh in and/or guide progress, so resources can get spread thin.

The old way to develop and tap technical depth won’t work in this frenetic work environment.

When conflicts arise, the natural human tendency is to defend the function/profession you come from. But these stakeholder-driven tradeoffs are systemic and do not represent rivalry between functional areas. If leaders remind everyone what the superordinate goal is, the natural limbic response can be avoided so that the team comes to the best solution.

The real challenge for influence function people will be how to protect their right to have a voice, without sounding confrontational.

5 – Adjust the service delivery model for influence functions

A service delivery model is a framework that segments different types of work and delivers them in ways that represent the best balance between effectiveness and efficiency. Because the work is changing, the way these staff units work together and divide up work will likely need to adjust.

The adjustments might include organization structure, issue prioritization, work and vetting processes, decision rights (who decides what), technologies, and people skills.

The current fragmentation across influence functions has caused some companies to combine those that frequently work together. For example, using employee communications as a resource for all initiatives and not just a mouthpiece for Human Resources. Make sure that internal communications and external communications are in sync by changing process and/or reporting lines.

At the extreme are companies that have appointed a senior leader for Impact (or Purpose, or Value), which could be interpreted as covering all social causes, with the line organization responsible for shareholder results. In theory that will reduce internal disagreement but it depends on reaching senior-level consensus on priorities.

Business leaders need customized advice depending on their challenges, opportunities, and overall value creation potential. Influence functions will still need their consultative skills more than ever.

Organizations can continue to foster the maintenance of expertise and technical depth by creating centers of excellence to preserve focus, data-driven decisions, and independent perspectives.

The transactional work such as reporting could be assigned to Global Business Services or shared services organizations. Or, just isolated and optimized within the function. Either option creates the advantage that the number crunching is executed with greater focus and independence.

Remote, heavily scrutinized, or specialized operating units may need dedicated local resources.

Usually, a fully centralized or fully decentralized model is too blunt of a tool to address the nuances and complexities that need attention. The resulting solution can often be some sort of hybrid. Dual reporting can be common but only works when the ground rules are clear and well understood. The challenge is conducting strategic exercises such as horizon monitoring, stakeholder evaluation, data analysis to characterize the issue portfolio, and assessment of structural alternatives, to get to the right balance.

Staying with the historical staff arrangements is unlikely to create the needed influence to affect change among internal leaders.  Nor will they drive adequate responsiveness and trust with stakeholders. New models for addressing the new and changing work are needed. It’s the only way to produce the results that we aspire to.

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